Energy Performance Certificates (EPCs) aren’t a new concept, but significant changes are coming, affecting both landlords and tenants across Scotland. While originally planned to apply from October 2026, the changes have been delayed slightly to align with UK-wide provisions. But coming they are.
These changes are so substantial that every business owner and property professional should familiarise themselves with what’s ahead.
Why are EPCs changing?
An EPC rates a building’s energy efficiency on a user-friendly letter scale, with A being the most efficient and G the least. The system has historically focused on theoretical energy use, based on the building’s physical characteristics, such as insulation quality and heating systems. The new regime introduces a more sophisticated approach.
Revised EPCs will assess:
- Thermal efficiency: how effectively insulation, glazing, and building fabric retain heat
- System performance: the efficiency of heating, ventilation, air conditioning, and lighting systems
- Actual energy consumption: real-world energy use based on how the building is occupied and operated
- Carbon emissions: greater emphasis on actual CO₂ output rather than theoretical figures
This shift toward real-world performance data should mean that energy costs become more transparent, and a building’s EPC rating reflects a more accurate estimate of what it costs to run, rather than a theoretical assumption.
What this means for businesses
Even if energy efficiency isn’t high on your list of concerns, you should pay attention to these changes. Building performance directly affects your bottom line: an inefficient unit costs more to heat, cool, and light, and these higher energy bills erode profit margins. Not to mention how an uncomfortable working environment can impact staff productivity and morale.
Secondly, environmental responsibility is a business imperative, with customers, investors, and employees increasingly expecting businesses to demonstrate a genuine commitment to sustainability. A poor EPC rating can easily become a reputational issue.
New penalties for non-compliance
The regulations require EPCs to be renewed every five years, with sanctions applying if deadlines are missed. Landlords will not be allowed to lawfully let a commercial property that fails to meet minimum EPC standards, and the financial penalties are equally serious. Non-compliance will see fines of up to £150,000. These obligations will fundamentally affect the value of commercial landlords’ property portfolios.
Guidance for tenants
The EPC compliance requirements set out in the changes don’t just fall to the landlord; tenants occupying public-facing buildings larger than 250m² are legally required to display the EPC certificate in a clearly visible location. This obligation is fairly straightforward, but the second presents more complexity and higher potential costs.
Many commercial leases will include “green clauses” that shift the responsibility for energy performance (and the cost of any necessary improvements) onto the tenant. Signing a commercial lease for an older building, period property, or any other building with poor insulation or single-glazed windows could see you liable for funding costly energy efficiency improvements in the future.
Certain properties are exempt from requiring an EPC:
- Temporary buildings with a planned use of two years or less
- Certain specialist property types with low energy demand
- Buildings with a total useful floor area of less than 50m²
Remember that when it comes to legal matters, it’s always better to confirm, not assume.
It’s not all additional burdens
The revised system does offer genuine advantages, allowing tenants access to much clearer and more detailed information about actual energy use and costs, allowing for more informed decisions when choosing premises, with a better understanding of running costs. EPC ratings could become a significant factor in decision-making when selecting a new property, and in theory, the market pressure should incentivise landlords to proactively invest in energy improvements, rather than waiting for regulatory requirements to force their hand.
When to involve a solicitor
Don’t assume you’ve escaped the regulatory changes by renewing an existing lease; lease renewals provide an opportunity for landlords to introduce new terms. In the coming 12 months, it’s more important than ever to have both new tenancy and renewal documents reviewed by a solicitor before signing.
How to prepare for the changes
Going forward, it’s important to consider EPC compliance when entering a new commercial lease. The key questions to ask include:
- What is the property’s current EPC rating?
- What improvements, if any, would be needed to meet anticipated minimum standards?
- Who bears responsibility for funding those improvements – landlord or tenant?
- If the tenant is responsible, are costs capped or unlimited?
- What happens if the landlord doesn’t maintain the required EPC rating during the lease term?
Forward planning is equally important for landlords. Now is the time to upgrade any properties that fall below the anticipated minimum standards. When regulations come into force, increased demand may see contractors increasing their prices and working over extended timescales. Acting now could not only cut costs but also reduce potential disruption to rental income.
The start of something bigger
The upcoming EPC regulations represent a broader shift towards net zero targets and reduced carbon emissions, which are likely to become more demanding over time. This leaves energy efficiency as a strategic consideration for any business leasing a property. The properties you choose, the leases you sign, and the improvements you make (or fail to make) will have lasting financial and operational consequences.
Early awareness and planning are always preferable over scrambling when deadlines loom. If you’re concerned about how the new EPC regulations might affect your business premises, or if you need a commercial lease reviewed to understand where responsibilities lie, seeking professional legal advice is worthwhile. The cost of that advice is typically modest compared to the potential cost of getting it wrong.
John Roberts is a Partner and Director at Austin Lafferty Solicitors. John has been with the firm for almost 20 years, with experience in all areas of business law.
