After the carrot, now the stick for energy efficiency
The Scottish Government has long indicated its desire to reduce the country’s CO2 emissions through greater energy efficiency and has been assiduous in providing carrots.
But with this month’s changes in regulation, are we are starting to see the stick?
One of the instruments in the drive to reduce unnecessary use of energy has been the Energy Performance Certificate (EPC) but other than the requirement to provide them, EPCS have had no statutory teeth.
There has been no element of compulsion on commercial property owners to implement their recommendations.
On 1 September however, the Assessment of Energy Performance of Nondomestic Buildings (Scotland) Regulations 2016 came into effect.
It has to be said that the new regulations, at this stage, are quite significantly limited in scope.
They only apply to buildings, or units, with a floor area of more than 1,000sq metres, which are being made available for sale or let.
The type of building likely to exceed 1,000sq m is going to be the largest retail units, such as department stores, large industrial units, and warehousing or commercial offices.
The other limiting factor is that the regulations apply only to buildings which do not comply with energy standards set out in Scottish building regulations from 2002 – so modern property or property altered within the last 14 years may not be impacted.
This means only a small proportion of the current commercial stock – perhaps some 5 per cent – will be affected.
But this is a long game. There is provision for the policing of the implementation of the new regulations, backed up by fines, and I think we will almost certainly see a reduction in the size of buildings affected to 500sq m within four to five years.
While the initial numbers of landlords and property owners affected may initially be small, the ramifications for them could be costly.
Sellers will now have to have affected properties assessed for compliance to 2002 energy standards and where necessary have an Energy Action Plan (EAP) prepared detailing measures ranging from improving lighting to replacing inefficient boilers.
The EAP attaches to the property in question rather than the person paying for it so it could become a substantial liability for a seller, since the buyer will be obliged to do the necessary work.
The changes are required to be implemented within three and a half years, so the clock is ticking as soon as the action plan is registered, with the property requiring reassessment to ensure compliance has been met.
An EAP can be deferred, but an owner will have to exhibit a display energy certificate with actual energy usage being monitored, the cost of which will quickly outweigh the expense of actually doing something to the building.
The jury is still out on whether this will make properties unsellable, and make owners turn to demolition – a situation already being factored in as a consequence of the changes in empty property relief.
There is certainly the possibility that asking prices will fall.
Commercial agents will have to become acutely aware of how this will impact on marketability and value. But of this there is no doubt: a new regime of compulsion is well under way.
MARKET BRIEFING Mark O’neill looks at the impact of the Energy Performance Certificate