Building safety and decarbonisation for property owners in Britain

Property owners in Britain are facing Increasing regulation following the Grenfell Tower fire in London and because of policy reactions to the climate emergency.

Navigating the requirements can be challenging, especially as the rules in England and Wales differ from those in Scotland.

Many rules are already in force governing building safety and decarbonisation, and they are different in England and Wales against to in Scotland, and new legislation is proposed .

Building safety

The Building Safety Act 2022

The Building Safety Act 2022 established a system of regulation for building safety across England and Wales. The main provisions of the Act came into force in England on 1 October 2023 and 6 April 2024 and have been supplemented by regulations that further detail the requirements to be met in England. The Welsh parliament, the Senedd, is responsible for enacting implementing regulations in Wales.

Among the main changes introduced under the Act is the introduction of a specific new building safety regime governing so-called ‘higher-risk’ buildings (HRBs).

HRBs are subject to approval at three ‘gateway’ stages of development – they must pass through the first ‘gateway’ to obtain planning permission; the second ‘gateway’ before building work can be commenced; and the third ‘gateway’ before a completion certificate is issued and the building can be occupied. The process is overseen by the new building safety regulator (BSR), provided for under the Act. The BSR sits within the Health and Safety Executive (HSE).

The Act also established a number of duty holder roles in respect of building safety for HRBs. Those duty holders are accountable throughout the design, construction, and occupation phases.

A ‘golden thread’ of information pertaining to HRBs must also be put in place and updated throughout the building’s lifecycle.

Developers and construction product manufacturers also face increased liability for building safety defects, including historic defects, under the Act, which also provides the government with powers to regulate construction products and introduce new regulations for the safety of construction products in the UK. The Act also provides protections for leaseholders in respect of the costs of remediating historic building safety defects in their properties.

Apart from the new powers relating to construction products, the Act does not apply in Scotland. Despite this, Scottish law makers have been developing separate plans to enhance the building control system and fund remediation of historic defects, with some features of those plans bearing similarity to features of the new regime in England. See more details below.

Compliance plan for high-risk buildings

The Building Standards division of the Scottish government has developed a new compliance plan approach for high-risk buildings. Compliance plans need to show that the duty to comply with the building regulations imposed on the ‘relevant person’ – usually a building owner or developer – is being delivered efficiently at the design and construction stages of a project. The plans need to be submitted when seeking a completion certificate for the building.

Building safety levy

There are plans for a building safety levy to be introduced in both England and Scotland.

In England, the secretary of state has powers to impose a new building safety levy in respect of certain residential development in England. The levy, which developers will be liable for, is intended to help fund remediation works to existing residential buildings where safety defects have been identified.

The secretary of state consulted on detailed proposals for the calculation and collection of the levy. The consultation closed in February 2024.

The Scottish government intends to introduce a building safety levy to mirror the one in place in England. The UK and Scottish governments are now jointly seeking views on how a levy could work in Scotland, including whether there is evidence to suggest it could lead to market distortions. 

Cladding

The Housing (Cladding Remediation) (Scotland) Bill was passed in Scotland on 14 May.

The Bill seeks to confer on Scottish ministers powers to identify external wall cladding systems on residential buildings that create or exacerbate risks to human life and to address those risks; to establish a register to record that a building's cladding has been assessed and that remediation works have been completed; to enable one or more schemes to be established to require persons in the building industry to contribute towards assessing and remediating dangerous cladding; and for connected purposes.

It is envisaged that the legislation will apply to buildings constructed between 1992 and 2022 that stand over 11 metres tall and that contain at least one residential unit.

Decarbonisation of buildings

Minimum energy efficiency standards (MEES)

In England and Wales, MEES are in place for both the residential and commercial private rented sectors respectively – currently, a minimum EPC E rating is required.

