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

Section 3: Costs, impacts and benefits

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.

In this section we set out what we think are the most likely costs, impacts and benefits of our EPC reforms, as set out in our preferred Option 3, above. As set out in that option, our reforms retain many of the existing 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 and EPC data to continue to support a wide range of other government policies and programmes; and
• 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.

There will be no change to the circumstances in which an EPC is triggered – when a property is advertised for sale or let, or when a newly-constructed building is completed, with a valid EPC being required to accompany both the advertisement of the property and upon completion of the sale or the lease.

Given that there will not be any change to these triggers, our assessment of costs is therefore narrower, and focuses only on those parts of our reforms which introduce new requirements that could add monetised impacts:

• the reduced EPC validity period from 10 years to five years
• the increase in EPC lodgement fees to support the provision of new technical infrastructure (updated calculation methodologies and new EPC Register), and operational infrastructure (enhanced quality assurance through new onside audit and inspection function)
• the implementation of a new rating system and redesigned certificate

Our assessment of benefits and wider impacts looks more broadly across all of the reforms, to assess non-monetised impacts.

The approach taken in estimating the direct costs and benefits of Option 3 (EPC regime reformed), including assumptions, is laid out later in this section. The assessment of costs and benefits operates at the level of a social appraisal, where the appraisal is based on guidance laid out as part of HM Treasury’s Green Book. In this BRIA, costs and benefits to business are considered.

In order to support this analysis, we also commissioned additional independent analysis^[38] using an initial version of the new Home Energy Model, to help quantify the ‘day one’, or ‘as is’ performance of the Scottish housing stock against the new EPC ratings. This analysis is important in establishing a baseline for the housing stock, which takes into account improvements that have already been made by many property owners, such as landlords, to achieve a particular EPC rating under the 2008 Regulations.

Whilst the EPC Regulations in themselves do not require building owners to act upon the findings of an EPC, or its suggested potential improvement options, it is nevertheless likely that many will wish to do so – in order to meet requirements of their mortgage lender or to be eligible for government support, for example, or to meet a regulatory standard such as a minimum energy efficiency standard.

The results of this independent analysis are presented in the updated Government Response which accompanies the laying of the new regulations. This analysis will be used to help inform the development of the statutory calculation methodology for domestic buildings using the new Home Energy Model, which will be adopted by the Scottish Government when the new regulations come into force in October 2026. It allows stakeholders to have a clearer picture of the extent to which the whole domestic stock may need to make further improvements in order to meet overall net zero and fuel poverty objectives. This will help support consideration of impacts in related proposals for regulations, or for regulation-making powers, upon which the Scottish Government has consulted, such as the proposed private rented sector minimum energy efficiency standard^[39].

As set out in the Government Response, the purpose of the independent analysis was to use the new Home Energy Model to confirm the amount of energy that current EPC Band C properties use in order to maintain a comfortable temperature. This will enable the Scottish Government to meet its commitment to ensure the bandings which we adopt for the new fabric Heat Retention Rating will retain broad equivalence with the current EPC Band C, which has been long-recognised as being a ’good’ level of energy efficiency. The Scottish Government has therefore committed to ensuring that Band C on the new Heat Retention Rating will also represent a ‘good’ level of energy efficiency. Ensuring equivalence between current EPC Band C and HRR Band C is vital to minimise any detriment from moving to the new rating system, particularly for those property owners who have already taken action to improve their property to current EPC Band C.

The new independent analysis using the Home Energy Model updated previous work undertaken by BRE in 2023, using the old SAP-based calculation methodology, which estimated that to ensure equivalence with current EPC Band C, the new HRR Band C should be set at 71-120 kWh/m²/year of energy consumption. The A-G HRR banding scale set out in the January 2025 Government response, was based upon this figure as the best estimate at the time to ensure equivalence to the current EPC bandings.

Since June 2025, an initial version of the Home Energy Model has now been become available for the first time, allowing modelling of the housing stock’s current performance using the new calculation methodology. The independent analysis undertaken from June 2025 by Cotality used the same approach originally taken by BRE, to assess the equivalence under the Heat Retention Rating to current EPC Band C, using a far larger and more statistically accurate sample, drawn from the Scottish House Condition Survey, the results of which are generalisable across Scotland’s 2.5m^[40] occupied homes. The Cotality analysis, using the Home Energy Model calculation, showed that the actual level of energy consumption for 80% of homes currently at EPC Band C was in the range of 91-159 kWh/m2/year, rather than the range of 71-120 kWh/m2/year, estimated by BRE.

As a result, the updated Government Response published alongside this BRIA and the new regulations, presents adjusted Heat Retention Rating bands A-G that we intend to adopt for further, more detailed, modelling between now and the final version of the Home Energy Model which will become available during 2026. In adjusting the bandings in this way, we are ensuring full transparency for stakeholders and Parliament when scrutinising the new Regulations and understanding their impacts. The ultimate bandings adopted as required by Regulation 10 of the new regulations, when they come into force in October 2026, may see some further adjustment, but this will always be done to meet our commitment to ensuring HRR Band C is broadly equivalent to existing EPC Band C.

