Government announces long-anticipated energy efficiency reforms for commercial properties in England and Wales
Published on 23rd June 2026
Non-domestic buildings required to have at least EPC B from 2031 as the government raises Minimum Energy Efficiency Standards
At a glance
From 2031, landlords must obtain an EPC rating of B or above to be able to let commercial properties of 1,000 square metres in England and Wales
The current requirement of EPC E or above will remain in place for buildings under 1,000 square metres
Previous proposals for an interim EPC milestone of C by 2027 will not be taken forward and current exemptions will remain in place
In January 2026, the government announced changes to the Minimum Energy Efficiency Standards (MEES) regulations for residential properties (a minimum C rating by 2030). Following consultations in 2019 and 2021, a response on MEES for commercial properties was still awaited. It was expected that the proposed deadline of achieving a minimum C rating by 2027 would be pushed back.
On 18 June 2026, the government published an interim response confirming non-domestic buildings will be required to have an EPC B or higher from 2031 (dropping the interim milestone of C-rating by 2027). The response sets out the government's approach, which it says is focused on supporting businesses that rent larger premises by helping to cut energy costs and improve energy efficiency. The government has modelled that this will help tenants see a reduction in their energy bills by £360m a year.
Secondary legislation
Secondary legislation will be required to implement this change, and will also provide further details. The government will also publish a full consultation response (setting out further detail on the new policy and its implementation).
The continuation of the current minimum standard of EPC E for building of less than 1,000 square metres will come as a welcome relief to many landlords who faced the potential of having to carry out costly energy improvement works.
Balancing act
In making this decision, the government says it has tried to focus action where it delivers the greatest benefits while balancing improving the poorest‑performing buildings through the existing EPC E minimum standard and giving additional flexibility to small and medium-sized enterprise (SME) businesses and high street landlords of smaller properties to upgrade their buildings over time.
The current exemptions and flexibility will remain, including devaluation (where qualifying works would reduce the property's market value) and the seven-year payback test (where the cost of works cannot be recovered within seven years through energy savings), however these are personal to each landlord and cannot be assigned or transferred.
Scope and effect of MEES
MEES only applies to properties with an EPC. While this is commonly a legal requirement, there are some exceptions including short leases (under six months), long leases (over 99 years) and licences.
If a property owner breaches MEES requirements, they expose themselves to a financial penalty based on the property's rateable value of up to £150,000 which carries with it reputational risk as the penalties are publicly published.
Osborne Clarke comment
The changes appear to provide a fair balance between the requirement to decarbonise commercial buildings and recognising the pressures on landlords of smaller properties.
There are still a number of questions around whether there will be transitional provisions; how buildings will be defined and measured; and whether there will be any corresponding reform on non-domestic EPCs. It is not surprising that the C milestone by 2027 was dropped in the end, given how difficult it would have been for landlords to comply with it at such short notice, resulting in many unlettable properties. However, a vast amount of properties will need upgrading to meet this B rating: the British Property Federation's latest annual analysis of EPC ratings in major cities in England found that 81% of commercial buildings have an EPC B or below.
Now the deadline has been announced, investors and developers should review their property portfolios and start considering upgrades, and securing consents and commissioning assessments in anticipation of the surge in demand. Lease wording should also be reviewed as it can affect landlords' obligations to improve energy efficiency and available exemptions.
Overall, the announcement brings much needed clarity within the commercial real estate sector, with landlords of larger buildings having an important role to play in making commercial buildings more energy efficient.
