The Energy Performance of Buildings (Scotland) Regulations 2025, as amended by the Energy Performance of Buildings (Scotland) Amendment Regulations 2026 - Business and Regulatory Impact Assessment (BRIA)

Section 1: Background, Aims & Options

Background to Policy Area & Issues

Current situation / why action is required

EPCs are an important source of information for current and potential building owners and tenants to help them understand the energy performance of their building. EPCs must be provided when a building is advertised for sale or for let to a new tenant, and upon completion of construction of a new building. They have formed part of the Home Report since 2008. EPCs are currently valid for a period of 10 years.

EPCs were first established as a legal requirement under the EU Energy Performance of Buildings Directive in 2002^[8], which has been recast several times since then^[9], and have been retained in Scottish law following the UK’s exit from the EU in 2020. They therefore represent a long-standing feature of Scottish law that has been embedded in the property market over several decades.

In spite of being well-established, many external stakeholders and independent reports have highlighted concerns around the relevance, accuracy and quality of EPCs produced. In large part, this reflects the changing policy landscape in the 16 years since EPCs became a legal requirement in Scotland – in particular since 2019 with the requirements of the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019^[10] (which sets targets to reduce Scotland's emissions of all greenhouse gases to net-zero by 2045).

Following the net zero legislation, the ratings which EPCs display have been criticised by stakeholders, including the Climate Change Committee^[11], consumer groups such as Which?^[12], academics^[13] and from within the assessment industry itself^[14] as in need of reform as, in their current format, EPCs are not aligned with our net zero ambitions^[15].

We have also received recommendations from an independent review of EPCs on the need to improve the quality of EPCs and, in particular, to strengthen quality assurance requirements around audit and inspection of Certificates^[16].

As well as this, the supporting technical and operational infrastructure which underpins EPCs (the EPC Register and the EPC calculation methodology) is life-expired, requiring significant upgrades.

These calls for reform have been made across the UK, with the UK Government receiving similar recommendations from the Climate Change Committee and consumer groups such as Which?, following its decision to retain EPC legislation in UK law following EU exit.

EPC Reform more broadly will contribute towards the Scottish Government’s wider strategic priorities of:

• Tackling the climate emergency by investing in green energy and infrastructure, since introducing the new EPC rating system will ensure that consumers have better information on the steps they can make to improve their property for net zero through investment in clean heating and energy efficiency; and the new operational framework will ensure higher quality EPC assessments that consumers can trust; these reforms will underpin proposed regulatory standards that will drive emissions reduction through decarbonisation of heating; and
• Eradicating child poverty, since the new EPC rating system will directly assess the contribution that poor energy efficiency makes towards fuel poverty specifically, and child poverty more widely, helping to inform the Scottish Government’s statutory fuel poverty strategy and to better-target government programmes and funding towards improving those properties which are hardest to heat.

Current EPC policies / frameworks in place

Domestic EPCs currently provide two key ratings and are modelled using the Standard Assessment Procedure (SAP) calculation methodology. The Energy Efficiency Rating (EER) is based on the cost to run the property based on standardised conditions, for example, the occupancy, heating setpoint and other factors. The Environmental Impact Rating (EIR) is based on carbon dioxide equivalent emissions from the same standardised conditions.

Non-domestic EPCs provide a rating based on the total emissions under the assumption of standardised conditions. Non-domestic EPCs use the Simple Building Energy Model (SBEM) calculation methodology, or an approved Dynamic Simulation Model. Assessments for new buildings are based on the building specification and data gathered during its construction. Assessments for existing buildings are based on non-intrusive surveys of the building under consideration.

EPCs are prepared and issued by assessors who must be qualified by education, training and experience to do this. Assessors must be members of Approved Organisations, which are approved by the Scottish Ministers to ensure that EPCs are prepared and issued in a consistent, accurate and independent manner.

EPCs are lodged by assessors on the publicly accessible EPC Register, which is currently maintained by the Energy Saving Trust which is appointed by the Scottish Ministers as Keeper of the Register.

The need for reform

The current EPC rating system has been widely criticised for not measuring and incentivising the most useful thing for consumers to be able to understand net zero climate impacts. For example, in some circumstances it can reward the installation of cheaper to run, but polluting, heating systems. For energy efficiency, this means that, since they are based on energy cost, they do not accurately reflect how good the building’s insulation is as the rating is strongly influenced by the cost of fuel.

