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Murray Beith Murray is a leading Scottish private client law firm.

For over 170 years we have specialised in meeting the legal, financial and administrative needs of individuals and families, family trusts, charities and private companies.

Has the moment come for commercial property to truly ‘go green’?

Whether in our capacity as property owners or as individuals, we can be in no doubt of the responsibility we collectively face to protect our planet for future generations.

The Scottish Government “recognises climate change will have far reaching effects on Scotland's economy, its people and its environment” (ref as Source http://www.gov.scot/Topics/Environment/climatechange).

The Climate Change (Scotland) Act 2009 commits us to reduce greenhouse gas emissions by at least 80 per cent by 2050 and a 42 per cent reduction by 2020.

The scale of Scotland’s Commercial Property sector means it has a considerable role to play in protecting the environment. New legislation from 1st September 2016 will require owners considering the sale or lease of non-domestic buildings to take steps to improve the energy efficiency and reduce the greenhouse gas emissions from their property.

While five months may seem a long way off, now is the time to consider the impact these regulations may have on you or your company as a property owner.

From 1st September, The Assessment of Energy Performance of Non-Domestic Buildings (Scotland) Regulations 2016 will come in to force. This imposes a duty on the owner of a ‘Building Unit’, after obtaining an EPC (Energy Performance Certificate), to carry out a further energy performance assessment. This will identify a target to improve the energy performance of, and reduce greenhouse gas emissions from this property. In addition, and crucial to the new legislation, an agreed ‘Action Plan’ will outline steps to carry out any improvement measures.

The improvements specified in this action plan must be carried out within 42 months of the date on which it is issued. However, the owner may choose to defer carrying out the works by instead arranging to record and report on the energy consumption and emissions via a display energy certificate on an annual basis.

These regulations will affect non domestic buildings with a floor area of more than 1,000 square metres andwhich are already subject to the requirement to provide an EPC.

Although the regulations will initially cover a relatively small proportion of all property transactions, I believe it’s likely that the Scottish Government, in order to meet its carbon reduction targets, will continue to broaden their reach to potentially encompass almost all domestic and non-domestic property.

While these regulations may seem like an onerous burden on the commercial property sector, the situation South of the Border has already taken a wider reaching stance. Legislation, due to take effect from 1 April 2018 in England and Wales, will make it unlawful for practically all commercial or residential property to be let without a specified minimum rating. In my opinion, this approach informs us of the likely approach that Scotland could very well adopt.

Notable exemptions include properties which have been built to current building standards, properties already included through a Green Deal and various transactions not caught by the regulations.

This could provide a flood towards the purchase of commercial properties that are not caught by the regulations, thereby creating a two tier property market with older, less energy efficient properties suffering a fall in value or even becoming un-marketable.

These regulations will mean that owning or renting “green” property is no longer purely desirable; it is fast becoming a necessity which will also result in significant energy cost savings for property owners going forward.

However, local authorities will be responsible for enforcement of the regulations, and will have power to impose a penalty charge of £1,000 for failure to issue an Action Plan or implement improvements. Some may observe this penalty to be relatively low set against the significant cost for some owners to comply with the regulations. This poses the question as to whether the enforcement provisions lack teeth. 

These regulations, on paper, reflect a commitment to the environment and the Scottish Government’s target to reduce carbon omission. In practice, however, it will be a matter of negotiation between the parties involved in the purchase and lease of commercial property as to who will be liable for the cost of the necessary improvements.

Only time will tell how the sector both reacts and adapts to the Regulations.

It is hard to believe that this will not mark a real turning point for the Scottish commercial property sector in its move towards greener working practice.

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