Commercial property EPC B by 2031 

But only for the big ones – the government’s new direction on commercial MEES.

After years of consultation and many conflicting signals, commercial landlords finally have some clarity on where Minimum Energy Efficiency Standards (MEES) are heading.

And it is not quite what many landlords expected. This last week, on 18 June 2026, the Department for Energy Security and Net Zero (DESNZ) published its interim response to the long-running consultations on tightening MEES in the non-domestic private rented sector. 

The headline change involves the previously proposed interim milestone of EPC C by 2027 – it has been dropped altogether. In its place, the government is targeting EPC B by 2031, but only for buildings over 1,000 square metres. Smaller commercial premises will remain subject to the existing EPC E standard, with no new deadline in sight.

For a landlord audience having spent the best part of seven years bracing for an EPC C cliff-edge, this news comes as a significant softening of the regime, and something of a relief, but it’s not a free pass. 

Secondary legislation is required before this becomes binding law, and landlords of larger buildings now face a single, more demanding target rather than a staged approach. 

This article aims to set out what MEES currently requires, what has changed, and what it means financially and practically for landlords managing older or tenanted stock.

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What MEES requires today, a quick refresher

MEES has applied to the commercial private rented sector since 2018, but the rules have tightened in stages, and with so many changes and revisions along the way it is easy to lose track of exactly where the law now stands.

Since 1 April 2018, landlords have been unable to grant a new lease, or renew an existing one, on a commercial property with an EPC rating below E. And since 1 April 2023, that prohibition was extended to cover existing tenancies. 

It means that a landlord can be in breach of the rules and commit an offence simply by continuing to let a sub-standard building, even where there has been no new letting, renewal or assignment.

According to the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (the MEES Regulations), any property in these jurisdictions rated F or G is treated as “sub-standard” unless a valid exemption has been registered on the PRS Exemptions Register. 

Exemptions last five years and must be renewed. The most used of these is the seven-year payback test. It exempts a landlord from carrying out an improvement where the cost cannot be recovered through energy savings within seven years.

Enforcement is now active and the penalties are not small. Local authorities can fine landlords up to £150,000 for the most serious or prolonged breaches. These are calculated by reference to the property’s rateable value and the length of a breach, and non-compliant landlords can be named and shamed on a public register. 

This is the background to the new EPC B proposals. They are not an entirely new regime, but an additional layer on top of existing obligations. 

The interim response

The interim response confirms four things, and it is worth being precise about each, because some commentary published since 18 June still references the old direction.

1 - EPC B by 2031, but only above 1,000 square metres

The government intends that, from 2031, all privately rented non-domestic buildings over 1,000 square metres in England and Wales will need to reach EPC B, “where it is cost effective.” This is a later deadline than the EPC B by 2030 figure that had circulated since the original 2019 consultation. 

2 - Buildings under 1,000 square metres stay at EPC E

For most small-scale commercial landlords, letting agents and high street property owners, nothing changes substantively. The existing EPC E minimum continues to apply, and the government has said it has “no set deadline” for these landlords to go beyond it.

3 - The EPC C milestone for 2027 is gone

The interim EPC C requirement by 2027 ahead of the previously expected EPC B by 2030 is cancelled giving landlords and tenants more time to plan improvements around their own lease cycles.

4 - The flexibility mechanism survives

The seven-year payback test and the existing exemptions regime will remain in place, meaning the financial backstop landlords already rely on for the EPC E standard will carry on through to the new EPC B requirement for larger buildings.

But crucially, none of this is yet set in law. This is only an “interim response” and the government says the EPC B changes “will only take effect following the successful passage of secondary legislation through Parliament” 

Further detail on the 1,000 square metre threshold and the EPC implementation is promised in a fuller government response still to come.

Why the narrowed focus?

The rationale the government sets out in its interim response is one of targeting effort where it delivers the most benefit. DESNZ estimates the EPC B requirement for larger buildings could save tenants in aggregate, in those properties, up to £360 million a year in energy costs by 2031.

The logic is that larger buildings offer the greatest scope for cost-effective energy savings, and that concentrating the toughest new standards there protects smaller occupiers and high street businesses from a compliance burden, while many are currently financially challenged. 

