Energy Performance Certificate reform – lodgement fees and penalty charges: technical consultation

Purpose of this Technical Consultation

This technical consultation builds upon previous Scottish Government consultations on EPC Reform in 2021 and 2023. The Scottish Government has issued its Government Response to the 2023 consultation^[1] in January 2025, which sets out our final decisions on EPC Reform prior to laying new EPC Regulations in Parliament later during 2025. We plan to bring the new Regulations into force in the second half of 2026, to align with the introduction of the UK Home Energy Model Calculation Methodology.

Statutory lodgement fees and penalty charges form part of the EPC Regulations and need to, respectively, reflect the costs incurred in running the technical and operational functions of the regulatory system, and act as a sufficient deterrent for any breach of the Regulations.

We are proposing changes to how some existing functions will be exercised, how they can be enhanced, and need to cover the costs of replacing life-expired technical infrastructure around the EPC Register and Calculation Methodology. This consultation sets out how we propose these can be covered by lodgement fees. This will be the first time the Scottish Government has consulted on lodgement fee levels since 2017.

We also want to ensure that the level of penalty charges is correct given that these have not been reviewed since 2009.

This technical consultation will, therefore, inform final decisions on the level of EPC lodgement fees and penalty charges to be set out in the new Regulations. The purpose of this technical consultation is to:

• Set out the Scottish Government’s intended lodgement fee levels for reformed domestic and non-domestic Energy Performance Certificates when new Regulations are brought into force during 2026, and to seek stakeholder views on this;
• Seek stakeholder views on the level of penalty charges to be imposed for non-compliance with the new Regulations; and
• Finalise consultation upon EPC Reform ahead of laying the new Regulations during 2025.

Objectives

The Scottish Government’s objectives in making these proposals are to ensure:

• The highest quality EPC operational system for users, so that EPCs continue to provide accurate and reliable information and perform their role as a key feature of a functioning property market whenever properties are sold or let;
• That EPC lodgement fees remain a fair and proportionate reflection of the costs incurred in providing technical and operational infrastructure within the EPC regulatory system (provision of a Register of Certificates, provision of a Calculation Methodology for the production of Certificates, and Audit & Inspection for the accuracy and quality of Certificates);
• Best value for any public expenditure in the discharge of these particular regulatory functions under the new Regulations, by continuing to ensure that costs are met wherever possible by users of the service provided; and
• That any penalty charges payable are fair and proportionate.

Aims

Our aims are to:

• Provide adequate resources for the operation and maintenance of a new EPC Register, Calculation Methodology, and Audit & Inspection functions to be exercised by the Scottish Government under the new regulations;
• Provide value for money to users of the service, by offering benefits reflective of the fee charged, and by charging lodgement fees no greater than the cost of delivering the service;
• Seek to maximise savings and efficiencies wherever possible of continuing to share technical infrastructure for the Register and Calculation Methodology with the UK Government;
• Continue to align with the EU Energy Performance of Buildings Directive provisions on EPCs where possible and meaningful to do so, including through introduction of new on-site audit and inspection requirements to verify the accuracy and quality of Certificates; and
• Ensure that penalty charge levels act as a sufficient deterrent to any breach of the Regulations.

Overview of reforms and the role of lodgement fees in supporting this

EPC Reform

As part of our consultation on reform of EPCs during 2023, we confirmed our intention to lay new EPC Regulations which would drive up the quality of EPCs and ensure that they provide more relevant information to support consumers making informed choices in relation to the climate impact, energy efficiency and cost of heating their property. These reforms would, in summary:

• Introduce a reformed EPC rating system to provide better information to consumers on the fabric energy efficiency, heating system emissions and efficiency of their property, and to ensure they better support net zero objectives;
• Introduce a new EPC Calculation Methodology – the Home Energy Model^[2] being developed by the UK Government, to replace the current SAP methodology;
• Reforming the EPC Register to make it more accessible and to support enhanced auditing of EPC quality; and
• Be complemented by an updated Operational Framework for EPC assessors and Approved Organisations (AOs)^[3] to strengthen quality assurance requirements for EPC assessors.

The Scottish Government has now responded to the consultation, and has set out our intention to introduce new EPC Regulations during 2025, and bring them into force in 2026. Our Government Response set out that we will:

• Introduce a new EPC rating system for domestic buildings, which will give clearer information on the fabric energy efficiency of a property; the emissions, efficiency and running costs of its heating system; and the cost of energy to run the home to standardised conditions;
• Introduce a new EPC rating system for non-domestic buildings;
• Adopt a redesigned EPC Certificate, based on a first phase of user testing, and to be followed by a second phase prior to regulations coming into force;
• Reduce the validity period of EPCs from 10 to five years to ensure consumers have more up-to-date information;
• Develop a new dynamic EPC user interface to sit alongside the published EPC;
• Introduce strengthened operational governance arrangements for EPC assessors and AOs to enhance quality assurance for consumers;
• Establish a new technical infrastructure to replace the current Standard Assessment Procedure (SAP) with the new UK Home Energy Model (HEM) Calculation Methodology, together with a new EPC Register, where we will share significant parts with the UK Government; and
• Continue to work with the UK Government and devolved administrations where we share elements of the EPC regulatory system such as around skills and qualifications, across the UK internal market.