EPCs have also been criticised for being hard to understand for consumers. Work is therefore needed to redesign the format of the certificate to make it more accessible. The current EPC only makes standardised assumptions about a building’s energy needs. It does not take account of occupants’ behaviour or preferences, making it harder for consumers to understand the impact their behaviours could have on their energy use and emissions.

The Scottish Government therefore recognises the need for reforms to remove the potential perverse outcomes of the current EPC rating system and to ensure that EPCs give more accurate and useful information to consumers on their building’s performance against statutory net zero climate objectives.

We also need to reform the technical and operational infrastructure upon which EPCs are based, since it is now life-expired and needs to be replaced. The technical infrastructure covers two elements: the EPC Register which is currently maintained by the Energy Saving Trust, appointed by the Scottish Ministers as Keeper of the Register; and the EPC calculation methodology (currently provided by SAP and SBEM). For domestic EPCs, the SAP calculation methodology is no longer fit-for-purpose in being able to measure and calculate the wider range of issues that need to be addressed in a reformed EPC (i.e. the metrics it reports are not aligned to policy objectives, and the methodology itself has been criticised as inaccurate), and needs to be replaced by the new UK Home Energy Model (HEM) and cloud-based calculation service (ECaaS) (expected in 2027). For non-domestic EPCs, the SBEM calculation methodology requires significant updates to specifically report non-domestic buildings’ direct emissions from heating systems and to model energy performance relative to a reference building. The EPC Register needs to be rebuilt to enable it to receive the revised EPC certificates and to be compatible with the revised calculation methodologies and cloud-based calculation service.

The operational infrastructure consists of the Approved Organisations and assessors, which must meet requirements set out in the EPC regulations, and in the EPC Operational Framework. The current Operational Framework (which governs the conduct of assessors and the Approved Organisations) was established by the Scottish Government and introduced in late 2012 as part of the transposition of the recast Directive^[17]. This Framework is also now life-expired and must be reviewed and reformed in order to support the reforms and to improve the overall assurance of EPC quality.

Wider policies relevant to EPC reform

Beyond the legal requirements of the EPC regulations themselves, EPCs are also used to support a wide range of other government policies, regulations and funding programmes, as well as to provide data to help monitor and evaluate the effectiveness of such policies. Such uses of EPCs include:

• supporting the delivery of Scottish and UK Government programmes such as Warmer Homes Scotland, Area-Based Schemes, Home Energy Scotland loans and grants, the Energy Company Obligation and Renewable Heat Incentive;
• underpinning statutory requirements (e.g. in practice, forming part of the prescribed documents within the Home Report^[18]; as part of the Scottish Government’s Fuel Poverty Strategy^[19]; evidence in support of the Energy Company Obligation);
• providing lenders and landlords with information about the energy performance of their stock;
• defining mortgage terms by banks and lending organisations; and
• supplying information for energy efficiency research and monitoring, including using the methodology which underpins EPCs to simulate EPCs for properties whose physical data is collected through the Scottish House Condition Survey, allowing national trends in energy efficiency to be reported^[20].

The Scottish Government has also proposed that EPCs could be used as a basis for setting minimum energy efficiency standards and providing evidence on how a building would meet such standards. The Scottish Government launched a consultation^[21] on 6 June 2025 on proposals for regulations to require private rented sector properties to achieve a minimum energy efficiency standard. Evidence recorded on the EPC Register on the presence of polluting and clean heating systems can also help to support Ministers in tracking progress towards the Scottish Government's target of decarbonising heating systems in buildings by 2045.

The market for EPCs operates across the UK, with assessors able to operate throughout the four nations, provided they meet the requirements of the respective regulations. The UK Internal Market Act 2020^[22] contains market access requirements around professional qualifications and regulation which include the automatic recognition principle that requires a professional qualified in one part of the UK to be automatically treated as qualified in respect of that profession in another part of the UK. The Scottish Government also shares the technical infrastructure of the EPC calculation methodologies (SAP and SBEM) with the UK Government, and will continue to do so when SAP is replaced by the new Home Energy Model and related cloud calculation function – ‘ECaaS’^[23], which will also be integrated with the EPC Register function. The UK Government itself has now consulted on making similar reforms to EPCs within England & Wales^[24] – such as on introduction of new domestic ratings and a reduction in the validity period. The Scottish Government will therefore continue to work with the UK Government and other devolved administrations as we implement EPC reform.

