Insights 29th June 2022 ESG services

EPC regulations have been steadily tightened in recent years, with further changes scheduled before the close of the decade. Investors are reviewing portfolios to identify which properties or units require attention, and what needs to be done to ensure they can continue to be let or sold.

With many nationwide portfolios spanning across the UK’s own borders, it’s worth remembering that EPC regulations are demonstrably different in Scotland as compared to England & Wales so those differences need to be fully understood before properties most at risk can be identified. The respective legislation differs in two key areas – when EPCs are required and what the minimum standards for those EPCs are.

Although there are no minimum standards in Scotland, investors may be required to produce an Action Plan, which is not a requirement in England & Wales. In addition, the EPC ratings themselves are not directly comparable as equivalent ratings north and south of the border do not necessarily reflect the same level of energy performance.

Key differences:

The minimum required EPC standards in Scotland (SEEP)

  • There is no prohibition on selling or letting properties with an EPC rating below a specific level.
  • An EPC needs to be available when a property is being marketed to be sold or let.
  • Regulations don’t cover sales or leases before construction of the building is complete, or the renewal of an existing lease to the same tenant.
  • In addition to the EPC, a Section 63 Action Plan is required, prepared by a specialist, and containing a list of improvement measures.
  • Owners of large (more than 1,000 sq. m.) commercial buildings must produce a Section 63 Action Plan and agree to carry out prescribed works within 42 months, or display an energy certificate (registered and renewed annually) showing total CO2 emissions and operational ratings.
  • If the building has been constructed in accordance with 2002 Building Regulations, then no Action Plan is required as deemed to be sufficiently compliant with energy performance requirements, or if the building is below 1,000 sq. m.

The minimum required EPC standards in England and Wales (MEES)

  • MEES regulations introduced in 2018 mean non-exempt buildings or units must have an EPC rating of E or higher to grant a new lease, or lease renewal.
  • Where the energy performance is below the minimum E level rating, landlords of commercial premises must not continue to let property after 1 April 2023. This legislation does not apply to sales.
  • All commercial premises will require an EPC B by 2030. There is also consultation over a requirement for all units to have a valid EPC by 2025 and a potential 2027 interim banding of a minimum C requirement.

Comparing EPC standards and ratings

EPC grades in England and Wales are not directly comparable to those in Scotland. To effectively compare the energy efficiency of buildings in England & Wales to those of Scotland, more information needs to be considered than just the headline rating achieved. Scottish properties may often appear to perform less well when compared to equivalent English & Welsh ratings. This is often because the methodology adopted in the latter includes a comparison with notional – or theoretical – building emissions, which aren’t used in Scotland. This means a building in England could appear to be more energy efficient than the same building in Scotland, which may make it more attractive to occupiers and investors. To truly understand a building’s energy efficiency, it is vital to look beyond EPC ratings and examine the real energy usage.

For further information on EPC regulations or advice assessing and mitigating the EPC risk profile of your assets, read our recent EPC bulletin or contact or ESG team.