The revised bands for further modelling continue to ensure Band C on the Heat Retention Rating (now set at 91-159 kWh/m²/year) is broadly equivalent to that of the SAP EPC Band C – 80% of homes currently at SAP EPC Band C achieve a Heat Retention Rating Band C or better, and around 54% of the stock achieves a Band C overall (in line with the results reported in the Scottish House Condition Survey for the survey years modelled).

These revised bandings will be used as a basis for further, more detailed, modelling of the specific measures that would need to be installed across the housing stock in order to achieve Band C on the Heat Retention Rating. As development of the Home Energy Model is finalised during the next 12 months, the Scottish Government will continue to refine its modelling and assessment of the current stock. We will therefore ensure that the final bandings adopted in the statutory calculation methodology (which will be adopted when the regulations come into force in October 2026) maintain our commitment to ensure that Heat Retention Rating Band C is broadly equivalent to current EPC Band C and therefore minimising any detriment of moving to the new fabric-based rating system.

Quantified Costs

In this section we assess the quantified cost impacts of the reduction in EPC validity period and the increase in lodgement fees on the following groups:

• businesses directly impacted (EPC assessment sector; wider property market businesses (estate and lettings agents, conveyancing solicitors, private landlords)

Wider consumer impacts are considered in section 4 as part of our assessment of the Consumer Duty, and specific impacts on local authorities are also considered in section 4.

Businesses directly impacted

Businesses expected to be directly impacted by EPC Reform include Approved Organisations (AOs), EPC assessor businesses, and wider property market businesses such as private sector landlords, estate and letting agents, and conveyancing solicitors and mortgage lenders.

Impacts faced by AOs and EPC assessor businesses are:

• Increased number of EPCs required due to shorter validity period, with a possible increase in the number of assessors active in the market
• Increased cost per EPC due to the increased lodgement fee, which may partially or wholly be passed to consumers
• Familiarisation costs associated with the implementation of the new metric and the move to HEM and SBEM

Impacts faced by wider-property market businesses are:

• Increased number of EPCs required for PRS landlords and/or letting or estate agents, due to shorter validity period
• Increased cost per EPC for PRS landlords due to the increased lodgement fee
• Improved information for mortgage lenders due to changes to calculation methodologies
• Improved information for landlords about the energy efficiency of their building, including measures they could consider to improve this, which could possibly lead to increased tenant retention rates
• Familiarisation costs associated with the implementation of the new metric and the move to HEM and SBEM

Numbers of EPCs lodged

In recent years, there have been around 200,000 domestic and 6,100 non-domestic EPCs lodged annually.

Of domestic EPCs, the majority of these are associated with properties for sale (around 90,000) or rental (around 50,000), or new build dwellings (around 20,000). Smaller numbers are recorded as being associated with assessments for funding programmes, or without a reason listed.

Of non-domestic EPCs, the largest part are recorded as being associated with properties for sale (around 2,800), followed by properties for let (around 1,900) and voluntary uptake (around 800). Smaller numbers are recorded as being associated with public buildings for display (around 200) and properties being constructed (around 300).

It is expected that the reduced validity period would have the most significant impacts. The main impact will be on properties for let, where landlords will no longer be able to recycle valid EPCs for up to 10 years to cover new lets. Instead, they will only be able to recycle for a maximum of five years. There will also be an impact for large public buildings which are always required to display a valid EPC. We will put in place transitional arrangements to mitigate this (see Section 3). There will be no change for owner occupiers given that an EPC is, in practice, used to meet the requirements of the Home Report legislation, meaning that a new EPC is produced each time a domestic property is advertised for sale. For non-domestic properties advertised for sale, there is no equivalent requirement as in the Home Report legislation, so for these properties, the reduction in validity period could mean that a new EPC is required more frequently. While sales make up the largest portion of EPCs lodged, most domestic dwellings acquire a new EPC as a matter of course when putting a property up for sale.

The Scottish Government recognises that there could be additional costs for businesses and the third sector from a reduced validity period, meaning that EPCs need to be renewed more frequently. This will not impact the advertisement of property for sale (where in practice a new EPC is produced each time a domestic property is advertised for sale to meet the requirements of the Home Report legislation) or for the construction of a new building, where a new EPC is also always required.

It will most likely impact properties which are advertised for let, where landlords have been able to ‘recycle’ existing EPCs for up to a decade whenever advertising. By reducing the validity period, landlords would have to commission a new EPC once more within a decade than at present (potentially increasing their costs from the current average £100 per EPC per property, to £200 per property to obtain two EPCs over a decade, depending on how often there is a change in tenancy). We believe this is balanced against the fact that we are not changing the trigger points for when an EPC is required, so the legal requirements for when an EPC is triggered for properties advertised for let remain the same. This will impact the private rented and social rented sectors differently.

One key reason for this difference is the different pattern of length of tenure in each sector, as set out in the table below:

Share of households by length of time spent living at current address^[41]

Sector	Under a year	1 to 5 years	5 to 10 years	Over 10 years
PRS	31%	44%	17%	8%
SRS	9%	28%	28%	35%

In the social rented sector, the longer average tenure length means that the vast majority of social rented properties will not immediately be affected by the change in the validity period of the EPC, with only around 9% of households expected to start a new tenancy during a year. In addition, around 35% of households are expected to live in their property for at least 10 years, which means that the properties in which they live will not be affected by reducing the validity of an EPC from 10 to 5 years.

