MEES Update: EPC B for larger commercial buildings moves back to 2031

The government has given an interim response to earlier consultations on strengthening Minimum Energy Efficiency Standards, known as MEES, for non-domestic private rented property in England and Wales. In broad terms, MEES set the minimum energy performance level a landlord must meet before a commercial property can lawfully be let, unless an exemption applies. The latest update confirms a more focused approach: larger rented commercial buildings are expected to move towards EPC B by 2031, while smaller premises will remain subject to the current EPC E standard for now.

What is changing?

The key proposal is that, from 2031, privately rented non-domestic buildings over 1,000 square metres in England and Wales will need to achieve an Energy Performance Certificate rating of B, where that is cost effective.

An EPC is a rating of a building’s energy efficiency, from A for the most efficient to G for the least efficient. At present, the minimum standard for most commercial rented property is EPC E. Since April 2023, that requirement has applied not only to new lettings, renewals and extensions, but also to continuing lettings.

The latest government update does not immediately change the law. The higher EPC B requirement will only take effect if and when secondary legislation is passed by Parliament. Further detail is expected in the full government response and updated guidance.

There are also two important changes of direction. First, the previously proposed interim EPC C milestone for 2027 will not be taken forward. Secondly, buildings below 1,000 square metres are expected to remain subject to the existing EPC E standard, with no fixed deadline for moving beyond that level at this stage.

Why does this matter for real estate?

For landlords, investors, occupiers and funders, this is significant because MEES affects whether a commercial building can be let, how it should be managed and what capital expenditure may be needed.

The government’s focus on buildings over 1,000 square metres means offices, warehouses, retail parks, larger leisure assets and bigger mixed-use schemes are likely to attract the closest attention. Many such buildings will need careful assessment well before 2031, particularly where improvement works may be complex, disruptive or expensive.

The removal of the 2027 EPC C milestone gives the market more breathing space. That will be welcomed by landlords and tenants who need time to align works with lease events, service charge cycles, refurbishment plans and wider asset management strategies. However, it should not be read as a reason to delay indefinitely. A building that is difficult to upgrade may need several years of planning, surveys, permissions, procurement and tenant engagement.

For tenants, the practical benefit could be lower energy use and lower running costs. The government has estimated that tenants in larger non-domestic rented buildings could save up to £360 million per year by 2031, although that figure may be refined as the policy develops.

Risks, opportunities and practical implications

The main risk for landlords is assets becoming obsolete. A building that cannot meet the relevant standard may become harder to let, finance or sell. Even before the law changes, buyers and lenders are likely to ask more searching questions about EPC ratings, planned works and the cost of compliance.

Lease drafting will also matter. Parties should consider who controls the works, who pays for them, when access can be obtained and whether energy improvements can be recovered through the service charge. Green lease provisions, which encourage cooperation on energy efficiency, data sharing and sustainable operation, are likely to become more common.

There may also be opportunities. Landlords who improve buildings early may benefit from stronger occupier demand, better rental prospects and a more resilient asset. Tenants may also be able to use lease negotiations to secure commitments on energy performance, reduced operating costs or collaborative improvement plans.

Importantly, the government has confirmed that flexibility mechanisms are expected to remain. These include the seven-year payback test and exemptions, meaning landlords should only be required to carry out improvements that are practical, affordable and cost effective. Even so, exemptions usually need to be properly evidenced and registered. They should not be treated as an informal workaround.

There is still uncertainty. The 1,000 square metre threshold, the detailed compliance route, enforcement approach and updated guidance are still awaited. Real estate stakeholders should therefore treat this as a clear policy direction, but not yet a complete rulebook.

Important points

The proposed higher standard is EPC B from 2031 for privately rented non-domestic buildings over 1,000 square metres.
Smaller commercial rented properties are expected to remain subject to the current EPC E standard for now.
The proposed 2027 EPC C interim milestone will not proceed.
The change is not yet law and will require secondary legislation.
Landlords, tenants, investors and lenders should start assessing affected assets, lease terms and upgrade strategies now.
Existing exemptions and cost-effectiveness tests are expected to remain important.

What should you do now?

Owners and occupiers of larger commercial premises should use the extra time constructively. Reviewing EPC ratings, identifying likely works, checking lease rights and planning investment early will put parties in a stronger position as the detail develops.

Please get in touch if you would like to discuss how the proposed MEES changes may affect your portfolio, transactions or leasing strategy.