Energy Performance of Buildings (Scotland) Regulations 2025: technical consultation analysis

Penalty Charges

The existing EPC regulations allow local authorities, as the enforcement authority, to issue a penalty charge notice if they believe that a property owner has breached any requirements to ensure that a valid EPC is made available to prospective buyers or tenants when the property is to be sold or let. Penalty charges have been fixed since they were legislated in 2008, as follows:

• £500 for domestic dwellings or buildings and building units ancillary to dwellings
• £1,000 in any other case

However, the consultation paper noted that local authorities have rarely, if ever, used these powers in the 16 years that the regulations have been in force.

In the future, the Scottish Government wants to ensure that any penalty charges payable are fair and proportionate, and to ensure that their levels act as a sufficient deterrent to any breach of the regulations. As such, the consultation sought feedback on what the appropriate level of penalty charges should be going forward, and views on the proposal to review the penalty charge level within two years of the new regulations coming into force to ensure they remain appropriate.

Appropriate Level of Penalty Charges

Q5. What are your views on the appropriate level of penalty charges under the new regulations going forward?

A range of views were expressed by respondents in relation to this proposal. Some were strongly supportive of penalty charges and increasing these in some or all circumstances. Others were against or ambivalent about the prospect of increasing penalty charge levels. Some were against the use of penalty charges at all (typically individuals). Mixed opinions were also expressed by the same respondents.

Generally, respondents did not specify the exact amounts they thought the penalty charges should be set at/increased to. While a few suggested they should be higher than the current level, others simply advised that the levels needed to be sufficiently high enough to act as an effective deterrent.

Sector Specific Penalty Levels

Some respondents (including organisations and individuals) highlighted a few specific sectors where they felt differential or higher penalty charge levels should apply. These included construction companies and new-build developers; private sector landlords; non-domestic buildings; and repeat offenders. This would reflect the increased responsibilities that commercial organisations have to consumers, the increased knowledge that these organisations should have regarding the system, and the increased significance for non-compliance among those commissioning a large number of EPCs. It was also felt that the current penalty rates were not a sufficient deterrent for poor practice:

“We would further recommend higher penalty charges for new build domestic properties, private sector landlords, and all non-domestic buildings in the case of repeat offences. We make this recommendation to address poor practice amongst developers, unscrupulous practices by private sector landlords, and because we do not believe that the penalties are sufficient to be a deterrent for developers of domestic properties and owners and developers of non-domestic buildings. We do not have a strong view on how high these penalties should be, other than we believe they would need to be substantially higher to act as a deterrent.” (Energy Focused Organisation)

One organisation also suggested that there was not enough of a difference between domestic and non-domestic penalty levels. They suggested that, while penalties should be increased for both sectors, non-domestic penalties needed to be higher in order to ensure this was a sufficient deterrent to taking shortcuts or not meeting the requirements.

Inflationary Increase

Several respondents suggested that an inflationary increase in the penalty levels would be a sensible or reasonable starting point. This is in line with the recommendations for the system in England and Wales and was therefore considered acceptable for Scotland as well.

One organisation also suggested that whatever level the penalty charges are set at, it should be subject to annual adjustments in line with inflation to ensure they remain appropriate.

No Change Required

A few respondents suggested that it may be more sensible to retain the current penalty levels and not introduce an increase. This was generally due to the fact that the current rates in Scotland are already above the increased rates proposed for England and Wales, and because the penalties have rarely/never been imposed. As such, it was felt there was little value in increasing the charges, particularly as this would incur some administrative costs.

One organisation suggested that Scottish penalties should be maintained at least until England and Wales had risen to the same level. However, this was contradicted by another organisation who argued that the English and Welsh penalties were too low and that the Scottish system should impose higher levels.

A few respondents also felt that discussion of penalty rates was not required due to the fact that no penalties had been imposed in the past. One individual suggested this meant there was no justification for changing the penalty levels.

Monitoring and Enforcement Required

It was perceived that, in addition to setting effective penalty levels, the Scottish Government also needed to consider ways to strengthen the monitoring and enforcement of EPC regulations. Without this, it was felt that penalty charges would be ineffective/redundant. One individual suggested that a central team should be responsible for this as the current situation where local authorities have rarely/never issued fines meant that people were emboldened to take risks:

“As long as they're actively monitored and enforced, otherwise it's a pointless exercise. The only way I see that happening [is] if this is monitored and carried out proactively by a team within the Scottish Government, and not local councils, who do not have the funds/means to do it… It should disincentivise the current attitude of people taking the risk since no one is getting fined.” (Individual)

Other Comments

A few other comments were provided which either supported the use of penalty charges, caveated support, or highlighted challenges that may be experienced (with each being mentioned by just one or two respondents each). These included that:

• Penalty charges need to exceed the cost of carrying out either a domestic or non-domestic EPC in person, and cover the cost of any enforcement action
• Penalty charges should be percentage based rather than a fixed a fee, otherwise it does not provide an equitable deterrent and will more severely impact some
• Challenges may be raised where people have little faith in the EPC due to them being a visual check only and potentially inaccurate
• Raising the bar on entry for EPC assessors would also help to control and improve quality

Opposition to Penalty Charges

Some individuals were either against the use of penalty charges at all or were concerned that the penalty levels were currently too high/would be set too high. One individual described the maximum proposed fine for non-domestic properties as “obscene”. Meanwhile, another felt the levels were too high, particularly when reflecting on the shorter lifespan of the EPC (from 10 years to five years validity) and the risk that people may not realise their certificates had expired.