Further more, as set out in the Government Response to our 2023 consultation, there are reasons outside or beyond the requirement within the Energy Performance of Buildings Regulations for a valid EPC to be provided, for example where a government funding scheme requires a new EPC, or where it could be used to fulfil the requirements of other regulations such as the Home Report Regulations. These additional requirements in other policies or regulations mean that currently a property can still be required to have a valid EPC even though it has not been advertised for let during the last 5 years. For the social rented sector, in addition, we have consulted on the basis that the proposed Social Housing Net Zero Standard would be based upon the reformed EPC’s new Heat Retention Rating. In this case, social landlords would anyway likely need to obtain a new EPC in order to demonstrate compliance with that standard, should it be adopted, regardless of changes to the validity period.

For the private rented sector, with its shorter average tenure length, we recognise that the reduced validity period in the EPC Regulations will have a greater impact. Only around 8% of properties are occupied by households who will stay longer than 10 years, and will thus not be affected by the reduction in EPC validity from 10 to 5 years. However, again the impact of the reduced validity period has to be considered alongside other regulations which require an EPC. We believe that the impact of the reduced validity period is balanced by our proposals for a Private Rented Sector Minimum Energy Efficiency Standard, which would be based upon the reformed EPC’s new Heat Retention Rating. In line with these proposals, private landlords would anyway likely need to obtain a new EPC in order to comply with that standard, should it be adopted, regardless of changes to the validity period.

We also recognise that there could be a significant increase in the demand for EPCs, particularly in the short run. This is likely to be spread across the first two years of the operation of the new regulations, due to their transitional provisions (outlined in detail further below). The transitional provisions will allow that during the first full year of operation of the regulations (from 31 October 2026 to 31 October 2027) both old-style EPCs (meeting the requirements of the 2008 Regulations) and new-style EPCs (meeting the requirements of the 2025 Regulations) will be valid for use in sales and lets. This should help to spread the peak in new-style EPCs across the first two years of implementation of the new regulations: in Year 1, some landlords may choose to continue using the old-style EPC, reducing the demand for new-style EPCs in Year 1, while some landlords may choose (or need^[42]) to obtain the new-style EPC which means that if there is a further change in tenancy, they will not need to obtain a new-style EPC in Year 2.

In the social rented sector, there are around 52,000 new social tenancies each year.^[43] Subtracting around 6,000 tenancies that start in newly built social sector houses^[44] (which will have an EPC in any event due to New Build Regulations) gives an annual requirement for new EPCs in the social rented sector of around 46,000. In the private rented sector, we estimate that there could be around 108,000 lets each year where a new EPC is required^[45]. We estimate that the annual requirement across the rented sectors for an EPC due to a new let could therefore be in the region of 154,000^[46]. If the regulations had no transitional provisions, this could have resulted in an additional 113,000 EPCs being issued annually (over and above the annual average of the last four years of 41,000 EPCs a year for letting^[47]). However, due to the transitional arrangements (set out below), this demand is more likely to be spread across the first two years of the new regulations coming into force. The number of EPCs for rental would then be expected to fall in the following years after Year 2, due to the tenure profile discussed above^[48].

For the short-term let sector, where properties are normally continuously advertised, we anticipate the impact of the transitional arrangements in the regulations to require all of the approximately 30,000 short term lets^[49] in Scotland to obtain a new EPC before 31 October 2027. If evenly-spaced over the transition period, this means around 2,500 additional EPCs per month.

In terms of cost impacts, the landlord of a property will have to pay at most an additional £100 per decade, which is an average of £10 per year, due to the shorter EPC validity period. On average, the cost will be less than this due to factors such as length of tenancy, and having a valid EPC for another reason (e.g. due to applying for funding from an energy efficiency programme).

The Scottish Government will work with the Approved Organisations who oversee EPC assessors, to ensure they are aware of this likely increase in demand for EPCs in the first year after the regulations come into force, so that the assessor market can prepare. It is also worth bearing in mind that when the 2008 EPC Regulations came into force in Scotland at the beginning of 2009, the assessor market similarly responded to a significant change in the requirement for EPCs.

The Scottish Government believes that, as set out in the Government Response to the 2023 consultation, on balance, our primary objective is to protect consumers by ensuring the EPC contains current and relevant information for the transition to net zero. Reducing the validity period will mean that landlords and prospective tenants have access to more up-to-date information on the property’s energy efficiency measures and emissions from its heating system than in the current EPC. This is particularly important for tenants and households at risk of fuel poverty, who are often more vulnerable to high energy costs and less able to make changes to their home environment. Having clear, reliable information will also be vital were proposed mandatory standards to be introduced, so that consumers can make more informed choices when buying or renting a property.

The increased lodgement fee will impact all EPCs lodged. However, this is a relatively small portion of the total cost of an EPC, so the cost in itself is not expected to have a behavioural impact on the number of EPCs lodged.

