Energy Performance of Buildings (Scotland) Regulations 2025: business and regulatory impact assessment

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Option 1 – EPC Regulations repealed.

This option would see the Energy Performance of Buildings (Scotland) Regulations 2008 repealed, removing the concept of an EPC and the requirement to provide one at specified trigger points.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.
• 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 in the Heat in Buildings Bill.

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 2026.

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.