In 2023, the Scottish Government launched its Energy Performance Certificate (EPC) reform consultation. Following responses received to the consultation, the Scottish Government is expected to implement significant changes to both domestic and non-domestic property EPCs in 2026.
The key changes to non-domestic property EPCs will be: -
- Redesign of the EPC;
- Reduction in the validation period from 10 years to 5 years meaning more frequent and up to date assessments;
- A reformed set of metrics for non–domestic buildings; and
- Introduction of Heating System Ratings.
Redesign of the EPC
The EPC will be redesigned to better display clearer information; and EPCs will move to a default online digital platform making it easier for consumers to access and understand EPCs, with real-time tracking and updates of energy metrics. A printable version of the EPC will still be available.
Reduction in the validation period from 10 years to 5 years
This change is to ensure that EPCs are accurate and reflect recent energy efficient improvements made to non-domestic properties while providing banks, purchasers and tenants with the current energy information for properties. Industry view from the consultation is that 10 years is too long a period for EPCs to remain valid. Indeed, some professionals in the sector believe that the EPCs validation period should be reduced further from the 5 years potentially to 3 years, to ensure that EPCs remain relevant and include the information on any recent energy saving improvements.
A reformed set of metrics for non-domestic buildings
The revised metrics will include three key ratings: -
The Energy Efficiency Rating, which is based on modelled emissions from regulated energy use for a building and will be shown on an A to G scale. This will follow the same rating scale as the Asset Rating used in non-domestic EPCs across England, Wales and Northern Ireland, aligning the UK rating system.
The Direct Emissions Rating which will provide additional information on buildings direct emissions. This will in turn help businesses work towards any decarbonisation goals particularly if the business leases a property which is subject to a green lease.
The Energy Demand Rating which will provide information about the regulated energy use of the building and allows a comparison against other buildings.
Introduction of Heating System Ratings
The reformed non-domestic EPC will detail specific information on heating systems within homes.
There will be a new rating for “Heat Retention”, to give clearer information about the fabric energy efficiency of a property (this is different from the Energy Efficiency Rating).
There will also be a “Heat System” rating, which is a rating for the main heating system, and this follows the same classification in the reformed domestic properties EPC. The heating system can be categorised as:
- Clean Heating – low or zero emission systems which can include heat pumps or heating from renewable sources.
- Renewable Bioenergy –systems using sustainable biofuels.
- Hybrid Systems – solar panels used to generate electricity, but gas central heating system used to heat the premises.
- Polluting Heating – gas central heating systems which may be subject to stricter regulatory measures in the future to drive businesses to use clean heating.
What are the implications for commercial real estate?
The new EPCs will provide valuable information:-for commercial property owners who are navigating the changes in energy legislation; for potential tenants seeking to secure a lease of an energy efficient building with lower energy bills; and for commercial lenders who may be cautious about financing properties depending on energy efficiency.
Redesign and digital integration of the EPC will streamline the process of monitoring energy efficiency in commercial buildings, which should allow easier compliance with the EPC requirements. The new EPC will focus information on the fabric energy efficiency and heating system emissions, encouraging owners to consider sustainability improvements and investment in energy-efficient technology and systems.
The shorter validity period for EPCs means that owners need to consider conducting regular energy audits to identify areas for improvement. Often this will mean increased costs while ensuring compliance with the latest energy standards. Lenders are aware of the future changes so, it is important for all landlords and tenants to stay up to date in relation to EPC amendments, and particularly any deadlines imposed by legislation. It may take time, effort and money to undertake major energy improvement works in compliance with the regulations, especially where it involves a portfolio of properties!
Preparing for the future
The specific date in which the regulations come into force will depend on when the new UK Home Energy Model comes into force. The Scottish Government confirmed in January 2025 that it was liaising with the UK Government with the expectation that Home Energy Model be introduced as the basis for a more detailed analysis of calculating new EPC ratings.
While the reforms appear daunting, they do offer the opportunity for owners to enhance the sustainability and the value of commercial properties, reducing emissions while contributing to Scotland's net-zero journey!
If you lease a commercial property, it is important to check your lease to ascertain who is responsible for compliance with EPC regulations. This can be reviewed by our expert team of commercial property lawyers!
If you need any advice on your lease or EPC requirements, please get in touch with Gemma Johnstone or any member of the commercial property team.