It also confirmed that, prior to laying the Regulations, we would also issue this short technical consultation which will set out increases to the EPC lodgement fee which we think will be needed to meet the cost of developing and maintaining the new technical and operational infrastructure to underpin the revised Regulations:

• A new EPC Register (to link into a new UK Government cloud calculation-based data input and processing infrastructure that meets latest digital standards);
• A new Calculation Methodology (to replace the soon-to-be life-expired SAP with the new UK Home Energy Model for assessors to calculate EPCs under the new Rating System); and
• A new on-site Audit & Inspection function to further enhance quality assurance of Certificates for consumer benefit. This would also align with new procedures being adopted by the EU’s 27 member states under the recast Energy Performance of Buildings Directive^[4].

This technical consultation covers these three aspects of the new technical and operational infrastructure listed above (the new Register, the new Calculation Methodology, and the new Audit & Inspection function). We believe that these reforms to the technical and operational infrastructure will ultimately benefit and better protect consumers, by making the EPC Register more accessible, and by driving up EPC quality.

Delivering regulatory functions

Under the new Regulations, the Scottish Government will be responsible for:

• Making and reviewing the Regulations;
• Specifying the EPC rating system and the content of Certificates;
• Specifying and maintaining the EPC Calculation Methodology;
• Keeping and maintaining the EPC Register;
• Appointment and review of AOs and the Operational Framework; and
• On-site audit and inspection to verify the accuracy of Certificates.

EPC assessors will continue to be responsible for:

• Assessing the energy performance of properties; and
• Issuing of Certificates.

AOs will continue to be responsible for:

• Accreditation and oversight of EPC assessors, including their training;
• Desk-based audit to verify the accuracy of Certificates; and
• Lodging Certificates on the EPC Register.

Local authorities will continue to be responsible for:

• Enforcing the Regulations.

Property owners will continue to be responsible for:

• Ensuring that a valid EPC is made available when a property is advertised for sale or for let; and
• Ensuring any advert in commercial media states the energy performance indicator for any property advertised for sale or let.

New regulatory functions – rationale for funding via statutory lodgement fees

The payment of a lodgement fee for the registration of EPCs is long-established in Scotland, with fees having been charged since 2012, and having risen subsequently, once, in 2017. These fees cover the costs of administering the EPC Register, which until present has been managed by a third party – the Energy Saving Trust – on a not-for-profit basis.

Lodgement fees are paid by AOs when a Certificate is lodged on the Register. AOs in turn charge this fee to assessors.

This consultation sets out the future level of EPC lodgement fees which we believe will be needed to pay for the costs of providing the following services to the users of the reformed EPC regulatory system:

• New Register of Certificates;
• New and updated Calculation Methodologies for generating domestic and non-domestic Certificates^[5], respectively; and
• New on-site Audit & Inspection of Certificates to ensure reliability and accuracy of assessors’ work, and to drive up the quality of assessments for consumers.

These three regulatory functions are those which most directly benefit users of EPCs by enabling the energy performance of their property to be calculated, certified, registered and verified as part of the normal functioning of the property market when their properties are advertised for sale or for lease.

We believe these costs should be funded by statutory lodgement fees on the following basis:

