April 23, 2025
Being a landlord isn’t all ocean-going yachts and Italian sports cars. Actually, it’s almost never either of those things. Rather than baking in the sunshine in St. Tropez, you’re more likely to find yourself sweating over paperwork. Such is life.
In this article, we’re going to look at one of those bits of paper – the Energy Performance Certificate – or EPC. If you’re a property investor, or indeed a homeowner, these things matter, and there are changes coming.
As property professionals with years of experience in the buy-to-let market, we’re going to examine EPC changes in Scotland, how they might affect you and why they’re happening in the first place.
First things first
So, what exactly is an EPC? The Energy Performance Certificate gives a snapshot of the – wait for it – energy performance of a property! We bet you never saw that coming.
Specifically it rates a property based on a standardised methodology in order to determine likely costs of heating and cooling, levels of insulation (heat retention) and aims to identifyareas where improvementscould be made.
Usefully, it will include indicative costs for the improvements, likely savings and whether Government subsidies might be available.
EPCs are a legal requirement when selling a property, included as part of Home Reports, in order to give interested parties a clear overview of the pros and cons of any property, and they are required at every change of tenancy.
The levers of power
EPCs are also the visible embodiment of government policies to address global warming and to force improvements in heating and insulation onto the housing market.
It’s here that they become particularly relevant to homeowners and property investors, as the ratings contained within the certificates are used to ensure that properties meet constantly shifting standards.
We say constantly shifting, and that’s because the dates when certain standards are due to apply have moved constantly for some time now. The Scottish Government has looked afresh at EPCs in general recently.
It’s enough to know that governments have set environmental targets and EPCs are the posterboys for their enforcement. We’ll get into more detail shortly.
Current state of play
Given what we’ve just written, the following may come as a surprise:
“There is currently no legislation in place to introduce a minimum energy efficiency standard in Scotland, however the government published its latest proposals in a consultation paper in November 2023.”
This quote came from the Scottish Association of Landlords (SAL) in October 2024 in response to an erroneous report of BBC Radio 4. The Scottish Government (SG) had intended to introduce minimum standards for the rented sector, but demurred.
The SAL response goes on to explain that the SG proposes to make it a legal requirement for rented properties to meet a certain standard by 2028 before they can be let. But, as they say, the game’s afoot.
EPC Changes in Scotland
Some of the changes in Scotland are driven by changes in the rest of the UK, specifically how EPCs will be compiled. This is a deeply technical subject and there is plenty of information out there if insomnia is your thing.
In short, EPCs are currently compiled using a model based on SAP – the Standard Assessment Procedure – currently SAP 10.2. This will be replaced by the Home Energy Model, an evolution of SAP.
As this new model has not yet been adopted, the SG proposals intend to make use of it, once it is fully approved in the rest of the UK. In the meantime, they have published their response to the 2023 consultation.
This gives a clearer picture of what Scotland can expect with regards to EPCs and legislation moving forward. Some property organisations have welcomed the SG’s response.
The new certification will include information about the fabric of the building along with clarification of pre-existing categories.
So far, so good – maybe
Being model-based, the EPC system has some drawbacks. It depends upon codifying assumptions about the way residents use the property to arrive at its conclusions and determine a rating.
This is hardly unusual but it does mean that any and all EPCs are based on assumptions. Heating costs are a good example.
The EPC will determine heating costs based on heat retention of the property, the type of heating system installed and the behaviour of the resident, and all of these have to be modelled as it’s impractical to survey each resident in detail.
Therefore, as they say, your mileage may vary, possibly dramatically. Older people may use the heating far more than younger ones. People who work from home will use it more than those who are office based.
There are many variables, and where there are variables, you cannot expect complete accuracy. This is exacerbated by a failure to include emergent technologies relevant to dwellings.
This is a large part of the drive from SAP 10 to HEM, as the new model uses much more data to better model the energy behaviour of properties. HEM will also be capable of adding and modelling new technologies such as heat batteries etc.
That’s a lot of theory, what does it mean?
It is a wide-ranging and at times technically complex subject, however the practical outcome is the Heat in Buildings Bill which has completed its consultation stage and will now, presumably move forward in 2025.
It doesn’t exist as a Bill before the Scottish Parliament yet, that is expected later this year. For landlords, the expectation is that they will see requirements for minimum energy ratings, as determined by an EPC, from 2028.
Those minimum requirements are expected to apply to private dwellings from 2033, with polluting heating systems targeted for replacement by 2045.
So, clearly defined changes then?
Changes – yes, clearly defined; not so much. All of the above is being incorporated into a number of proposed changes in Scotland.
As already mentioned, surveyors will begin changing the way that EPC ratings are calculated. This is expected from June this year.
As a consequence, EPC ratings are likely to change and in some cases we could see higher EPC ratings for properties which haven’t actually changed in any material way.
The EPC itself will be changing, giving more information about a property. The Scottish Government is also proposing to reduce the valid period for an EPC from the current 10 years to 5.
Their reasoning is that this will ensure that information regarding energy efficiency will be more up-to-date than at present.We are also told that we can expect to see an online portal making it easier to see and ‘interact’ with EPC data.
2028 has been flagged as the start of mandated EPC ratings for rented properties. This is expected to be EPC Rating 3, however we would caution that this has been mooted before and delayed before.
We have no information at this point concerning how these changes will apply to listed buildings, conservation areas or tenements where landlords do not have overarching control over the building.
Advice from the property pros
We can say without fear of contradiction that there will be EPC changes in Scotland. They are coming, they’ve been well-flagged and they will definitely happen.
What we don’t know is exactly what form they will take and when they will apply. It’s most likely that the private rented sector will see the effects of these changes before the domestic market.
Without having the upcoming Bill before us, we cannot say with certainty what allowances and exceptions there may be within the requirements of the legislation.
It has long been accepted that some properties will not easily allow for upgrading to meet EPC requirements; think of listed buildings as an example. Whether a maximum spend will be mandated to do ‘as much as possible’, we don’t know.
It is likely that landlords will face additional costs as a result of these changes, depending on how new and energy efficient their properties are. Lots of unknowns unfortunately.
In summary…
EPC changes in Scotland are a difficult subject to ignore, unless you are willing to dismiss climate change and hold the position that your tenants have no right to live in a well-insulated, warm property. Not a tenable stance we feel.
It is to be hoped that as the proposed Bill traverses the Scottish parliament, any problematic provisions will be lost to common sense and committees. However, when principles butt up against increased costs there is some unavoidable pain.
Sadly, the pain is probably going to be felt most amongst smaller landlords, as their costs will be proportionately higher should remedial measures to their properties be necessary .
As ever, if you’d like to discuss this, or any other matter regarding the buy-to-let market and the opportunities there, we are always available to help you and to guide you to the best options for you.
EPC changes in Scotland can become a complicated subject very quickly, so thank you for reading this far!
Written by Ross MacDonald, Director of Sales & Cofounder of Portolio
Get in touch on 07388 361 564 or email to [email protected]
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