The government set out plans to impose stricter MEES for non-domestic MEES – to require an EPC B rating by 2030, where cost effective – in its energy white paper in 2020. It consulted on delivering on that plan in 2021, where it also proposed an interim target for non-domestic buildings to meet the EPC C standard by 2027. However, the government has yet to prepare legislation to deliver those requirements. Amidst the government’s shift in approach towards meeting its ‘net zero’ objectives, there is now uncertainty as to whether the government will impose the stricter standards at all or in line with the initial proposed timescales.

In its October 2023 response to the Climate Change Committee the government made it clear that there would now be delay to the proposed timescale for the increase in MEES “to allow sufficient lead in time for landlords and the supply chain”. There has been no indication of how long the delay might be

There are currently no MEES in force in Scotland. However, in its heat and buildings strategy, the Scottish government proposed a series of minimum standard of energy efficiency (MSEE)targets for different types of property.

For example, for private rented housing, it proposed a MSEE equivalent to an EPC C rating by 2028. While failure to meet those standards would not prohibit a sale of the property, leasing to a new tenant would be prohibited where the standards are not met.

In respect of owner-occupied housing, the Scottish government proposed a MSEE equivalent to an EPC C rating be required by 2033.

Heating systems

In December 2023, the UK government opened a consultation on technical standards for new Future Homes and Future Buildings Standards. The standards proposed would apply to England only. The government said at the time that it planned to lay regulations to implement the standards some time in 2024 with a view to the new rules coming into force in 2025, with a 12-month transition period to then apply before they take full effect.

It is proposed that all new homes and non-domestic buildings use low-carbon heating and are “zero-carbon ready”. This means no further work would be needed to those buildings to operate with zero carbon emissions once the electricity grid is fully decarbonised.

In its consultation, which closed in March, the government also proposed that fossil fuel heating, such as gas, hybrid heat pumps, and hydrogen-ready boilers, would not meet the proposed standards. The new standards are also unlikely to allow for the installation of biofuel systems, including wood and manufactured solid fuels.

In October 2023, the government also responded to an earlier October 2021 consultation on fossil fuel phase out with proposals relevant to hearing systems. Under those plans, from 2024, no new fossil fuel heating would be permitted to be installed in commercial buildings over 1,000 square metres, and there would be a complete ban on the installation of such systems in any commercial buildings of any floor size from 2026. The government also set out proposed grid connection restrictions in respect of fossil fuel-powered heating systems and is expected to set out its decision on the role of hydrogen-powered heating in homes by 2026.

In Scotland, the Scottish government has set out plans for all property to be powered by zero emissions heating systems by 2045. This envisaged a shift away from natural gas or oil-powered boilers. Some restrictions aligned with that trajectory have already taken effect.

Since 1 April 2024, it has been prohibited for persons applying for a building warrant in certain circumstances to use ‘direct emissions heating systems’ – systems which produce greenhouse gas emissions at point of use – to meet their space and hot water heating and cooling demand. Instead, the use of zero direct emissions heating (ZDEH) technologies is required.

The rules apply to new domestic and non-domestic buildings, as well as the conversion of existing buildings. They also apply to any installed heating system within the curtilage of a building – both the main heating system and any other fixed heating system for that building.

District heating networks

The Future Homes and Building Standards consultation also outlined the government’s support for the expansion of cleaner heat networks. It said new heat networks will be an important part of the UK’s ‘net zero’ economy.

According to the government, new homes and non-domestic buildings can be connected to existing heat networks, where that heat network produces sufficient clean heat to heat the new homes and non-domestic buildings to be added to the network.

Under the Energy Act 2013 OFGEM was appointed as heat networks regulator in England & Wales and Scotland and the ground was laid for heat networks to require licences which would be subject to conditions on consumer protection issues such as fair pricing, required standards and carbon limits.

The government has consulted on consumer protection in relation to heat networks in England and has recently  issued its response to the consultation responses. It is intended that customers of heat networks should enjoy the same consumer protection as they have for other utilities, The government proposes to issue further consultations during 2024 on other aspects of consumer protection with a view to legislation being in place in 2025.