Analysis estimates that the impact of increased audit requirements due to higher numbers of EPCs, increasing the lodgement fees, and the requirement to familiarise with new systems and methodologies could result in an estimated cost to businesses of around £11-£13m over a 20-year period. However, some of this is associated with the increase in lodgement fees, which would likely be passed wholly or partially to consumers. Therefore, the effective cost to businesses could be lower than this estimate.

There are also some costs which it was not possible to monetise. These include:

• If assessors are required to travel more often, this could result in increased travel costs associated with transport.
• If there is an increase in the number of assessors then training and accreditation would be required. Due to uncertainty about current capacity in the labour market, this is not monetised.

Transitional Arrangements

The updated Government Response published alongside this BRIA and the new 2025 Regulations, sets out transitional arrangements. These will help to mitigate potential negative impacts on particular parts of the property market when the regulations come into force.

In order to avoid ‘day one’ issues and provide certainty to those involved in property transactions around the in-force date, the transitional arrangements within the regulations provide up to a one year grace period for properties being sold and let.

• Buildings for sale or let

These provisions cover all existing domestic and non-domestic buildings (other than particular large non-domestic buildings frequently visited by the public and newly-constructed buildings (see provisions for these other types of properties, below)).

The regulations specify a one year ‘relevant period’ within which the transitional arrangements apply:

• The relevant period is, at maximum, one year, from 31 October 2026 to 31 October 2027, but ends earlier if a property is sold or let before 31 October 2027.

The transitional provisions in Regulation 38 therefore allow that:

• between 31 October 2026 and 31 October 2027, properties being sold or let (including short term lets) may continue to use either valid EPCs issued under the 2008 Regulations or valid EPCs issued under the 2025 Regulations.

But they also restrict the length of the one year transition period for properties sold or let within that one year period in the event that they are sold or let again:

• an EPC issued under the 2008 Regulations may be used for the sale or let of a property after 31 October 2026, but if a property is sold or let again within the one year transition period, a new-style EPC issued under the 2025 Regulations will then be required.

Regulation 38 specifies a clear backstop date for the end of the transition:

• after 31 October 2027, only the new-style EPC issued under the 2025 Regulations will be allowed for sale or for let.

In practice, from 31 October 2026 onwards, when a building owner commissions a new EPC, assessors will only be able to issue new-style EPCs meeting the requirements of the 2025 Regulations, but if an old-style EPC meeting the requirements of the 2008 Regulations is still valid during the transition period, it can still be used until the end of the transition period, or completion of the sale or let (i.e. downloaded from the EPC Register and used in a property transaction).

From 31 October 2026 to 31 October 2027, we will therefore see diminishing numbers of EPCs previously generated under the 2008 Regulations being used in property transactions. Conversely, we will see increasing numbers of EPCs issued under the 2025 Regulations. From 31 October 2027, only EPCs issued under the 2025 Regulations will be allowed.

The Scottish Government believes this represents a fair transition which will mitigate the following particular impacts:

• a potentially significant increase on day one in the number of EPCs that would be needed for properties which are continuously advertised, such as for short term lets, allowing hosts adequate time to obtain a new 2025-style EPC
• a potentially significant increase in year one in the number of EPCs that would be needed for private rented sector properties, where around 31% of the stock turns over per year, allowing landlords more time to obtain a new 2025-style EPC when advertising a new let
• day one and year one pressure on the assessor market as it adjusts to higher levels of expected demand for new certificates (as outlined above), allowing demand to be more evenly spread across year one and two from the regulations’ 31 October 2026 in-force date

By introducing the new regulations 12 months in advance of them coming into force, and by allowing the one year transition period for sales and lets after they come into force, the Scottish Government believes that it is giving sufficient time for property market actors to adjust to the new requirements. We will engage with all stakeholders in the property market and with the general public through a communications and marketing campaign to ensure they understand the changes. The one year transitional period will allow more time for the new rating system and redesigned certificate to become embedded and understood within the market before it is required for every property transaction.

• Large non-domestic buildings (frequently visited by the public)

The regulations provide that certain large non-domestic buildings which are frequently visited by members of the public must always display a valid EPC in a prominent place that is clearly visible to visiting members of the public.

The Scottish Government recognises the need to mitigate the risk that on day one, several thousand large buildings would immediately require a new EPC. Given the significantly higher costs of preparing an EPC for these more complex non-domestic buildings, and the smaller numbers of active non-domestic assessors available within the market, we do not believe that it would be possible to issue new EPCs at a rate beyond current market capacity.

The regulations therefore make provision that buildings which are affected by the requirements to always display a valid EPC in a prominent place that is clearly visible to visiting members of the public, can continue to use the old-style EPC they currently display under the 2008 Regulations until the end of its validity period, or until 31 October 2031.

This means that if the validity of an EPC issued under the 2008 regulations expires before 31 October 2031, it will be required to use a new-style EPC. After 31 October 2031, all building owners or occupiers covered by Regulation 13 will need to obtain and display a new-style EPC meeting the requirements of the 2025 Regulations.

For large public buildings, our analysis suggests that around 1,900 buildings in Scotland will need to meet the requirements to always display an EPC. The majority of these buildings currently have EPCs that would expire after 1 October 2031.

