Lease renewals to be exempt from Scottish energy efficiency retrofit requirements

In its response (58-page / 415KB PDF) to a consultation on improving the energy efficiency of non-domestic buildings, the Scottish Government said that its initial set of regulations would only be triggered by the sale of the property or entering into a lease with a new tenant. It has also softened its original proposal which called for the owners of affected properties to 'retrofit' more modern energy efficiency measures before renting that property out. Instead, owners will be able to choose to "monitor" the property's energy consumption to demonstrate that it is reducing over time.

"Operational monitoring will provide businesses with the information to improve the actual use of energy within the building," the Scottish Government said in its response. "It is important that they are given the opportunity to improve their buildings on a voluntary basis. For the first set of regulations owners will be able to opt for either building fabric and services or operational ratings. Alternatively they would be able to take up a Green Deal Finance offer up to the maximum allowable level and install the energy efficiency measures and opt out of [the requirements]."

The Scottish Government said that it intended the new measures to come into force from next year. This "lead-in time" would, it said, "help ensure there are sufficient trained assessors and give industry time to gear up for the workload".

The Climate Change (Scotland) Act, which came into force in 2009, requires the owners of non-domestic buildings to assess energy performance and greenhouse gas emissions. It also requires the owners of these properties to take action to improve energy performance and reduce emissions. Regulations, to be drawn up by the Scottish Government, will require an Action on Carbon and Energy Performance (ACEP) to be drawn up for eligible properties consisting of an Energy Performance Certificate, Recommendations Report and an Action Plan. Owners will then have to either carry out physical improvement work to the building or make arrangements to measure, report and display operational ratings. These will be stored on an electronic register.

Buildings constructed after 2002 that meet the building standards of the time or later, and buildings constructed after that date that have been built to or subsequently improved to meet energy standards will be exempt from the new regulations; as will buildings which have installed 'Green Deal' measures under the UK Government's flagship energy efficiency programme up to the maximum eligible within a Green Deal finance offer. Larger public and private buildings, with a conditioned floor area greater than 1,000 square metres, will be included within the scope of the regulations.

Property law expert Alan Cook of Pinsent Masons, the law firm behind Out-Law.com, said that the concessions would be "welcomed" by the property industry. However, he warned that concerns remained about the economic impact the measures could have on struggling property companies.

"Stakeholder discussion and consultation on the new measures has been ongoing for some time, and it is helpful that we now have more information about how they will work and when they will start to apply," he said. "However, the property industry remains concerned about the economic impact that these measures will have on the already-struggling property sector and we will now await the Regulations themselves to give us further detail. In the meantime, businesses need to be aware of the impact which the new measures could have on the sale or letting of commercial premises when they take effect next year.