The sector has been navigating a difficult period. Increased interest rates, the abolition of upwards-only rent reviews under the English Devolution and Community Empowerment Act 2026, delays at the Building Safety Regulator, and a forthcoming Building Safety Levy are all adding cost or uncertainty to the investment climate. 

A softer and later MEES timetable would seem sensible in these circumstances and is consistent with a government that’s keen to avoid putting further pressure onto small business landlords and SME occupiers. 

What does this mean in practice?

For landlords of larger buildings, 2031 may seem a long way ahead but retrofit projects are not quick to organise and occupied buildings create bigger challenges. Planning, funding, procurement, tenant coordination and the works themselves can easily take twelve to eighteen months for a single property.

Landlords with portfolio-wide programmes may take considerably longer. Landlords in this category should treat this interim response as a strong enough commitment to begin planning works now, even if legislation has not yet become certain, it will come eventually.

For landlords with smaller buildings, the message is reassuring but should not be taken as a signal to do nothing. The EPC E standard is not new and is already enforced and the absence of a further deadline does not mean there won’t be one.

Landlords know the direction of travel and therefore should be making their own plans to upgrade their buildings, ideally when they have vacancies. If there are exemptions, they should still plan to make improvements when they can and make sure the exemption is properly registered and renewed on schedule.

For both groups, large and small, it is worth remembering that the 1,000 square metre threshold itself, and the detail of how it will be calculated and applied, are still subject to consultation feedback. Landlords with buildings close to that boundary should watch this space closely.

The financial reality for older buildings

The cost of moving a building up the EPC scale varies enormously by building type, age and the starting rating. Savills research cites in-industry cost guides putting the price of taking an office from D to C at roughly £10 to £25 per square foot, rising to £36 to £65 per square foot for the deeper retrofit required to reach D to B. 

Applying these metrics to a typical 5,000 square metre office implies a total investment in the region of £250,000 to £750,000, depending on the nature of works needed: fabric improvements, glazing, heating and cooling system replacement, insulation and, in some cases, on-site renewable generation. 

Warehouses and industrial buildings tend to come in at the upper end of this range given their size, volume and heating and cooling demands, while retail property costs depend heavily on glazing ratios and HVAC configuration.

The seven-year payback

The seven-year payback test remains the main safety net for some. Where a package of improvements cannot pay for itself in energy savings within seven years, a landlord can register an exemption rather than carry out the works. 

This, however, is not a simple solution. There is a valuation dimension and exemption claims require proper financial modelling, contractor quotations and energy cost projections. A back-of-envelope estimate will not suffice.

The “brown discount”

Buildings that are low on energy performance ratings risk market pressures when it comes to attracting the best tenants. Reduced rental and capital values relative to comparable, more efficient stock will seriously affect the profitability of a building in the future.

Landlords looking at the cost side of the equation should investigate “green commercial mortgages” and lender-linked sustainability improvement loans. Several banks now offer these specifically to fund retrofits.

A particular challenge - tenanted buildings

Where a building is occupied, the practical difficulty of carrying out energy efficiency works multiplies several fold. Many of the most effective measures such as full fabric upgrades, HVAC replacement and extensive insulation work are extremely difficult or impossible to deliver around a trading tenant. That’s not to mention any legally binding non-interruption clauses that may exist in the lease.

Questions arise as to who bears the cost of energy efficiency improvements, whether some expenditure can be recovered through the service charge, and what alterations and reinstatement obligations apply. 

These are all matters that depend on the specific terms of each lease and most were not drafted with MEES compliance in mind. So, landlords reviewing portfolios now would do well to audit existing leases for these provisions rather than discovering the gaps when works are due to start.

Duties of cooperation

The government has previously indicated in the consultation process its intention to introduce duties of cooperation requiring tenants to facilitate reasonable energy efficiency works. This has not yet been progressed or confirmed as part of the interim response, and landlords should not assume it will arrive soon. Watch out for it in the fuller government response.

In summary

This latest government announcement brings some softening of the requirements and relief for many commercial landlords but this is not an invitation for complacency. The need to upgrade energy efficiency standards in all commercial buildings in England and Wales is an ongoing inevitability and compulsion will arrive sooner than later. Landlords should start planning now.

[Main Image Credit: Bingqlan LI]