As with other parts of the property market, the Scottish Government will engage with building owners and occupants covered by these requirements to ensure that they understand the requirement to have a new EPC before the new regulations come into force.

• New construction

The regulations set out a requirement for EPCs to be provided upon construction of a new property. This replaces the existing requirements in standard 6.9 of Schedule 5 of the Building (Scotland) Regulations 2004, and brings all legal requirements for the provision of EPCs into one set of regulations.

Developers of new buildings completed on or after 31 October 2026 will be required to give a copy of a valid EPC and Property Report that meets the requirements of the 2025 Regulations to the owner of the building within 7 days of submitting a completion certificate to a local authority verifier.

As with other parts of the property market, the Scottish Government will engage with developers of new buildings and with local authorities to ensure that they understand the requirements the new regulations before they come into force.

Benefits

The Scottish Government believes that there are a wide range of benefits which will be delivered for businesses and for other actors through our EPC reforms.

Qualitative benefits

It has not been possible to monetise the majority of benefits associated with EPC reform. Nevertheless, these benefits are expected to be significant.

Key non-monetisable benefits of EPC reform include:

• Clearer information for landlords as to how their property can be improved to benefit current or potential tenants
• More accurate and understandable information for property owners, users and those providing financing (including Government delivery schemes)
• Continued data sharing provisions with more accurate and up to date information for government and researchers
• More accessible presentation of data means information accessed by users is greater and more useful, and available to more people
• Support to decarbonisation goals through improved energy efficiency information and information on clean heating options
• Support to other legislation, such as minimum energy efficiency standards
• Potential for increased employment and economic activity in the EPC assessor sector
• Raised quality standards and improved assessor skills through creation of new onsite audit regime leading to greater consumer confidence and reputational benefits for assessors

These benefits, while not monetised, indicate the significant positive impact EPC Reform is expected to have across multiple groups.

Providing accurate and understandable information

EPCs are a requirement under the EU Energy Performance of Buildings Directive and are a longstanding feature of the property market, providing potential owners and tenants with information about properties. For building owners, they provide information about how the building could be improved, leading to greater comfort and lower running costs for the occupier.

EPCs are the only mandatory assessment of the energy efficiency of buildings. The information they provide is relied upon by numerous high profile Government schemes and policies including the Fuel Poverty Strategy, proposed private rented sector minimum energy efficiency standard (PRS MEES), Energy Efficiency Standard for Social Housing / proposed Social Housing Net Zero Standard, Home Reports, Local Heat & Energy Efficiency Strategies, Warmer Homes Scotland, Area-Based Schemes, Home Energy Scotland loans and grants, the Energy Company Obligation, and the Renewable Heat Incentive. Collectively, the major Scottish funding schemes which use EPCs include Warmer Homes Scotland, Area-Based Schemes and Home Energy Scotland grants and loans, have a total capital allocation of nearly £200m for 2025-26. It is therefore essential that EPCs provide accurate and clear information to inform individuals and policymakers.

Improved Accuracy and Clarity

The reforms we have set out in regulations are essential to improving the clarity and accuracy of EPCs. This includes reforms to include more ratings to allow more targeted policy (e.g. through the introduction of a Heat Retention Rating, which will allow policies to directly use a rating based on the energy efficiency of the building fabric, and a Heating System Rating, which will allow policies to focus on the heating system. The current rating system combines these aspects meaning policies (such as PRS MEES) cannot target individual aspects of a building’s efficiency).

These separate ratings will also provide clearer information to current and prospective building owners and occupiers. This includes assisting landlords in understanding how they can improve their building to benefit and retain tenants. Businesses can therefore be better-informed when seeking to make investments in improving the energy performance of their property.

In addition to improving the accuracy of the EPC ratings, we have also undertaken user-centred-design to inform the design of the reformed EPC. This work sought to identify how the EPC can best communicate new ratings systems, support decarbonisation and ultimately, better inform consumers and building owners.

In response to user feedback, we have proposed designs for a new certificate –

• with a clean and modern colour scheme and layout
• reduced text and introduced icons and visual elements to communicate information more easily
• used primary ratings and page hierarchies to ensure users get key information quickly, and are signposted towards more information
• removed unwanted information

In advance of new regulations coming into force we will continue to iterate designs and engage with users to inform this work. We will complete user centred research to –

• Update the online website as part of EPC register updates.
• Move to a web-based format, building on the modular designs to date.
• Test how best to communicate new ratings systems.
• Engage with stakeholders to ensure accessibility requirements are met.
• Investigate the potential for an interactive tool to encourage people to consider retrofit options.

The updated designs received consistent positive feedback from users including that the new certificate design is more modern, the introduction of graphics makes it easier to understand and that the new ratings can be quickly identified. Users also called for links to further support and advice and this will be included. An easily understood and accessible EPC can be an effective tool to inform building owners and occupants and support the improve the energy performance of buildings.

More up-to-date information

Ensuring that the information EPCs provide is up to date is a key component of improving the accuracy of EPCs (as stated by organisations including Which?^[50] and the Building Research Establishment^[51]). Currently, landlords can provide an EPC to prospective tenants that is up to 10 years old, and there is no requirement to update the EPC if work is undertaken to the building (such as changes to the heating system or building fabric).