Our decisions on EPC reform

The Scottish Government has consulted extensively on a package of reforms to address the need for reform outlined above. Following an initial scoping consultation in 2021^[25], we consulted again in 2023^[26] on a final package of proposed reforms to improve the quality of EPCs and make them more fit-for-purpose in supporting net zero. This was followed by a further technical consultation in early 2025 on EPC lodgement fees and penalty charges^[27]. We have also conducted an internal review during 2024-25 of the operational governance arrangements covering the Approved Organisations, EPC assessors and the Operational Framework, which has been supported by the evidence given during the technical consultation.

The Scottish Government set out its final decisions on EPC reform in its Response to the 2023 consultation^[28], which committed to laying new EPC Regulations in Parliament later during 2025. We also concluded our review of operational governance during spring 2025.

In summary, the Government Response to the 2023 consultation set out our final decisions on reform. We committed to:

• introduce new EPC regulations in the Scottish Parliament during 2025 and bring them into force in 2026 (will be 2028 following the 2026 amendment);
• adopt a new EPC rating system for domestic buildings:
• Heat Retention Rating (fabric energy efficiency);
• Heating System Rating (type, emissions, efficiency, running costs)
• Energy Cost Rating (retaining the existing SAP-based EE Rating)
• adopt a new EPC rating system for non-domestic buildings;
• adopt a redesigned EPC certificate;
• reduce the validity period of EPCs from 10 to five years;
• develop a new EPC user interface to sit alongside the published EPC;
• introduce strengthened operational governance arrangements for EPC assessors and Approved Organisations to enhance quality assurance for consumers;
• establish a new technical infrastructure: replacing the Standard Assessment Procedure (SAP) with the new UK Home Energy Model (HEM) calculation methodology;
• design and build a new EPC Register to be kept by the Scottish Ministers; and
• continue to work with the UK Government and devolved administrations where we share elements of the EPC regulatory system across the UK internal market.

In response to the technical consultation on EPC lodgement fees and penalty charges, we can now confirm that we will:

• amend EPC lodgement fees within the regulations to ensure that they can cover the costs of providing the technical and operational infrastructure to support the EPC regulations and which provide benefit to consumers;
• use the lodgement fees to support the development and delivery of a new EPC Register, a new EPC calculation methodology (the Home Energy Model and updated SBEM), and to support the establishment of a new onsite audit and inspection function within the Scottish Government to oversee improvements to EPC accuracy and reliability;
• retain EPC penalty charges at the level currently set in the 2008 regulations;
• review lodgement fee and penalty charge levels every two years to ensure they remain fair and proportionate; and
• review the onsite audit and inspection function within two years to see if it is fit for purpose and continues to be needed.

In response to our internal review of EPC operational governance arrangements (which has also been informed by responses to the technical consultation), we can now confirm that we will:

• revise the Approved Organisation appointment process, to encourage new entrants to the market and re-appoint existing bodies deemed to meet the new requirements;
• establish new independent onsite audit and inspection arrangements to align with the recast EU Energy Performance of Buildings Directive (2024);
• adopt a new Memorandum of Understanding with the UK Government and devolved administrations to agree a common approach to issues around accreditation, skills and consumer protection; and
• continue to work with local government to agree the future arrangements for the discharge of enforcement functions.

This full BRIA accompanies the new regulations as they are laid in parliament, and covers the full breadth of reforms, as set out above.

Purpose/ Aim of Action & Desired Effect

The purpose of the new regulations is to put in place reforms to the EPC regime that address the issues highlighted above. This will involve making EPCs as accurate and high quality as possible, to ensure Scottish citizens can make informed choices to ensure their homes and workplaces are retrofitted for net zero.