There has also been a consultation on heat network zoning in England. This system would involve heat network zones being identified and a zone coordinator for each zone appointing a heat network developer. Within zones all new buildings and some large existing buildings would be required to connect to the heat network. The intention is that this regime would make the development of heat networks easier to fund and help the government reach its target of 20% of heat being supplied by heat networks from 2050 – up from 3% today.

In Scotland, a regulatory and licensing system for district and communal heating, provided for under the Heat Networks (Scotland) Act 2021, became operational in early 2024. The scheme forms part of the Scottish government's heat networks delivery plan.

In Scotland, there is also the concept of heat network zones. Since 30 May 2023, local authorities have been obliged to identify, consult on, and designate potential heat network zones in their areas. The Scottish government can also designate some zones. The purpose of zones is to attract investment from heat network developers.

Since 30 May 2023, owners of non-domestic public sector buildings have been required to produce a building assessment report for each of their buildings to check if they are suitable to connect to a heat network. This duty may be extended to non-domestic buildings beyond the public sector.

Further rules, which are not yet in force, will require prospective heat network operators in Scotland to obtain a permit to build and operate a network in a designated zone. One permit may be issued per zone for a specified number of years. This will help to encourage investment, by providing operators with exclusive access to high opportunity areas.

All heat network companies, including existing operators, will also need a licence to operate in Scotland. This will help to drive up standards, improving user trust and providing greater certainty to investors. A licence will give heat network developers certain rights and powers – such as compulsory purchase, road works and surveying rights – to help reduce construction time and costs.

A consent system is also to be introduced for heat network developments. Companies will need consent for each individual network they operate. This will help to make sure that networks are developed in places where they will have the most benefit, and that communities get a say in plans for their areas.

A new assets schedule and transfer scheme is also still to come into force. This will help to ensure continuity of supply for customers by enabling a smooth transition between operators, if their existing operator stops trading.

EPCs

EPC legislation

EPCs were introduced in England and Wales in 2007 and were supplemented by MEES regulations in 2015 and 2017 for both the commercial and residential private rented sectors. As a minimum, rented buildings must currently meet an EPC E rating, subject to an exemption applying. EPCs are valid for 10 years.

In Scotland, EPCs were introduced in 2008. For non-domestic buildings, EPCs are supplemented by the Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016 (AEP Regs 2016). As part of a package of EPC reforms, the Scottish government is proposing to reduce the period EPCs are valid for from 10 years to five years.

Methodology

The methodology used by energy assessors in respect of the EPC system in England and Wales differs to that used in Scotland. EPC ratings in England and Wales cannot therefore be directly compared with EPC ratings in Scotland. Were the different methodologies in place in the different jurisdictions to be used on the same building, it would generally give a higher rating in England and Wales – for example, a building that receives a B rating in England may be rated C using the Scottish methodology, which can give the perception that it is less energy efficient.

In June 2022, the methodology used in England was changed with the introduction of a new “primary energy” metric. This will have a significant effect on EPCs issued after that date as it takes account of grid decarbonisation over the previous decade. It  means EPCs that pre-date June 2022 are unlikely to be accurate (although they remain for their 10 year life)  with electrically heated buildings likely to attract higher ratings and fossil fuel heated buildings likely to have lower ratings.

A consultation on replacing the methodology currently used in England to estimate energy performance of homes closed in March 2024. 

In Scotland, EPC reform is also proposed. The Scottish government is proposing a set of new factors to be incorporated in the EPC to provide more holistic information about the efficiency of the building, such as fabric rating, cost rating, and heating system type. The proposal is methodology-focused and changes the metrics intended to improve the workings of EPCs and achieve a better output in terms of data and awareness of energy issues. Regulations are expected in 2024 to allow the new metrics to be in place in advance of the new Heat in Buildings Regulations, which are anticipated in 2025.

Energy and carbon performance ratings

One criticism of EPCs is that they do not take into account the actual use of the property. In 2021, the government consulted on a framework to rate the energy and carbon performance of commercial and industrial buildings above 1,000 square metres in England and Wales. Annual ratings and mandatory disclosure were proposed as a first step towards reform.

Co-written by Katharine Metcalfe of Pinsent Masons.