The 2025 Regulations reflect this need to ensure information on EPCs is up-to-date through the introduction of a five year validity period. This provides a benefit to prospective tenants who may be able to make more informed decisions (e.g. the figures shown on the EPC as to the building’s energy efficiency and features will have been produced no more than five years prior to the tenancy, as opposed to 10 years as is currently the case). Landlords who have made improvements to their property will be able to market those improvements to prospective tenants through the enhanced rating information available on the reformed EPC.

Continued data sharing provisions with more accurate and up to date information for government and researchers

The data gathered through EPC assessments is stored in the Scottish EPC Register and a subset of this data is made available to stakeholders on our statistics platform. This data is used by a range of stakeholders including the Office for National Statistics, Ofgem, the Scottish Government, the Energy Saving Trust, local authorities, registered social landlords, universities, and private organisations. Uses of the data including helping local authorities and registered social landlords understand and track the performance of their stock (including supporting production on LHEES), and informing research into the energy performance of Scottish buildings. The EPC provides a standardised methodology for data collection and calculation.

Supporting other legislation

The information EPCs provide is relied upon by various UK and Scottish government legislation. This legislation includes:

• Climate Change (Scotland) Act 2009
• Energy Act 2011
• Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019 (and the related, statutory Fuel Poverty Strategy)
• The Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016
• The Building (Procedure) (Scotland) Amendment Regulations 2007
• The Building (Scotland) Regulations 2004
• The Civic Government (Scotland) Act 1982 (Licensing of Short-term Lets) Order 2022
• The Domestic Renewable Heat Incentive Scheme Regulations 2014
• The Electricity and Gas (Energy Company Obligation) Order 2023
• The Enhanced Enforcement Areas Scheme (Scotland) Regulations 2015
• The Feed-in Tariffs Order 2012
• The Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) Regulations 2012
• The Home Energy Assistance Scheme (Scotland) Regulations 2009
• 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 Renewable Heat Incentive Scheme Regulations 2018

Government schemes and policies which use EPCs include:

• the Fuel Poverty Strategy
• proposed Private Rented Sector Minimum Energy Efficiency Standard (PRS MEES)
• the Energy Efficiency Standard for Social Housing (EESSH) and proposed Internal Scottish Government and wider public sector engagement (SHNZS)
• Home Reports
• Local Heat & Energy Efficiency Strategies (LHEES)
• Warmer Homes Scotland
• Area-Based Schemes
• Home Energy Scotland loans and grants
• the Energy Company Obligation
• the Renewable Heat Incentive.

Collectively, schemes underpinned by EPCs manage delivery of nearly £200m per year.

Increased awareness of energy efficiency and heating system improvements

The reformed rating system introduces separate ratings for the building’s fabric (the Heat Retention Rating), heating system (the Heating System Rating), and cost (the Energy Cost Rating). This will provide building owners with more specific insight into the drivers of their building’s energy cost – whether this is due to the building fabric or the heating system – and so where they should prioritise upgrades.

Modernised, dynamic, EPCs

The reforms include moving from a static Portable Document Format (PDF) EPC format to a webpage-based EPC, with, in future, dynamic tools to allow consumers to input different variables in terms of their behaviour and preferences, to understand the likely impact that this would have on their energy use and the impact of retrofit measures could have on their home. This interactive format will help to ensure consumers and businesses can more accurately model the likely impacts of any changes to their property’s energy efficiency or heating system, and the associated costs and savings from doing so.

Streamlined EPC lodgement process

Our EPC reforms include moving to the Home Energy Model, making use of the UK Government’s Energy Calculation as a Service infrastructure (ECaaS) rather than developing separate calculation infrastructure for Scotland (with anticipated cost saving of £6.5 million and avoided £0.6m of annual running costs). This involves moving to a single point of lodgement for EPCs through ECaaS. This brings benefits to EPC assessors, Approved Organisations, and assessment software develops (specifically those who operate in both Scotland and England) as it reduces complexity for their systems – they will no longer need to develop, test, administer and operate software that lodges against two different EPC Registers.

Revised Non-Domestic EPC Rating System

The reformed non-domestic EPC rating system responds to stakeholder feedback that the current rating can act as a barrier to investment in Scotland, due to differences to the rating system used in England and Wales. This is because financial organisations that operate across the UK reportedly often do not understand the difference between the rating currently used on Scottish non-domestic EPCs and the rating used on EPCs in the rest of the UK:

• The Scottish non-domestic EPC rating is current based on absolute emissions intensity (CO2e/m2/year).
• In the rest of the UK, the non-domestic EPC rating is based on the building’s emissions intensity compared to a reference building. The reference building is a type, size and layout, which is built to a specified standard. This means the rating system compares buildings against others of the same category, rather than an absolute comparison between libraries and swimming pools, for instance.

Moving to a similar non-domestic rating system as is used across the rest of the UK will allow those involved in non-domestic property transactions across the UK to compare EPC ratings more easily. This may lead to such organisations having greater confidence investing in Scottish buildings.