The aim of our reforms is to ensure EPCs:

• give better information to current and prospective property owners and tenants on the net zero impacts of their property;
• continue to perform their role as a key feature of a functioning property market whenever properties are sold, let or constructed;
• are based on the most accurate methodology;
• are carried out to the highest standard;
• adopt updated methodologies and infrastructure shared with the UK Government; and
• maintain broad alignment with the recast EU EPBD, in particular through introduction of a new onsite audit and inspection regime to verify the accuracy and reliability of certificates.

The overall intended outcome is to maintain a functioning EPC system which remains an integral part of the property market (whenever a property is advertised for sale or let), which consumers can trust, and which delivers high quality, accurate, reliable, and relevant information to help them make decisions on the energy efficiency and contribution to net zero of their property.

These outcomes will be measured through annual data which shows that:

Key outcome

We have an accurate and reliable EPC system (underpinned by updated methodologies) which consumers can understand and trust, while maintaining alignment with EU Directives.

Progress indicators / metrics

• EPC accuracy rates within 95% tolerances of EU Directive
• Consumer complaints fall
• Consumer surveys show EPC confidence rising

How will data be gathered?

• Annual Approved Organisation (AO) audit results to confirm accuracy rates
• Regular AO reporting to gather insight into consumer complaints handling
• On-site inspections of completed EPC assessments

Key outcome

We see EPCs continue to function effectively as part of the wider property market.

Progress indicators / metrics

• Volume of EPC transactions remains in line with market demand

How will data be gathered?

• Register lodgement data
• Landlord Register

Key outcome

We inform consumers to make decisions to improve the energy efficiency and decarbonise the heating systems of their property.

Progress indicators / metrics

• Numbers of properties improving the EPC Heat Retention Rating of their property
• Numbers of properties recording clean heating system on Heating System Rating

How will data be gathered?

• Register lodgement data
• Scottish Household Condition Survey
• Heat in Buildings Annual Progress Report

Key outcome

We inform non-domestic building owners to make decisions to improve the energy efficiency and decarbonise the heating systems of their property.

Progress indicators / metrics

• Numbers of properties improving the Energy Performance Rating of their property
• Numbers of properties recording clean heating system on Heating System Rating

How will data be gathered?

• Register lodgement data
• Heat in Buildings Annual Progress Report

Key outcome

We deliver best value for any public expenditure in the exercise of our regulatory functions.

Progress indicators / metrics

• Benchmarking of lodgement fees against EU counterparts and UK Government
• Benchmarking against equivalent Scottish Government regulatory regimes
• Ongoing independent Gateway Review and Audit Scotland independent assessments of EPC programme

How will data be gathered?

• All of the above

EPC Reform more broadly will contribute towards the Scottish Government’s wider strategic priorities of:

• Tackling the climate emergency by investing in green energy and infrastructure, since introducing the new EPC rating system will ensure that consumers have better information on the steps they can make to improve their property for net zero through investment in clean heating and energy efficiency; and the new operational framework will ensure higher quality EPC assessments that consumers can trust; these reforms will underpin the target for decarbonising heating systems in 2045, and;
• Eradicating child poverty, since the new EPC rating system will directly assess the contribution that poor energy efficiency makes towards fuel poverty specifically, and child poverty more widely, helping to inform Scottish Government’s statutory fuel poverty strategy and to better target government programmes and funding towards improving those properties which are hardest to heat.

This BRIA will assess the potential impacts of the proposals to reform domestic and non-domestic EPCs. We will detail impacts of these reforms on businesses of all scale and related organisations operating across Scotland.

This BRIA takes into consideration the wider impacts on all groups regularly interacting with EPCs as part of the normal functioning of the property market, which include organisations such as estate agents, letting agents, conveyancing solicitors, surveyors, EPC assessors, mortgage lenders and landlords.

The BRIA will also consider UK Internal Market Act impacts and how this is balanced with our continued intention to remain aligned with the recast EU Energy Performance of Buildings Directive (EPBD).

Beyond the BRIA, a suite of related impact assessments which accompany the regulations will consider their impact on a range of specific groups and issues, including equalities, children’s rights & wellbeing, and island communities.

Options

Options considered

Option 0 – Existing EPC regime retained - Do Minimum i.e. a business-as-usual approach.

