What the Government’s new EPC announcement means for commercial landlords 

Commercial landlords in England and Wales have been operating under considerable uncertainty about the future of energy efficiency requirements for some time. The current minimum standard, an EPC E rating, has been in place since 2018, but successive consultations have pointed toward a significantly higher threshold, leaving landlords and their advisers working toward targets that were never formally confirmed.

On 18th June 2026, the Government published its interim response to its 2019 and 2021 consultations on non-domestic Minimum Energy Efficiency Standards (MEES), and with it came long-awaited clarity on the direction of travel.

The headline is that from 2031, landlords of privately rented commercial buildings over 1,000 square metres in England and Wales will be required to achieve an EPC B rating, where cost effective. For smaller properties, the current EPC E minimum will remain in place with no fixed deadline for further improvement. The previously proposed interim milestone of EPC C by 2027 has been scrapped.

What has changed and why it matters

The Government’s 2020 Energy White Paper set out EPC B by 2030 as the intended trajectory for non-domestic properties in the private rented sector. This generated significant market activity, but the lack of implementation detail, particularly around the 2027 interim milestone, left many landlords reluctant to commit to improvement programmes. The interim response resolves that ambiguity of what is required and when, although it shifts the goalposts in two respects.

The deadline has moved from 2030 to 2031, giving landlords an additional year to comply. Second, the EPC C milestone will not be taken forward. The rationale behind it is to give landlords and tenants more time to plan and carry out improvement works in a way that suits both the building and its lease arrangements. For those who had been working toward the earlier date, this change affects investment planning, lease negotiations and asset management strategies.

Secondary legislation will be required before the new EPC B standard takes legal effect. The Government has confirmed that a full consultation response, together with the necessary legislation and supporting guidance, will follow in due course. Until that legislation is passed, the new standard is not in force.

The size threshold and what it means in practice

The decision to apply the higher EPC B standard only to buildings above 1,000 square metres reflects the Government’s view that this is where the most benefits can be achieved. Larger commercial buildings represent a disproportionate share of carbon emissions from the built environment. The Government estimates that improving these larger properties could save tenants up to £360 million per year in energy costs by 2031.

For landlords of larger assets, such as offices, industrial facilities and retail warehouses, the 2031 deadline is the relevant date to plan around. For those with mixed portfolios straddling the threshold, the position is more intricate. Buildings below 1,000 square metres will remain subject to EPC E, but without any fixed timeline for upgrading to a higher standard. Although it may feel like flexibility, it also means those assets carry ongoing uncertainty about future requirements, and prudent landlords are unlikely to want to defer improvement works indefinitely.

What is staying

Existing flexibility mechanisms will be retained. The seven-year payback test will continue to apply, meaning that where the cost of the recommended improvements cannot be recovered through energy savings over a seven-year period, landlords are not required to carry them out. Any exemption will still need to be registered on the exemptions register with supporting documentation, and other established exemptions – relating to third-party consents, recently purchased properties and property devaluation – continue to apply.

This is an important safeguard for landlords of buildings where the economics of improvement are unfavourable. However, it is not an open-ended escape route. Exemptions require active registration and evidence, and landlords who assume they are exempt without carrying out the necessary assessment expose themselves to compliance risk.

What landlords should be doing now

Five years is a reasonable window but given the scale of improvement works that EPC B will require for many properties, it is not as long as it might appear. A significant number of commercial properties currently rated below B need substantial investment in insulation, heating systems, lighting and other measures to reach the new standard. The challenge lies in the availability of contractors, materials and specialist advisers capable of delivering that work at scale across the sector, and that capacity is not unlimited.

The 2031 question is not the only compliance issue. Under the current rules, all privately rented non-domestic properties in England and Wales must already hold a minimum EPC E rating – a requirement that has applied to such properties since April 2023, regardless of whether there has been a change in tenancy. Research has indicated that more than 13,000 commercial rental properties still hold EPC ratings of F or G, meaning they are already non-compliant and unlettable under existing legislation. For landlords in that position, addressing current compliance is the more pressing priority before turning attention to 2031.

Landlords should start by auditing the current EPC position across their portfolio, understanding which buildings already meet or approach EPC B, which will require intervention, and which may qualify for exemptions. The assessment will inform longer-term asset management and capital expenditure planning, as well as decisions around lease renewals and new lettings. Energy efficiency considerations need to be present from the outset.

Lease structures also need attention. Where a landlord intends to carry out improvement works, it will need to consider how access rights, tenant disruption, service charge provisions and apportionment of costs interact with the terms of existing leases. Getting this wrong can be costly commercially and legally speaking.

The legal perspective

The recent announcement has been broadly welcomed by the real estate sector as a step toward the clarity that landlords and investors have been seeking. But clarity on what is required doesn’t remove the work of getting there. Regardless of whether your portfolio is primarily above or below the 1,000 square metres threshold, the case for early assessment and forward planning remains strong.

We advise landlords, developers and occupiers on commercial property compliance, lease structuring and the practical legal questions that arise when regulatory requirements intersect with existing contractual arrangements. For the landlords who want to understand how the new MEES direction affects your assets or your leases, get in touch with our team at enquiries@newmanor.com and our specialists will be glad to assist.