• The new EPC Register. This provides direct benefit to service users in enabling the details of their property to be recorded and be made publicly available to prospective buyers and tenants, which we are supporting through enhanced data sharing features. The current Register is now life-expired and must be replaced, so there are unavoidable costs of doing this. The Scottish Government has decided that it will be more efficient to host this directly, rather than via a third party. This is to allow the SG to reduce costs by working directly with the UK Government to share the cloud calculation service used for the EPC Register in England & Wales, which will simplify and standardise data inputting processes across the UK, whilst retaining a separate, searchable database of EPC records for all properties in Scotland. This will ensure continued efficiencies for AOs in using UK-wide data-gathering software for assessors to upload property details into the UK cloud calculation service before this is then passed to the Scottish Register. The Scottish Government expects to contribute towards the ongoing costs of the UK Government in providing this cloud calculation service. The new Register is also being developed on a modular basis to allow synergies for other regulatory regimes to build upon this in future. This supports wider SG objectives of building high quality digital public services based on user and business needs.
• The EPC Calculation Methodology. This provides direct benefit to service users in enabling the energy performance of their property to be calculated, and for it to be rated. This rating can be used to evidence compliance with regulatory standards or to demonstrate eligibility for government funding programmes. The current SAPmethodology will shortly become life-expired and must be replaced, so there are unavoidable costs of doing this. The Scottish Government will reduce costs by continuing to share the methodologies (the new Home Energy Model and existing SBEM^[6]) with the UK Government, but will have greater autonomy to develop a Scottish ‘wrapper’ for HEM to ensure that EPCs produced are better-tailored to Scotland’s building stock and climate. We need to resource and develop in-house capabilities to develop and maintain this Scottish ‘wrapper’ going forward. The Scottish Government expects to contribute towards the ongoing costs of the UK Government in developing and maintaining HEM infrastructure and SBEM for the benefit of service users.
• The new on-site Audit & Inspection function. This provides direct benefit to service users in enhancing verification procedures to ensure that their Certificate and rating is accurate. The Scottish Government’s independent review of EPCs in 2019 recommended that the Scottish Government should ‘introduce the requirement that the quality assurance procedures include independent on-site re-inspections’ and that it should ‘establish an independent regulator (or vest it within Scottish Government) to oversee the independent re-inspection of EPC assessments, and to report annually on the results’^[7]. Such a system already exists in the Republic of Ireland^[8]. The EU itself has now introduced a new requirement for on-site verification of EPC assessment data in the recast Energy Performance of Buildings Directive.

The Scottish Government wants to align with this new requirement of the EU Directive because we agree with the EU that current desk-based audit of EPCs can continue to be strengthened to drive up quality, and that further on-site inspection of a proportion of that sample is needed to verify accuracy and give greater confidence to consumers that their EPCs are reliable. This is particularly important where accuracy is vital where consumers could use EPCs to help them to evidence compliance with any proposed regulatory standards or to access government funding programmes – or where inaccurate EPC ratings could potentially have an impact on property values as a result. The Scottish Government has engaged with other EU member states and believes that this additional audit function should be exercised independently of AOs, assessors, and property owners, all of whom have a commercial interest. This will ensure absolute objectivity over and above the current desk-based audits. This function would initially be exercised on a time-limited basis until evidence was clearer on whether a return could be made to desk-based-only oversight by the AOs^[9].

Who delivers regulatory functions will therefore largely remain the same under the new Regulations, except for the new EPC Register, Calculation Methodology, and new on-site Audit & Inspection function, which we propose to exercise ourselves within the Scottish Government.

Beyond these functions, the Scottish Government will continue to meet other core costs associated with policy development and regulatory oversight of the EPC system through its own general expenditure, and through providing support to local authorities through the general local government settlement. There are no plans to change local authorities’ powers to enforce the new Regulations. We are in discussions with COSLA about how local authorities will enforce the new Regulations, including future resourcing requirements when they come into force.

By continuing to share technical infrastructure with the UK Government, the Scottish Government has avoided significant upfront capital costs of developing a new Register and Calculation Methodology on our own. We believe that maximising shared resources wherever possible going forward is the most efficient way to deliver the EPC system together, given that assessors and AOs operate across the UK internal market. A new Memorandum of Understanding is being finalised between the UKG and the devolved administrations, which gives assurance and clarity around our shared responsibilities and infrastructure, whilst protecting our devolved competence over the regulations.

Impact on lodgement fees of funding new regulatory functions

Detail of proposal

The Scottish Government expects to begin delivering the three new regulatory functions outlined above during financial years 2026-27 and 2027-28, to coincide with the new Regulations coming into force. Set up costs would initially be borne by the Scottish Government (including TUPE of existing staff managing the Register from EST), with running costs progressively covered by lodgement fee income as it is generated.

Our objective is to ensure that lodgement fee income is as closely balanced as possible with running costs on a year to year basis, to avoid any surplus or deficits. In 2023, 230,429 EPCs were lodged in Scotland (222,333 domestic and 8,096 non-domestic), with lodgement fee income of around £600,000 p.a. which meets EST’s Register running costs. Given the additional regulatory functions delivering benefits to service users, which we propose should be covered by lodgement fees, overall fee income will need to rise to cover costs.

We recognise that fee income can vary from year to year depending on the volume of Certificates lodged. We have therefore developed our proposals by considering average volumes over the past 5 years, using the conservative, low estimate of 200,000 domestic and 5,000 non-domestic EPC lodgements per annum only (to ensure a conservative estimate in the income generated from any fee increases). This cost does not factor in the projected increase in EPC assessments per annum, based on our proposal to reduce the EPC validity period to five years, which we project would see volumes increase from 216,000 p.a. to 260,000 p.a..

The Scottish Government recognises the importance of ensuring stability of fee levels to enable certainty for AOs in projecting future costs. We retain powers to amend fees within the Regulations and we will review the fee level within two years of them coming into force to ensure they remain appropriate.