Raised quality standards and improved assessor skills

By creating the new onsite audit regime, assessors and Approved Organisations will receive an additional set of checks and scrutiny to ensure that EPCs are accurate and reliable. The Scottish Government believes that this will help to drive up standards and will support assessors in their continuing professional development to raise their skills and knowledge. We anticipate the impact of this to be an improvement in the reputation of EPC assessors and the assessment sector more generally, leading to greater consumer confidence and potential new business opportunities (for instance where a consumer requests an EPC voluntarily).

As the Scottish Government continues to develop the mechanics of our proposed audit regime, affected businesses will continue to be directly consulted via our External Reference Group.

Quantitative benefits

A reduced validity period is expected to lead to an increased requirement for EPCs, meaning businesses including AOs and EPC assessor businesses would see an increase in demand. In the central scenario, demand for EPC rises in line with a reduced validity period, resulting in a benefit to businesses of around £175m over a 20-year period. Depending on the scenario, benefits to businesses are estimated at between £75m and £274m.

EPC reform also provides underpinning support to other Scottish Government priorities such as the requirement to achieve net zero emissions by 2045 and removing energy efficiency as a driver of fuel poverty. By providing improved and more accessible information to businesses, consumers, researchers, and governments, EPC reform could indirectly support an increase in the uptake of energy efficiency measures, both in domestic dwellings and in non-domestic buildings. There is evidence that this secondary route could reduce household bills by increasing energy efficiency, and increase the value of a property^[52].

Other Impacts

The Scottish Government has engaged with a wide range of stakeholders during the past four years when it has consulted on EPC reform. Other impacts raised include:

• respondents stated that the reform process in general should be explained early to property owners and stakeholders, as they may be involved in improvement works over several years.
• The Regulatory Review Group recommended that comprehensive public engagement is essential to ensure consumer understanding and support.

We will develop a communications plan to ensure our key stakeholders and the wider public are made aware of the EPC reforms and how these changes may affect them in advance of the regulations coming into force.

The Regulatory Review Group also noted concerns raised about potential unintended consequences for consumers if mortgage providers start using the revised EPC ratings as criteria for lending. We will mitigate this through extensive engagement with the financial sector, including through the Financial Conduct Authority, Scottish Financial Enterprise, UK Finance and individual lenders and mortgage advisers, in advance of regulations coming into force. This will help ensure consistency in the way that lenders use the revised EPC ratings.

Beyond the public consultations, our stakeholder engagement has suggested other potential impacts:

• The Scottish Government has a commitment to maintain alignment with EU law where it is feasible and desirable to do so. Our approach to EPC reform will ensure that we continue to broadly align with the EU Energy Performance of Buildings Directive. The Directive has been amended since EU Exit, with its 2024 recast introducing a new requirement for member states to carry out onsite audit and inspection of a proportion of certificates. As set out in the technical consultation on EPC lodgement fees in 2025, the Scottish Government will exercise this function, to ensure independence from Approved Organisations and assessors. We estimate that this will cost £428,000 p.a. which will be reflected in the increase to the EPC lodgement fee. These additional costs will not apply in England & Wales which does not have a requirement to maintain alignment with EU law. These higher fees in Scotland therefore reflect the additional costs necessary to maintain broad alignment with the Directive since EU Exit. We have committed to reviewing the onsite audit function and lodgement fees within two years of the regulations coming into force, to ensure they provide best value for public expenditure.

Scottish Firms’ International Competitiveness

We do not believe that these proposals will impact on the ability of Scottish businesses to compete internationally. EPCs are a legal requirement all around the UK and across the EU. Energy performance ratings for buildings are also required in other nations such as Australia, Canada, the United States of America, and South Africa. Scottish firms seeking to leverage their expertise and operate in these other markets would face similar legal requirements that would need to be addressed.

Small Business Impacts

Due to data constraints, we are unable to provide employment numbers for the entire EPC assessment company employment stock. We estimate there are over 3,000 EPC assessors active in Scotland, with many working in small numbers and likely part of SMEs.

Existing data for domestic EPCs between November 2023 and October 2024 indicates that most EPC assessor companies would be considered micro businesses, and none would be considered a large company.

Through our ERG, we have ensured members of Scotland’s EPC assessment industry (both domestic and non-domestic) are represented. The ERG will continue to meet throughout 2025 (and beyond) to ensure that the Scottish Government has a formal means to discuss and gain views of our proposals directly from organisations representing EPC assessors themselves.

As part of the development of this BRIA Scottish Government officials engaged directly with businesses of all sizes (including micro and small businesses) to help us assess the impacts of our proposals on businesses who operate in Scotland’s energy assessment market.

Investment

It is not envisaged that our reforms will have an effect on global investment as the broad requirements for when an EPC is needed have not changed. Changes to the EPC validity period, and to the lodgement fees will have cost impacts as outlined above, but these are more likely to fall upon existing domestic actors, rather than act as a barrier to new investment. Given that the requirement to have an EPC exists throughout the UK, and across the EU, investors in Scotland face similar requirements. Though lodgement fee costs will be higher in Scotland than in other parts of the UK, they remain well within the range of equivalent small member states across the EU, and we have not been able to quantify any negative impact.

Workforce & Fair Work

We do not believe that these regulations will impact on Fair Work First principles.

