2027 ‘C’ EPC requirement scrapped in favour of long term 2031 goal of B.
The UK Government has published its long-awaited interim response to consultations on tightening the Minimum Energy Efficiency Standards (MEES) for non-domestic property in England and Wales, providing greater certainty for landlords, investors and occupiers.
Under the current regime, commercial properties generally require a minimum EPC rating of E in order to be lawfully let, unless a valid exemption applies. Since April 2023, this requirement has applied to all privately rented non-domestic properties, regardless of whether a new lease has been granted.
What is changing?
The Government has confirmed that from 2031, privately rented commercial buildings larger than 1,000 square metres will be required to achieve a minimum EPC rating of B, provided the necessary improvements are cost-effective. Buildings below 1,000 square meters will remain subject to the current minimum standard of EPC E, with no fixed timetable for further upgrades.
Importantly, the Government has abandoned the proposed interim milestone which would have required commercial properties over 1,000 square meters to achieve an EPC rating of C by 2027, and has pushed on with the 2031 proposal instead. This will provide landlords and tenants with additional time to plan and implement improvement works.
Existing exemptions remain
The Government has indicated that existing flexibility mechanisms, including the well-established seven-year payback test and other exemption regimes, will continue. This reflects a policy approach that improvements should be practical, affordable and cost-effective.
The interim response also signals that further consultation is expected on several outstanding issues, including enforcement powers, penalty levels, treatment of shell-and-core lettings, and whether tenants should have statutory obligations to support compliance with MEES requirements.
What should landlords do now?
Although the proposed EPC B requirement will not take effect until secondary legislation is enacted, landlords should not delay reviewing their portfolios. Owners of larger commercial properties should assess current EPC ratings, identify buildings that may require improvement works, and consider whether any exemptions may be available.
For investors and occupiers, energy performance is increasingly influencing asset value, occupier demand and lease negotiations. The latest announcement provides welcome clarity on the direction of travel, while giving the market additional time to prepare for more stringent energy efficiency standards.
How we can help
Our commercial real estate team can assist with advising landlords, investors, developers and occupiers on EPC-related lease provisions and green lease drafting. If you would like to discuss the impact of the proposed changes on your property portfolio and what you may need to consider, please get in touch with our Real Estate Team.
This article is for information only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided. If you would like to discuss your specific circumstances, please feel free to contact us on 0118 951 6200.
