The Government has published its long-awaited interim response to the 2019 and 2021 consultations on strengthening the Minimum Energy Efficiency Standards (MEES) regime in the non-domestic private rented sector in England and Wales. The response provides much-needed clarity on the future direction of the regime and confirms significantly revised proposals compared with those originally consulted on.
The key headline is that, while the Government remains committed to raising energy efficiency standards in the commercial rented sector, it now intends to adopt a more targeted approach than previously proposed. Rather than applying enhanced requirements across all privately rented commercial properties, the proposed uplift to an EPC rating of B is intended to apply only to larger rented buildings.
What are the key issues in the revised proposals?
From 2031, privately rented non-domestic buildings with a floor area exceeding 1,000 square metres are proposed to be required to achieve a minimum EPC rating of B, where it is cost-effective to do so. This represents a one-year extension to the EPC B by 2030 target consulted on previously.
Smaller buildings below the 1,000 square metre threshold will continue to be subject to the current minimum standard of EPC E, with no fixed deadline for any further improvement. The Government has indicated that this approach is intended to provide greater flexibility for small and medium-sized businesses and landlords of smaller premises.
The previously proposed interim EPC C milestone will not be taken forward. Under the 2021 consultation proposals, landlords would have been required to ensure their buildings achieved EPC C by 2027 before progressing to EPC B by 2030.
The existing flexibilities, including the seven-year payback test and exemptions are intended to remain in place, so that only improvements which are practical, affordable, and cost-effective will be required.
A departure from the original proposals
The Government's consultations in 2019 and 2021 envisaged a much broader reform of the non-domestic MEES regime. The proposals were designed to create a staged pathway towards achieving EPC B across the commercial private rented sector, backed by compliance windows, milestone dates, and revised enforcement measures.
The interim response reflects a shift away from that universal approach. Instead, the Government has sought to target those buildings where it considers the greatest energy savings can be achieved, while reducing the compliance burden on smaller landlords and occupiers. The Government estimates that tenants in larger non-domestic buildings could save up to £360 million per year in energy bills by 2031, although that estimate remains subject to refinement as the policy develops.
What does this mean for the market?
For landlords of larger commercial buildings, the direction of travel has now been made considerably clearer. Although the proposals are not yet in force and will require secondary legislation to take effect, the proposed 2031 EPC B requirement is likely to influence asset management strategies, refurbishment programmes, leasing decisions, and acquisition due diligence well before the new requirements take effect.
Landlords of smaller properties will welcome the absence of any immediate uplift beyond EPC E and may wish to use the breathing space this creates to implement improvements as part of refurbishment or asset management programmes.
For tenants, energy efficiency is increasingly relevant not only from a regulatory perspective but also from an occupational and cost-management standpoint. Even where buildings fall outside the proposed EPC B threshold, energy performance is likely to remain an important consideration in leasing and investment decisions.
For both landlords and tenants, the interim response cannot necessarily be viewed as a permanent settlement. The Government has emphasised its continuing commitment to improving the energy efficiency of the built environment, and further reforms cannot be ruled out.
Remaining uncertainty
Although the interim response answers some of the market's key questions, significant uncertainty remains.
No timetable has yet been confirmed for the introduction of the necessary secondary legislation, although the Government has stated that further details will be provided in its full response to the consultations and that it aims to introduce legislation and updated guidance at the earliest opportunity.
A number of practical issues also remain unresolved. Most notably, there is currently little detail on how the 1,000 square metre threshold will operate in practice. Questions remain as to how floor area will be assessed in multi-let buildings, mixed-use properties, and more complex ownership structures, including whether the threshold will be applied to an individual letting or to the building as a whole.
The Government has also not addressed potential reforms to the EPC methodology itself in this interim response. Commercial EPCs remain asset-based assessments rather than measures of actual building performance, and concerns persist regarding the extent to which EPC ratings accurately reflect operational energy consumption.
Conclusion
The Government's interim response provides the first substantive update on non-domestic MEES reform for several years and resolves a degree of uncertainty that has persisted since the 2019 and 2021 consultations. While the ambition of achieving EPC B has been retained, the policy has been refocused on privately rented commercial buildings over 1,000 square metres and the proposed compliance date moved to 2031. The proposed EPC C milestone has been abandoned, and existing exemptions will remain available.
For now, the response signals a more pragmatic and targeted approach to improving the energy performance of commercial buildings. However, with secondary legislation and further guidance still to come, landlords, tenants and investors will need to monitor developments closely as the detail of the new regime emerges.
If you would like to discuss how the proposed changes may affect your property portfolio or transactions, please contact our Real Estate team.