Climate Change & the Circular Economy

Our decisions on EPC Reform and the provisions of the new regulations are part of wider plans to support decarbonisation of heat in buildings and to ensure EPCs have a continued role as a vital tool to help our buildings reach net zero: helping to ensure more accurate and comprehensive energy efficiency assessments, thereby enabling targeted improvements to - ultimately - reduce energy consumption and carbon emissions.

Competition Assessment

The measures taken to reform EPCs are not intended to limit the number or the ranges of suppliers of any such associated product including EPC themselves.

Suppliers will still be able to compete freely and vigorously to attract customers. Customers, in turn, will not be affected by limits to the choices they make or the information they can access.

We therefore do not envisage that the proposals contained within this document will limit the number or range of suppliers. The proposals should not affect the number of assessors or AOs, or their ability to carry out EPC assessments. We are not proposing any changes to the points at which an EPC is required under the regulations.

Conversely, the adoption of the Home Energy Model and new Scottish EPC Register may remove complexity barriers to new software developers and Approved Organisations. This is because the Home Energy Model would use a cloud-based calculation, removing the requirement for new entrants to develop their own calculation engine^[53]. Similarly, the new Scottish EPC Register will simplify software development by using the same lodgement end point as the UK EPC Register.

The lodgement fee increase will be applied equally to all EPC assessments – therefore, not causing any market distortion or limiting the ability of suppliers to compete.

We do not envisage the proposals to limit suppliers’ incentives to compete. AO handling and membership fees for assessors already vary between AOs, while EPC lodgement fees are applied equally (which we also envisage will likely be passed onto consumers, and reflected in the overall EPC cost).

Consumers will still have the ability to engage with the market and make their own choices with regards to who they wish to carry out any EPC assessment.

Finally, we do not envisage these proposals impacting any suppliers’ ability and/ or incentive to introduce new technologies, products, or business models.

Consumer Duty

The Scottish Government is reforming EPCs with the objective of improving the information that they provide to consumers wishing to understand the energy performance and emissions of their building – and hence its contribution to net zero objectives. We also want consumers to continue to be able to understand the impact of the performance of their building on their energy costs, and how they could reduce these through improvements to the building’s energy efficiency or changes to its heating system. And we want consumers to be able to trust that their EPCs are accurate and reliable.

Our reforms to the EPC rating system will ensure that consumers have more comprehensive and relevant information to meet these objectives. We have worked closely with consumer groups to test our proposals and ensure that EPCs are redesigned to make them more relevant and accessible. The updated EPC design proposals have been directly iterated by user feedback. The designs have received positive feedback from users who have welcomed that the designs are more modern and that the introduction of graphics makes it easier to understand the content. We will scope out the potential content for a new dynamic interactive tool linked to EPCs. Interactive features would allow consumers to input different variables in terms of their behaviour and preferences, to understand the likely impact that this would have on their energy use and the impact of retrofit measures could have on their home.

We also want to safeguard consumers by ensuring that EPCs are of the highest quality in terms of their accuracy and reliability. That is why we have proposed to strengthen audit and inspection arrangements through introduction of smart-auditing and the creation of a new onsite audit and inspection regime to verify that EPCs are accurate. These strengthened audit arrangements will enhance quality assurance for all consumers: ensuring they have accurate, reliable information to base decisions on. This work will be supported through increases to EPC lodgement fees set out in the new regulations.

The revised lodgement fee set in the new regulations will increase domestic EPC lodgement fees from £2.60 to £6.00, and non-domestic fees to £15.50. It is important to highlight that EPC lodgement fees have not risen since 2017 from their current price of £2.60 per domestic EPC and £12.60 per non-domestic EPC (if they had risen in line with inflation, they would already be 30% higher at £3.38 and £16.38 respectively).

The Scottish Government believes that the proposed fee increase represents a reasonable increase in costs to consumers in order to pay for an improved system from which they benefit. While these fees would, ultimately, be passed to consumers, the increase in the context of the total cost of an EPC is small (£3.60 increase against an EPC cost of £80-100), and minimal compared to other costs at EPC trigger points (e.g. when selling a house, or letting a property). The lodgement fees set in Scotland are also well within the range of those of similar smaller-sized EU countries^[54], and reflect the higher fixed costs of the infrastructure, relative to the volume of transactions. These costs have been further reduced by continuing to share technical infrastructure with the UK Government. . If fees had risen by the rate of inflation since 2017, they would already have risen to £3.38 and £15.71, respectively. The proposed lodgement fee increase set out in the regulations, therefore, represents a small increase when taking this wider context into account.

The EPC lodgement fees will also cover the costs of providing the following services to the users of the reformed EPC regulatory system:

• New EPC website and register of Certificates;
• New and updated Calculation Methodologies for generating domestic and non-domestic Certificates, respectively; and
• New on-site Audit & Inspection of Certificates to ensure reliability and accuracy of assessors’ work, and to drive up the quality of assessments for consumers.

These three regulatory functions are those which most directly benefit users of EPCs: by enabling the energy performance of their property to be calculated, certified, registered and verified as part of the normal functioning of the property market when their properties are advertised for sale or for lease.