This option would see current provisions for EPCs remain, including on ratings, validity periods, and data sharing. There would be no changes to the EPC regulations and no changes to the Operational Framework. Current lodgement fees and penalty charge levels would be retained - lodgement fees for domestic and non-domestic EPCs would remain at the levels set in 2017^[29], and penalty charge levels would remain at the level set in the 2008 Regulations^[30].

Option 0 is not considered a feasible way forward as EPCs, in their current format, are not aligned with our net zero ambitions, and the supporting technical and operational infrastructure which underpins them is life-expired, requiring significant upgrades. External stakeholders and independent reports have highlighted concerns around the relevance, accuracy and quality of EPCs produced across the country, particularly that they do not give consumers the information they need on the performance of properties against net zero objectives. It is clear, from our extensive engagement, that stakeholders including AOs and assessors, and statutory advisors such as the CCC, see the benefit of, and need for, introducing well-developed and considered reform.

Option 1 – EPC Regulations repealed.

This option would see the Energy Performance of Buildings (Scotland) Regulations 2008 repealed, removing the concept of an EPC and the requirement to provide one at specified trigger points. This would also cease all non-regulatory functions, including the Operating Framework and appointment of Approved Organisations by the Scottish Ministers.

This option would mean that Scotland would no longer be aligned with neighbouring countries, including the rest of the UK and the EU. Consumers would no longer automatically receive information as part of the process of buying or letting a property, leaving them without knowledge of the energy performance of a building and its impact on net zero targets. Whilst consumers would still be able to access information from professional experts at their own behest, there would no longer be any standardisation of information, nor means of comparing different properties on a consistent basis.

For the EPC assessor market, there would be UK Internal Market Act implications through loss of the Scottish part of the UK market, with all EPC assessors (approx. 3,000) active in the Scottish market, impacted negatively through loss of revenue. The requirements of the Home Report legislation where in practice a new EPC is produced each time a domestic property is advertised for sale, would need to be revised, or an alternative means of providing required information developed.

Delivery of Scottish and UK Government schemes which rely upon EPC ratings would be impacted, requiring them to establish alternative means of meeting the current role of the EPC in supporting the schemes. Public reporting on the overall energy performance of the Scottish building stock would be diminished, meaning that alternative approaches would need to be developed to measure progress against climate change and fuel poverty targets.

Many of the above requirements and others are set out in legislation, for example through the following instruments:

• Climate Change (Scotland) Act 2009
• Energy Act 2011
• Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019
• The Building (Scotland) Regulations 2004
• The Civic Government (Scotland) Act 1982 (Licensing of Short-term Lets) Order 2022
• The Housing (Scotland) Act 2006 (Prescribed Documents) Regulations 2008
• The Letting Agent Code of Practice (Scotland) Regulations 2016
• The Private Landlord Registration (Information) (Scotland) Regulations 2019
• The Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016

Option 1 would likely be a very disruptive option. While relatively small costs to businesses and homeowners would be removed, misinformation and potential market abuse could arise in the absence of a government-authorised assessment methodology and prescribed format for certificates for the energy performance of buildings. The UK internal market would be disrupted, and the Scottish Ministers would no longer be in broad alignment with EU law under the EU Energy Performance of Buildings Directive 2024. It is therefore the Scottish Government’s firm view that such a methodology and means of certification must continue to be authorised by the Scottish Ministers, and the market regulated to ensure that it operates in a fair, transparent and consistent way to ensure the highest quality for consumers.

Option 2 – EPC regime reformed and infrastructure shared with UK Government (preferred option).

This option will retain the basic requirements of the EPC regime:

• to ensure the continued provision of information to consumers on a standardised certificate and rating system, based upon a government-authorised methodology;
• to require that this information is provided to consumers whenever a building is advertised for sale or for lease, or following completion of construction of a new building;
• to ensure that certificates are prepared by suitably skilled and qualified assessors;
• to ensure that EPCs are prepared to high standards of quality, accuracy and reliability;
• to allow EPCs to continue to support a wide range of other government policies and programmes
• to remain consistent with UK-wide internal market legislation and in alignment with the broad requirements of the EU Energy Performance of Buildings Directive 2024.

