The start of this month, April 2018, saw the introduction of Minimum Energy Efficiency Standards (MEES) regulations in relation to both commercial and residential properties in England and Wales. They do not apply in Scotland.
MEES regulations make it illegal to lease a property, domestic or non-domestic, with an EPC rating of F or G. This, again, does not apply in Scotland.
And again, unlike in Scotland, MEES regulations require landlords to improve their property to an Energy Performance Certificate, or EPC, rating of E or better before the property can be leased.
MEES Regulations do not apply to Scottish property: in this country, large commercial properties are subject to what is known as Section 63 assessments and Energy Action Plans.
Scottish EPC ratings are calculated differently to those in England and the scaling of the ratings are different. An E rating in England bears no relationship to an E rating in Scotland.
So why is it important to spell out the differences between the two jurisdictions?
Banks, other commercial lenders, some property professionals and some commentators in Scotland have read about the band E benchmark and are beginning to take note of it.
Some commentary, even here, has centred on the requirement that all properties must attain a band E energy rating, since a failure to do so will impact on landlords’ ability to market a property for let and will cost property owners significant sums to improve their properties.
As a result, there are disturbing early signs that some lenders and pension funds are applying the MEES regulations, which apply only to properties in England and Wales, to Scottish properties. This misunderstanding could have an adverse impact on the ability of DM Hall’s clients to borrow or to place property into SIPPs.
A focus on an energy rating of E or better in Scotland is wrong. The Scottish Government has not adopted a cut and dried Minimum Energy Rating in line with England and Wales.
Nor could it, since The Assessment of Energy Performance of Non-domestic Buildings (S) Regulations 2016 make no mention of a Band E benchmark or threshold.
The bases upon which EPC ratings north and south of the Border are calculated differently, while the rating bands themselves sit on different scales.
The message then, to property owners in Scotland, is at this point, E’s are good – but only in England when aiming at enhanced energy ratings.
There are no legal bars to transacting a property in Scotland based on its energy rating.
For further information or if you have a lender imposing MEES in Scotland, please contact Mark.O’Neill@dmhall.co.uk