One individual also suggested that AOs already had powers to address inaccurate EPCs and so they were best placed to manage compliance.

Review of Penalty Charges Within Two Years

Q6. To what extent do you support or oppose the Scottish Government’s intention to review the level of penalty charges within two years of the new regulations coming into force, to ensure they remain appropriate?

Of the 25 respondents who rated their level of support or opposition at this question, 16 (64%) supported the proposal to review the level of penalty charges within two years of the new regulations coming into force. Conversely, five respondents (20%) opposed this, all of whom were individuals.

Reasons for Support

Feedback at this question was largely consistent with that provided at earlier questions, particularly in relation to reviews of the lodgement fee and the on-site audit and inspection function, and in relation to the levels of penalty charges.

Those who supported the proposal to review the level of penalty charges within two years felt this was appropriate and sensible. Respondents were generally supportive of the use of reviews, particularly to test changes in the system. It was also felt that a review would offer a useful opportunity to:

• Assess whether the penalty charges were set at a fair, appropriate and effective level
• Determine whether the correct balance had been stuck between lodgement fees and penalty charges
• Look at both penalty charges and the on-site audit and inspection functions to determine if any changes are required to support improvement

A few noted that the timescale proposed was sufficient to ensure that the necessary changes had been implemented and the system established. It was felt that this would allow sufficient time for testing and evaluation of the changes, to consider effective penalty levels for different sectors, and for the review to be able to accurately judge effectiveness.

Again, a few respondents advocated for more regular reviews. This would provide more long-term monitoring to ensure the penalty charges remain appropriate and effective in ensuring compliance. It would also allow for inflationary adjustments, which a few respondents felt was necessary:

“Regular reviews and considerations towards inflationary adjustments, and any increase in EPC regulation breaches, would be a reasonable course of action in keeping the penalty charges proportionate over the medium and long term.” (Built Environment Focused Organisation)

A few individuals felt the review would be useful to assess how many people had been fined and whether that was reasonable, and to identify what proportion had and had not paid the penalty change.

Caveats to Support

Enforcement issues were also raised again at this question. One organisation stressed that it would be important to ensure that the EPC regulations were enforced, otherwise the penalty charges would be ineffective. Meanwhile, another was concerned that local authorities were not sufficiently resourced to undertake effective enforcement of the EPC regulations, meaning this could result in a postcode lottery effect:

“In reviewing the level of penalty charges, it’s also important to consider…the enforcement of existing EPC regulations. Without this, higher penalty charges will be redundant.” (Organisation, Real Estate Focused Organisation)

“One consideration that the Scottish Government should consider on an ongoing basis is whether Scottish local authorities have sufficient resources to [enforce] standards. Failure to occupy enforcement across Scotland could result in a postcode lottery of enforcement.” (Real Estate Focused Organisation)

Reasons for Opposing

Of the five individuals who opposed the proposal to review the penalty charges within two years, only three provided further details about their reasons for opposition. One further individual, who answered ‘don’t know’ at the closed element of this question, also expressed opposition in the comments.

Two individuals again argued that there should be no penalty charges. Another felt it was difficult to stay abreast of legislation, particularly when they perceived that the property sector was already over-regulated. They argued that:

“Moving the goal posts every two years adds to that burden.” (Individual)

The final individual again questioned the validity of considering this topic due to the fact that penalty charges had never been applied in practice.

Feedback on Penalty Charges from the Workshops

The main issue raised by workshop attendees was the current lack of enforcement. It was suggested by attendees across all three events that local authorities currently do not impose penalty charges. Therefore, there was no effective enforcement of the requirements or disincentives for non-compliance. As such, it was suggested that discussions around the penalty charge level and a review were irrelevant.

There was a suggestion from one attendee that, until enforcement was being actively pursued, the penalty charge level should remain at its current level as there was no benchmark regarding costs or effectiveness. However, it was acknowledged that, once enforcement was implemented the penalty charge levels may not be high enough to cover the cost of enforcement.

Attendees in one workshop event suggested that the enforcement function should be removed from local authorities and placed with a central body (either a local authority body or central government). However, the key issue was to ensure that enforcement happens.

In terms of the timescales for undertaking a review, this was only discussed in one workshop event. However, attendees were generally in agreement that this should be two years after the regulations are implemented. It was felt that one year was not a sufficient time period, while any longer than two years would be too long to wait for any necessary changes.

Other issues related to penalty charges, raised by one respondent each, included:

• Establishing a mechanism to increase penalties by inflation
• Linking the penalty charge to the transaction value as current levels do not encourage compliance
• How enforcement organisations would be held accountable, and who would police the police?
• That some local authority properties do not have EPCs and it may be unrealistic to expect them to penalise themselves