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New regulations in force from September 2016 now place a duty on a number of commercial property owners to assess and improve the energy performance of their buildings. Whilst this predominantly affects owners, we feel it is imperative that all parties with an interest in commercial property transactions are aware of the potential implications that may arise.

As part of the international effort to battle climate change, the Scottish Government has set targets to reduce Scotland’s greenhouse gas emissions by 42% by 2020 and 80% by 2050. As non-domestic buildings are accountable for a large portion of these emissions, Section 63 of the Climate Change (Scotland) Act 2009 has introduced The Assessment of Energy Performance of Non-Domestic Buildings (Scotland) Regulations 2016.

These regulations came into force on 1 st September 2016 and apply to the majority of non-domestic buildings (or parts thereof) over 1,000sqm offered for sale or lease. Alongside the existing requirement for an Energy Performance Certificate (EPC), a Section 63 Assessment is also a mandatory process for the marketing of these buildings. This assessment produces an Action Plan setting out carbon and energy savings targets that the building will achieve if specified improvement works are undertaken.

Seven standard prescriptive measures (improvement works) have been set by the regulations and the Action Plan places a duty on the owner to undertake all of those which are applicable to the building in question. The owner is then be provided with a 42 month timeframe to complete the works and have an updated EPC prepared to finalise the procedure and prevent enforcement action.

It is possible to negotiate alternative improvement works in lieu of these prescriptive measures providing they still achieve or exceed the initial savings targets set down in the Action Plan. This may be beneficial for the owner if they already have upgrade works planned for the building or if less expensive works are possible and will ensure the most cost effective package can be implemented.

Owners will have the option of deferring implementation of the works by recording the operational ratings of the building through a Display Energy Certificate (DEC), however these certificates must be updated annually for as long as they wish to delay. If they fail to have the DEC updated on time they must automatically revert to completing the improvement works. The decision on whether to proceed with this deferral route will likely be determined by comparing the long term annual DEC assessor fees and the need to update against the actual costs of undertaking the works.

As Section 63 Assessments are triggered by the sale or lease, it is probable that implications will begin to arise concerning liability under a commercial property lease and, in terms of a purchase, the Action Plan affecting the value of the building which is likely to be adjusted to compensate for the cost of the works.

This leaflet is not intended to cause alarm but we believe it is prudent that you are informed of these regulations. If you require any further information or wish to find out if a specific building will be affected, please contact our team.