Bringing the heat

Energy performance, heating systems, energy efficiency improvements… these are probably not things that we conveyancing solicitors spend a great deal of time thinking about at the moment. This is likely to change soon.

In a conveyancing transaction, we will ensure that a property has any requisite energy performance certificate (EPC), but do we actually look at that EPC? Probably not. Do we notice what type of heating system a property has? When it breaks down at settlement, yes, but otherwise, not likely. Occasionally we will need to check for servitude rights to a heating oil tank sitting outwith a client’s title, or perhaps for some alterations consents for a new wood-burning stove that has been installed, but generally speaking, we don’t really consider what type of heating a property has, or even if it has any heating. And will we have any awareness of what measures could improve a property’s energy efficiency? Again, probably not – unless compliance with an action plan (under The Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016) forms part of the transaction negotiations.

This is all likely to change soon.

The Scottish Government has recently consulted on a proposed Heat in Buildings Bill, which, among other things, proposes to introduce requirements on homeowners to ensure that their properties meet a particular energy efficiency standard within a set timescale (possibly as early as 2028 for landlords and 2033 for owner-occupied properties).There is currently no proposal to prohibit the sale of domestic properties that do not meet this energy efficiency standard. Private rented sector landlords, though, would be prohibited from leasing to new tenants if their property failed to meet the requisite energy efficiency standard by the end of 2028. The Scottish Government does not currently propose to introduce a minimum energy efficiency standard for non-domestic property.

The use of polluting heating systems, including gas central heating and oil-fired heating, is likely to be completely prohibited in both domestic and non-domestic buildings within around 20 years, by 2045, but with an earlier trigger for buyers to convert to non-polluting heating (perhaps within two to five years of purchase) in the case of domestic and non-domestic properties that have been sold during that time. Importantly, under the current proposals, homeowners who have ended their use of polluting heating by 2033 will not have to meet the requisite energy efficiency standard in addition. However, landlords of private rented properties will still have to meet the requisite energy efficiency standard by 2028, even if they have switched to a non-polluting heating system by then.

This is likely to introduce a new element to buying and selling residential properties. A house buyer may not simply be looking at the size, condition and location of a property, but instead also its EPC rating and the type of heating system it has. It may become more attractive to purchase certain homes that already meet the relevant energy efficiency standard and do not have a polluting heating system, while some homes, which will require investment after purchase to achieve compliance or risk enforcement action, may become less attractive options for buyers. Similarly, for non-domestic property, the type of heating system it has will become a factor for buyers to consider.

The Law Society of Scotland has responded to the Government’s consultation. In keeping with the Law Society’s role, no comment has been made on the policy considerations of the proposed legislation and instead the response deals with the workability of the proposed measures. Throughout our response we have noted a significant lack of substance to the proposed legislation at this stage; much more detail will be required before full comment can be made. For this reason, it is very difficult to envisage what a Heat in Buildings Act will actually look like and how it might affect conveyancing practice. Much more detail will be required on the particular energy efficiency standard that is required and how this is to be assessed (it might be more complex than simply an EPC rating), as well as on the triggers and timescales for compliance, exemptions for some properties, a possible cost cap on improvements, how the requirements will operate in Heat Network Zones, and also what penalties and other consequences will be incurred for non-compliance. The eventual legislation may look very different from the Bill but, one way or another, energy efficiency in properties is almost certainly going to be some form of issue for our profession in the coming years.

Solicitors may at this stage therefore wish to start considering how this is to be dealt with. Should we be warning clients about the proposed legislation now? We will all be acting for clients at the moment who will be buying properties that may, in the near future, become targeted by this proposed legislation and require energy efficiency upgrades as well as changes to heating systems. That being said, given the lack of detail on the proposed legislation and the fact that this can all still change, it would seem premature to actually be trying to advise clients on such a matter at this point. The Government’s proposals are in the public domain and we solicitors know no more than anyone else.

But this may change quickly, particularly once we have more detail on the proposed legislation. Solicitors may therefore wish to start thinking now about how clients are to be advised on these matters.

Clients will certainly look to us to give some advice on what a Heat in Buildings Act actually says, including in general terms what the Act requires, which properties it affects, what the timescales are for compliance and the penalties for non-compliance. There are likely to be exemptions from the legislation, and clients will want to know whether or not their property will qualify for an exemption.

There will certainly be an element of advice that is never likely to fall within the scope of a solicitor’s work (and therefore will be best excluded from the scope of your instructions). For example, solicitors may not be expected to know how to assess or improve energy efficiency or how to replace a property’s heating system. However, with a Heat in Buildings Act, we should anticipate that clients will be more likely to have questions about EPCs (and action plans). It will therefore be beneficial for solicitors to have sufficient knowledge of those to be able to draw the relevant parts to a client’s attention, while also signposting them to those who might be able to offer fuller advice on the practicalities of improving a property’s energy efficiency.

In cases where clients are planning to make energy efficiency improvements to properties, in particular to install new heating, they may well require advice on the property law aspects of this. Clients will want to know whether or not the roof on which they plan to install solar panels, or the wall on which they intend to install an air source heat pump, is common property or exclusively owned. They may need to be directed to advice on planning matters as to whether some improvements are permitted.

The legislation will need to be applied to a wide range of property types, including listed buildings, tenement flats and rural properties, all of which will bring their own peculiar challenges (both physical and legal) for improving their energy efficiency. Once passed, the legislation is likely to throw up some challenges and uncertainties in its application, at least initially, as we all familiarise ourselves with it.

The legislative requirements that will be introduced will mean that conveyancing solicitors (and others, such as surveyors and estate agents) will have an important part to play in advising their clients on energy efficiency. Conveyancing solicitors should therefore be watching any developments regarding the Heat in Buildings Bill carefully.

Written by Struan Ferguson, Partner at Blackwood and Smith WS and member of the Society’s Property Law Committee (article written as member of the Committee)