These basic requirements will be enhanced through our reforms which will ensure that:

• EPCs are better-aligned to net zero objectives through the implementation of a new rating system and redesigned certificate, which will give better information to current and prospective property owners and tenants;
• consumers receive more up-to-date information through EPCs which have a five- year instead of 10-year validity period, to more accurately reflect a property’s transition on the journey to net zero;
• life-expired systems are replaced through adopting updated calculation methodologies and infrastructure (such as a new EPC Register) shared with the UK Government;
• EPCs are carried out to the highest standard through the introduction of enhanced quality assurance and oversight requirements for EPC assessors and Approved Organisations, including the creation of new onsite audit and inspection functions, thus maintaining alignment with the EU’s own enhanced audit requirements in the 2024 recast of the EPBD.

This is the option on which the Scottish Government consulted during 2021, 2023, and 2025, and during its review of the Operational Framework. It would meet the calls from statutory stakeholders such as the CCC, consumer groups such as Which? and those from within the energy assessment sector itself, on the need to reform EPCs whilst at the same time retaining the basic requirements outlined above.

Option 2 is our preferred option that will be assessed within this BRIA .

This option will see changes to the EPC rating system, design of certificates, and user accessibility and interaction provide more relevant information to consumers. This will be backed up through enhancements to the technical and operational infrastructure, shared across the UK, which will bring benefits to users of the EPC system through ensuring better quality, more accessible, more accurate and more reliable EPCs. EPC lodgement fees will rise to £6.00 for domestic certificates and £15.50 for non-domestic certificates to cover the £1.27m p.a. costs of this enhanced infrastructure – as set out in the Scottish Government 2025 technical consultation. EPC penalty charges levels will remain the same as at present since they already act as a sufficient deterrent to non-compliance with the regulations. Lodgement fee and penalty charge levels will be reviewed every two years to ensure they remain fair and proportionate – meaning that they could fall or rise in light of evidence.

The Scottish Government believes this is the most credible option since:

• it ensures that we retain an EPC system which is already well-embedded in the property market and Home Report, and provides standardised and consistent information to consumers at existing trigger points where a property is advertised for sale or let, or following completion of construction of a new building;
• it ensures that EPCs continue to be prepared by suitably skilled and qualified assessors who can operate across the UK internal market (including being underpinned by common, UK-wide national occupational standards);
• it enhances these basic features of the EPC system by also introducing better information for consumers through a new rating system, redesigned certificated and more accessible, interactive EPC format;
• it increases quality assurance for consumers by introducing new operational governance requirements for onsite audit and inspection to ensure EPCs are more accurate and reliable; and by using a new technical infrastructure which we continue to share with the UK Government (the Home Energy Model, and updated SBEM calculation methodologies, which are more up-to-date, giving a more accurate assessment of building energy performance; together with the more interactive and accessible new EPC Register);
• it maintains broad alignment with the EU EPBD and UK Internal Market Act requirements;
• it avoids £6.5m of upfront capital costs and £0.6m p.a. ongoing operating costs, by sharing technical infrastructure on the calculation methodologies (the Home Energy Model) and new EPC Register with the UK Government;
• it allows other policies and programmes which rely upon EPCs to continue to do so;
• it maintains the existing principle that users who benefit from the service provided by the EPC technical and operational infrastructure continue to contribute towards the cost of doing so; and
• it ensures that penalty charges remain proportionate to the risk of breach of the regulations, and act as a sufficient deterrent.

Option 3 – EPC regime reformed and separate infrastructure for Scotland.

This option would be the same as Option 2, but would be the ‘do maximum’ approach. Reforms to the policy and regulations would be the same (i.e. introduce the new EPC rating system and reduce the validity period etc), but this option would entail the Scottish Government developing the technical and operational infrastructure for EPCs without any collaboration with the UK Government. This would mean the Scottish Government setting up its own new calculation methodology, and maintaining fully separate register infrastructure from the UK Government. The estimated cost of this route, based on UK Government contracts for methodology and Register infrastructure development, is £6.5m in upfront capital costs. This option would also likely entail higher ongoing running costs (£0.6m p.a.) than Option 2, on the basis that the Scottish Government would be solely responsible for maintaining a calculation methodology and register infrastructure, and would bear the full costs of upgrading and updating this over time.