We estimate the costs of delivering the new regulatory functions as follows:

Amended lodgement fees

The statutory fee for lodgement of energy performance data is built into the overall fee charged to building owners by an EPC assessor for their services. As such, any increase in cost, however small, will either be absorbed by the Assessor (reducing profit) or passed on to the building owner (increasing cost of assessment). Property owners are not generally aware of the lodgement fee as a small, discrete component of the overall cost to consumers of an EPC (which averages around £80-£100 per domestic Certificate – therefore lodgement fees make up between 2.6-3.25% of the overall cost of a domestic EPC). Likewise, the lodgement fee and overall cost of an EPC remain a very small part of the much larger £10-100,000’s of costs associated with property transactions.

We propose that to meet the anticipated annual costs budgeted above, statutory EPC lodgement fees would change to the following:

• £6.00 for Domestic EPCs
• £15.50 for Non-Domestic EPCs

This will provide the projected annual revenue to meet anticipated running costs, and ensures both types of lodgement fee rise equally. We believe that by raising domestic and non-domestic lodgement fees equally, this will ensure fairness across all EPCs lodged, in covering the additional costs of the new system.

If fees had risen by the rate of inflation since 2017, they would already have risen to £3.38 and £15.71, respectively.

Comparative analysis with the UKG and the rest of the EU shows that prices vary substantially, with larger countries such as the UK able to reduce costs due to greater volume of transactions relative to the similar fixed costs of maintaining the technical infrastructure, meaning that the UK Government has been able to keep these charges lower than in comparison to Scotland (the UKG charges a lodgement fee of £1.50 for a domestic EPC for a volume of 1.6 million domestic transactions p.a.). On the other hand, smaller countries such as Lithuania, Ireland and Denmark charge administrative fees of around £5 to £25 per domestic EPC. Research published by CXC alongside this consultation summarised the fees charged by other small and medium countries as follows:

The proposed new lodgement fee level of £6.00 for an EPC in Scotland is therefore well within the price range of comparative small EU countries. Overall EPC costs in the EU are substantially higher than £80-100, and range from €95-600 per domestic EPC^[11]. The generally higher cost of EPCs across the EU reflects generally higher standards around assessor skills and qualifications. The Scottish Government aims to strike the right balance, working with the AOs, the assessor market and the UK Government, to ensure continued upskilling of the workforce to drive up quality standards and consumer confidence – and that is reflected in the higher fees needed to cover the new technical and operational infrastructure, from which we believe consumers will benefit, in particular through enhanced audit and inspection of Certificates’ accuracy and quality.

Whilst EPC lodgement fees are already higher in Scotland than in the rest of the UK, due to smaller volumes, and will need to rise again to cover the costs of new regulatory functions provided to service users, our approach to maximising shared infrastructure with the UK Government has resulted in significant savings through avoided capital costs of establishing a separate technical infrastructure for the Register and Calculation Methodology. This has avoided an estimated £6.5 million of funding being provided centrally by the Scottish Government, together with avoided £0.6m of annual running costs, and a further rise in lodgement fees to cover these costs.

The Scottish Government also believes that paying for enhanced audit and inspection will deliver genuine benefits to service users. We support the conclusions of the EU’s 27 member states that after 20 years in operation, EPC quality across Europe is not yet as high as it could be for its 450 million inhabitants. We therefore agree with the revisions to the EU Directive and consider that the additional costs associated with the new on-site audit and inspection function will deliver genuine benefits for consumers in the longer term by driving up quality in the marketplace. If on-site inspections verify that EPCs are accurate and reliable, and that desk-based auditing is sufficient, then this function would no longer be required, and lodgement fees could be reduced. We propose to review this function within two years of the regulations coming into force.

Penalty charges

The existing EPC Regulations make provision for 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^[12].

Penalty charges have been fixed in the regulations since they were legislated in 2008, and have been set at a level of:

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

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. We have already engaged with local authorities who have advised that they have rarely, if ever, used these powers in the 16 years that the existing Regulations have been in force.

The Scottish Government recognises that the ratings given on an EPC can have an impact on a property’s value, and on its ability to evidence compliance with regulatory standards or eligibility for government funding. We therefore want to understand if the existing penalty charges would act as a sufficient deterrent under these circumstances.

We note that the UK Government has recently consulted on changes to penalty levels for the EPC Regulations in England & Wales, and has proposed that, at the least, they should be increased to take account of inflation. This would see them rise to £325 for a domestic EPC and £815 for a non-domestic EPC at a minimum, rising to £8,150 maximum.

We seek views from enforcement authorities and other respondents on what the appropriate level of penalty charges should be under the new Regulations going forward. We will review the penalty charge level within two years of the new Regulations coming into force to ensure they remain appropriate.