5. Scottish firms impact test
We had discussions with landlords, assessors and businesses in the supply chain while developing the options for regulation and during the consultation phase, as set out in section 3.2 and section 3.3. Business ranging from micro (e.g. landlords with one to three properties) to larger organisations were included in these discussions.
As set out above, in most cases the fuel bill savings should more than offset the costs of the upgrades. However, as discussed in section 2, market failures can mean upgrades are not installed when they would pay back. The regulations will therefore support good landlords who provide a more energy efficient property, by ensuring they are not undercut by landlords who set a cheaper rent on a property with worse energy efficiency, where the higher fuel costs to the tenant more than offset the cheaper rent, so that they are providing an inferior product.
In terms of the impact of the regulations on landlords of different sizes, as set out below in the section 6.1, the regulations will apply pro rata to businesses depending on the size of their portfolio, upgrade and EPC assessment costs apply per property. Sanctions for breaching the regulations (for properties that do not meet minimum standards for energy efficiency) will be applied per property and per breach. If landlords are seeking an exemption these will be by individual property. Therefore the regulations will not differentially impact landlords of different sizes.
The cost cap for each of the stage to EPC E and EPC D will act as a safeguard to ensure that the regulations do not result in excessive costs to landlords.