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The new energy efficiency regulations: Their impact on Scotland’s commercial property market

Posted: 15th September 2016

Energy efficiency has been one of the hot topics in the Scottish real estate sector in recent weeks.

On 1 September, the Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016 came into force.  The Scottish Government introduced the new measures, ahead of the rest of the UK, as part of its efforts to reduce the country’s carbon footprint under the provisions of the Climate Change (Scotland) Act 2009.

Designed to change behaviour and encourage a more energy efficient approach to the operation of non-domestic buildings, the new regulations require owners of properties with a floor area of 1,000m² or more to provide an Action Plan at the point of sale or new lease of the property, in addition to a valid Energy Performance Certificate (EPC).

The Action Plan, which must be prepared by a qualified advisor, sets out a programme for the implementation of measures to improve the energy performance of the building and reduce its carbon emissions, including physical improvements such as the installation of draft insulation and low energy lighting.

Property owners have the choice to carry out suggested improvements within 42 months following the completion of the Action Plan, which can result in significant work and pose a considerable financial burden, or defer the work and instead report on operational ratings, the energy consumption associated with the use of the building, on an annual basis. The reporting option is not a “do nothing” approach but means there is no immediate requirement for the owner to spend a large sum of money on physical improvements.

According to Scott Ritchie, a partner at leading UK law firm Shepherd and Wedderburn, specialising in commercial property law, the new regulations which are now in force, introduce many uncertainties for commercial property owners.  “The extent to which the new rules will impact negotiations between parties entering into a sale or lease will be of interest to clients. Buyers and prospective tenants will want to understand the cost and extent of improvement works or reporting requirements before committing”, he said.  “Other important questions are how the new regulations will affect investment in the non-domestic Scottish property market. And how do the Scottish regulations vary from those due to come into force in England and Wales on 1 October, is there a risk of two different markets emerging?”

These questions and many others will be addressed at Property 2016, the annual highlight in the property industry conference calendar in Scotland, which returns to the Edinburgh International Conference Centre on 10 November. While Scott Ritchie will focus on the legal implications of the new regulations, Mike Gribben, Director – National Engineering Services at commercial property consultancy, CBRE will share his more practical insights. Highly experienced in providing clients with a wide range of energy related building services, Mike is ideally placed to equip delegates with the practical steps commercial property owners should be taking.

Property 2016 is hosted in association with the Urban Land Institute, one of the world’s most respected and diverse organisations in the field of development, land use, and urban planning. Additionally, the event has again attracted top flight sponsors such as AMA, one of Scotland’s most innovative property developers; Invest in Fife, a one-stop shop for companies seeking to invest in Fife; and financial markets and risk specialists, JCRA.  For the third year running, Property Week is supporting the conference as media partner.

More information about Property 2016 can be found at www.property2016.co.uk.

 

Business Comment

Business Comment is the Edinburgh Chamber of Commerce’s bi-monthly magazine. It provides insight on Edinburgh’s vibrant business community, with features on the city’s key sectors, interviews with leading figures and news on new business developments in the capital.
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