Publication
Publication
Last month, the Government provided its long-awaited interim response to the 2019 and 2021 consultations on strengthening the non-domestic Minimum Energy Efficiency Standards (“MEES”) in England and Wales. The response signals a more targeted approach than was previously proposed – from 2031, the higher Energy Performance Certificate (“EPC”) standard of B would apply only to private rented buildings over 1,000 square metres, and only where it is cost effective to achieve. In this article, we explore the latest proposals and consider what questions remain unanswered.
Stakeholders in the commercial property sector will remember that the Government published consultations in 2019 and 2021 on strengthening MEES requirements for non-domestic properties. Summarised in our publication ESG: Key Issues for Real Estate Global Q&A 2025, the previous proposal provided a highly ambitious target of EPC C by 2027 and EPC B by 2030 for non-domestic buildings – largely felt to be more aspirational than achievable.
Since then, after a prolonged period of uncertainty as to whether the Government would move forward with these plans, long-awaited clarity has finally been provided. Hot on the heels of the Government’s response to the consultation on improving the energy efficiency of privately rented homes published earlier this year, the Government has now confirmed its intention to implement the following proposals in respect of the non-domestic sector:
(i) from 2031, all private rented buildings over 1,000 square metres in England and Wales will need to reach a higher standard of energy efficiency of EPC B – but only where cost effective to do so;
(ii) buildings below 1,000 square metres will continue to be subject to the current minimum standard of EPC E; and
(iii) the previously proposed interim milestone requiring EPC C by 2027 will not be taken forward.
This announcement will likely be seen by the market as a welcome rewrite, but the proposals need to be explored in more detail to fully understand the implications.
Whilst the latest proposals clearly signal a more targeted approach, and the proposals have been described by the UK Green Building Council as a “welcome step forward”, some key questions remain as to the substance of the proposals.
(i) The 1,000 square metre threshold
One of the most important unanswered questions is how the 1,000 square metre threshold will operate in practice. The interim response refers to “buildings” over 1,000 square metres in size – but it is unclear how “building” will be defined. At present, EPCs are often assessed in respect of individual units within a larger building, so further guidance will be needed to make this clear.
(ii) Smaller buildings
The decision not to extend the higher standard to buildings below 1,000 square metres reflects a deliberate prioritisation of larger assets. That may reduce the immediate compliance burden for parts of the market, but it also leaves a substantial segment of poorer-performing stock subject only to EPC E. In practice, some larger prime “best in class” buildings already meet tenants’ sustainability expectations, whereas smaller secondary assets may present the greater retrofit challenge. It remains to be seen whether further requirements will be introduced for smaller buildings at a later date.
(iii) The “cost-effective” caveat
The interim response also indicates that EPC B would be required only where it is cost effective to achieve. It remains unclear whether the Government intends simply to rely on the existing flexibility mechanisms under the MEES regime (which it has said will remain in place), including the seven-year payback test (which allows landlords to bypass upgrading the property if the cost of doing so outweighs the energy bill savings generated over seven years) and existing exemptions, or whether it will introduce a revised or additional test for cost effectiveness. That detail will be critical in determining how demanding the new standard proves in practice.
The earlier proposals were widely seen as ambitious. The latest announcement reflects a narrower and more pragmatic policy direction.
That said, the extent of the change should not be overstated. For buildings within scope, EPC B by 2031 would still represent a substantial compliance challenge. A report published by the British Property Federation in February 2026 found that around 81 per cent of commercial buildings in major cities across England have an EPC rating below B. If the new regime is implemented as broadly as proposed, significant capital expenditure will still be needed across the market.
The proposals will not take effect unless and until secondary legislation is introduced. The timetable for that remains uncertain. Even so, the interim response provides a clearer indication of the Government’s direction of travel.
Landlords should consider:
(i) reviewing existing EPC ratings across their portfolios and commissioning new EPC assessments where existing EPCs are approaching expiry;
(ii) identifying assets that may fall within the proposed 1,000 square metre threshold;
(iii) modelling the likely capital expenditure required to achieve EPC B; and
(iv) engaging with tenants early on data sharing, access and retrofit planning.
Similarly, investors acquiring new assets should ensure that technical due diligence properly tests energy efficiency risk, expected upgrade costs and the effect on asset value and letting strategy. If implemented as proposed, the reforms are likely to increase the divergence in value and lettability between compliant and non-compliant assets. Buildings that already meet the expected standard may benefit from the “green premium”, while those requiring substantial works may face increased pricing pressure and the so-called “brown discount”.
So, to B or not to B? For many landlords, that is no longer the only question. The more pertinent questions are when, at what cost and for which buildings. For now, the Government has revealed enough to show that the script has changed, but not enough to tell us exactly how the final act will play out. The move away from a universal EPC B target and the abandonment of the proposed 2027 EPC C milestone will come as a relief to many, but the real significance of the reforms will depend on the detail still to come.
If you wish to discuss any of the issues discussed in this article, please do not hesitate to reach out to your usual Linklaters contact.