On 18th June, the Government published its long-awaited interim response to consultations on the future of the Minimum Energy Efficiency Standards (MEES) for commercial property in England and Wales. The announcement sets out a revised approach to Energy Performance Certificate (EPC) requirements, which will affect many commercial landlords and tenants over the coming years.
If you own, lease or manage commercial property, understanding these proposed changes can help you plan ahead, which means you can protect the value of your investment and prepare for future compliance requirements.
What is an EPC?
An Energy Performance Certificate (EPC) measures the energy efficiency of a building, awarding it a rating from A (most efficient) to G (least efficient).
An EPC is generally required when a commercial property is built, sold or let. It provides prospective buyers and tenants with information about a building's energy performance, likely running costs and recommendations for improving energy efficiency.
What has changed?
The Government's announcement on 18th June marks a significant change from its previous proposals to increase EPC requirements for all commercial properties.
The Government now intends to introduce changes to the EPC regulations for commercial property, with the new requirements expected to become enforceable from 2031.
The key proposals are:
- All privately rented non-domestic buildings larger than 1,000 square metres will be required to achieve an EPC rating of B, where this is cost-effective.
- The previously proposed interim target of EPC C by 2027 will no longer go ahead.
- Only improvements that are considered cost-effective and affordable will be required, with the existing seven-year payback test and current exemptions expected to remain in place.
- For smaller non-domestic buildings (under 1,000 square metres), the current minimum standard of an EPC E rating will remain. At this stage, the Government has not announced any plans to increase this requirement.
This will come as welcome news to many smaller businesses and commercial landlords who had anticipated significant expenditure to meet the previously proposed staged increase to EPC C and EPC B.
Although the new proposals are not yet law and will require further legislation before taking effect, they provide much-needed clarity on the Government's intended direction of travel.
Why are these changes being introduced?
The revised proposals continue to support the Government's commitment to achieving the UK's net zero targets while taking a more proportionate approach to improving the energy efficiency of commercial buildings.
The focus has shifted towards larger commercial premises, recognising that these buildings typically consume more energy and therefore have greater potential to reduce carbon emissions.
Improving energy efficiency can also help to reduce energy consumption; to lower running costs, to improve environmental performance and to support businesses in meeting their own sustainability objectives.
What do commercial landlords need to know?
Commercial landlords should continue to monitor developments to the Minimum Energy Efficiency Standards (MEES).
Although many smaller commercial properties will remain subject to the existing minimum EPC E standard, landlords with larger buildings should begin considering whether future improvements may be required before the proposed 2031 implementation date.
Early planning can help avoid unexpected costs and reduce disruption to tenants.
How could businesses be affected?
The proposed changes are likely to influence commercial property decisions well before they become enforceable.
Businesses may face:
- increased costs where larger buildings require energy efficiency improvements.
- changes in property values as higher-performing buildings become more desirable.
- growing expectations from occupiers seeking energy-efficient premises with lower operating costs.
Energy performance is increasingly becoming an important factor for investors, lenders and prospective tenants.
Steps property owners should take now
Rather than waiting until 2031, commercial property owners should consider:
- reviewing EPC ratings across their portfolio.
- identifying properties over 1,000 square metres that may require improvements.
- budgeting for future energy efficiency works.
- seeking legal and property advice before buying, selling or granting commercial leases.
Planning ahead now will provide greater flexibility if improvement works become necessary.
Common ways to improve EPC ratings
Many improvements can enhance a building's energy performance while also reducing operating costs.
These may include improvements such as: upgrading to LED lighting, improving insulation, replacing heating and cooling systems, installing solar panels or other renewable energy technologies and introducing smart building management systems.
The most appropriate measures will depend on the age, construction and use of each building.
The benefits go beyond compliance
Improving a commercial property's EPC rating is not simply about preparing for future regulation.
Energy-efficient buildings can also benefit from lower energy bills, increased market value, greater demand from prospective tenants, and stronger Environmental, Social and Governance (ESG) credentials.
As sustainability continues to influence business decisions, energy-efficient commercial properties are likely to become increasingly attractive to occupiers and investors alike.
Looking ahead
The Government's announcement provides greater certainty about the future direction of commercial EPC requirements.
While the proposed changes are intended to come into force from 2031, landlords should not wait until the deadline approaches. Reviewing your portfolio now and planning for future improvements can help spread costs, minimise disruption and ensure your properties remain attractive in an increasingly energy-conscious market.
How Coles Miller can help
The evolving EPC regime is likely to have an increasing impact on commercial property transactions, lease negotiations and property management.
Whether you are buying, selling, leasing or managing commercial property, our experienced Commercial Property team can advise on the legal implications of the proposed EPC changes and the wider impact of the Minimum Energy Efficiency Standards.
We work with landlords, tenants, developers and investors across Dorset and the South to provide practical, commercially focused advice that helps clients make informed property decisions.
Contact Coles Miller
If you own, lease or manage commercial property, now is the time to review your EPC ratings and understand how the Government's latest proposals could affect your investment.
Taking action early can help avoid future compliance issues, reduce long-term costs and make your property more attractive to prospective tenants.
If you would like to discuss how the proposed EPC changes may affect your commercial property, please contact us today.
Georgina Ellis is a Solicitor Apprentice in the Commercial Property team at Coles Miller Solicitors. The team advises landlords, tenants, developers and business owners on a wide range of commercial property matters, including acquisitions and disposals, commercial leases and property portfolio management.