In this scenario, the Scottish Government would also have to continue to develop its own enhanced audit and inspection function in the same way as for do minimum, if it was to remain aligned with EU law. The Scottish Government would also have to develop separate national occupational standards for the skills and qualifications of assessors, rather than on a UK-wide basis as at present.

The Scottish Government does not believe that this is a viable option since to cease sharing technical and operational infrastructure across the UK would undermine the operation of the EPC assessor market which has operated on a UK-wide basis since inception of the EPC regime in 2009. EPC assessors are accredited by Approved Organisations who operate across the UK, and the requirements of the UK Internal Market Act 2020 around mutual recognition for services providers means that service providers authorised to exercise a service activity (i.e. the preparation of EPCs) in Scotland, should be able to exercise that activity throughout the UK. This relies on there being a shared technical infrastructure (calculation methodology and Register) to support the operation of the market.

This also applies to the mutual recognition of qualifications across the UK internal market, where the training and qualification of EPC assessors takes place across the UK, underpinned by UK-wide national occupational standards, with assessors all using the same underpinning calculation methodology and software. If the Scottish Government were to develop methodologies, qualification requirements and operational infrastructures that were substantially different from those already shared across the UK, there would be the risk of breaching the requirements of the Internal Market Act. By instead pursuing our preferred option, Option 2, the Scottish Government is able to maintain a distinctive approach to the EPC rating system and regulations, whilst continuing to share infrastructure that enables the assessor market to operate on a UK-wide basis.

Sectors & Groups Affected

The following groups may be affected by these proposals:

• Consumers (domestic and non-domestic) – including current home/ building owners, landlords and tenants, prospective buyers and tenants, and building users;
• Businesses – those working directly within the EPC assessor market (Approved Organisations (AO), EPC assessors and property surveyors), and those working indirectly through the wider property market (landlords (private rented and social), estate agents, letting agents, conveyancing solicitors, mortgage lenders) and construction industry (property developers, plant and equipment manufacturers and installers);
• Local authorities – directly through their responsibilities for enforcing the EPC regulations and indirectly as social landlords;
• Government delivery programmes – those programmes offering Scottish and UK Government support to improve the energy efficiency of buildings and to decarbonise heating systems, in support of wider fuel poverty and net zero climate policy objectives; and
• Academics / Researchers – EPCs are widely used in climate change and energy efficiency research.

These groups are present throughout Scotland, given the operation of the property market country-wide^[31].

The largest groups impacted by EPC reform are likely to be the current and prospective owners, landlords and tenants of domestic or non-domestic property. This is because the information the EPC displays about their property will change with the introduction of the new rating system and redesigned certificates.

Even though the trigger points for when an EPC is required are not changing, the new rating system, redesigned certificate, and reduced validity period will mean that current and prospective owners, landlords, and tenants will receive new and more relevant information, which is more up-to-date, on how a property they occupy, or are thinking of occupying, performs against net zero objectives, and on potential improvements they could make to it.

For landlords specifically, there will be additional costs related to the reduction in EPC validity from 10 to five years, reducing the period during which they can recycle an existing EPC whenever a new tenancy is re-let for the same property. For large non-domestic buildings (over 250m²) occupied by public bodies which are frequently visited by the public, there is a requirement to always display a valid EPC.

Transitional arrangements are being established to avoid ‘day one’ risks of these buildings being unable to obtain a new EPC (see Section 3). All consumers will be directly impacted by the increase in EPC lodgement fees, which are likely to be passed on by assessors and reflected in an increased cost to consumers of purchasing an EPC.

The EPC assessment sector will be directly affected as businesses. This includes individual assessors who undertake assessments and those working for Approved Organisations who oversee assessor accreditation, training, and quality assurance of their work. These groups are affected because they deliver EPCs and explain the content to consumers.

Whilst changes to EPCs since 2009 have been achieved incrementally (through regular CPD outlining changes to assessor conventions and software updates to SAP and SBEM), the reforms which the Scottish Government is now making are more fundamental (new rating system, redesigned certificates, and new technical and operational infrastructure), meaning AOs and assessors will need to fully understand, and implement, the reforms to ensure they remain operational in the market.

