There is a formal system of measuring a building’s energy efficiency, known as the Energy Performance Certificate (EPC). Buildings are rated by an energy assessor from A to G based on a holistic review of several factors, including but not limited to, insulation, heating source type and energy management controls.
For non-domestic property in England and Wales, local authorities enforce EPC compliance. If you do not make a valid EPC available when selling or letting, you can be issued with a civil penalty which is typically calculated as 12.5% of the property’s rateable value (subject to minimum and maximum penalty levels). Where a building is over 500m² and frequently visited by the public, there may also be a requirement to display the EPC prominently, and a penalty can apply if it is not.
Legal change
The government introduced Minimum Energy Efficiency Standards (MEES) to improve energy efficiency in commercial property and did so under The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. With this regulation it became unlawful for landlords to grant new leases on commercial premises from 1 April 2018 if the EPC rating was below an E, the government further expanded this regulation to apply to all commercial leases, whether new or existing, effective from 1 April 2023.
Exemptions to the MEES requirements exist (see: Non-domestic private rented property: minimum energy efficiency standard - landlord guidance - GOV.UK). These are not automatic in most cases: landlords need to register the exemption and retain appropriate evidence. One key route is the ‘7-year payback test’, if the cost of the relevant energy efficiency improvements are not expected to pay for themselves through energy savings within seven years, the landlord may be able to register an exemption.
This then brings us to the anticipated EPC/ MEES changes. With the government looking to tighten the rules further, they commissioned the Consultation on Reforms to the Energy Performance of Buildings Regime which ran between 4 Dec 2024 and 26 Feb 2025 and aimed at formulating the best way to do so.
The legislative changes are expected to be introduced in the latter half of 2026. These may include raising the MEES to an EPC rating of B and even possibly removing the listed building exemption, it is also highly likely that a new multi-metric EPC rating system will be implemented, with ratings for several individual energy efficiency factors making up an EPC, rather than an overall rating. A further target of the change is to increase enforcement activity, expanded powers for local authorities, increased fines, shorter validity periods, and more stringent requirements for documenting and displaying EPCs may facilitate this. An additional point of note is that Air Conditioning inspection reports have been singled out for specific focus.
What does it mean for the landlord?
The industry expects that a significant proportion of commercial stock is currently below an EPC B threshold. A CBRE study suggest 58% of Central London office space may be rated below B; figures vary by source and by how stock is sampled, but the picture can be even more challenging in older, rural and suburban areas.
Landlords face mounting pressure, the regulations themselves put a financial burden on implementing changes to raise EPC ratings, and then an increase in enforcement action brings with it the risk of fines and reputational damage for those caught falling short.
Practical steps for commercial landlords (England and Wales)
- Identify any assets with EPC ratings of F/G (and any that are likely to fall short of future targets) and prioritise those with upcoming lease events.
- Check EPC validity/expiry dates and plan ahead, assessor lead times can be material.
- Review the EPC Recommendation Report and commission a costed improvement plan.
- Assess whether measures meet the 7-year payback test and keep an evidence pack (quotes, calculations, reports) in case an exemption is needed.
- Where an exemption applies, ensure it is properly registered and diarise review/expiry dates.
- Build MEES risk into lettings strategy (rent-free/capex discussions, timelines, works access) and keep agents/managing parties aligned.
- Maintain compliance basics: make EPCs available to prospective tenants/buyers and, where required, display EPCs in qualifying public buildings.
The government consultation is yet to release its findings report, but when it does, it should give a clearer indication of what changes are to be expected. In the meantime, landlords should treat EPC/MEES as an active compliance and asset-planning issue, specifically when considering leasing or buying/ selling any commercial property.
Blog author: Christian Cheng
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