By retaining the existing trigger points for when an EPC is required, the volume of business generated for EPC assessors will likely remain consistent with the broader performance of the property market – in terms of the numbers of properties advertised for sale, lease or newly-constructed.

There will likely be additional business opportunities created for assessors through the reduction in the EPC validity period. This is unlikely to impact domestic properties which are sold, since, in practice, a new EPC is always produced to meet the ‘information on energy efficiency’ requirements of the Home Report Regulations, but for properties which are let, EPCs will no longer be able to be recycled for up to 10 years, and so assessors are likely to see some upturn in business from more frequent renewals every five years.

AOs and assessors will be affected by the increase in EPC lodgement fees – either having to absorb these or choose to pass them onto consumers. The time required to complete an assessment (and therefore cost) may increase depending on the required inputs to the assessment under the UK-wide move to the Home Energy Model. Any such changes will be UK-wide and we do not expect a significant difference to the time required to complete an assessment in Scotland compared to the rest of the UK.

Businesses working in the wider property market – particularly estate and lettings agents, conveyancing solicitors and mortgage lenders will be impacted through the changes to the rating system.

Whilst the trigger points for when an EPC is required are not changing, property agents, solicitors and mortgage lenders will need to understand the new rating system and will also need to be aware of the reduction in the EPC validity period to ensure the EPC remains valid. This is unlikely to be an issue for estate agents where an EPC is required when properties are advertised for sale, or for conveyancing solicitors and mortgage lenders where a new EPC is in practice produced each time a domestic property is advertised for sale, to meet the requirements of the Home Report Regulations.

Estate agents, conveyancing solicitors and mortgage lenders will simply continue to ensure that the EPC is valid. However, for letting agents, the reduction in EPC validity period from 10 to five years will likely reduce the number of times that an EPC can be recycled whenever a property is re-let. Letting agents will need to understand this reduced validity period and be able to check that adverts and leases are accompanied by EPCs which are five years old or less.

Other key sectors include businesses who are involved in manufacturing or installing energy efficiency or heating measures in buildings. They will be affected because the way that their products are rated and how these are reflected on the EPC (in terms of their energy efficiency, emissions impacts, installation costs and running costs) may change.

Local authorities will be impacted in their role as enforcement authorities for the regulations, including their power to issue civil penalties (as well as owners of public buildings, mentioned previously). Given that there are no changes to the trigger points for when an EPC is required, it is unlikely that there will be a greater burden of enforcement action for local authorities than at present. Nevertheless, the reduction in EPC validity period from 10 to five years will mean that for property lettings, local authorities may need to work more closely with letting agents as the new certificates bed into the market, to ensure they can target any enforcement action that may be needed in the event of any widespread breach of the regulations.

Government delivery programmes and policies which rely on EPCs will continue to be able to use them but will need to adapt to the new rating system. The intention to rename the existing headline rating as the ‘Energy Cost Rating’ will ensure continuity for programmes which have until now relied upon that rating as a means of measuring progress against their objectives. Likewise, retaining this rating will allow continued reporting of official statistical information such as via the Scottish Housing Condition Survey to show changes in performance across the whole building stock over time.

New ratings such as the Heat Retention Rating will be able to be used by policies and programmes seeking to more directly target fabric energy efficiency performance (as is the case with the Scottish Government’s proposals for a minimum energy efficiency standard (MEES) for the private rented sector, which could also have a related impact on local authority enforcement, if local authorities are to use EPCs as a means of evidencing landlords’ compliance with the MEES). The Heating System Rating will help to record progress of the building stock against the Scottish Government’s target for decarbonising buildings.

This impact assessment is unable to fully consider how the range of government programmes and policies which rely upon EPCs will be impacted by the reforms. Impact assessments for those programmes will follow in due course as and when they choose to respond to the new certificates coming into force in 2028.

Academics and researchers will continue to have access to information on EPCs held in the Scottish EPC Register, through data access provisions within the new EPC Regulations. EPC data can help inform the development of better policy making across Government, the public sector, and other sectors to support decarbonisation. The Scottish Government has conducted a separate Data Protection Impact Assessment to accompany the new regulations.

Section 3 and 4 outlines in detail the Scottish Government’s assessment of the expected impacts on these different groups and which are likely to result from our EPC reforms.