Commercial EPC Regulations: Why Landlords Need to Prepare for EPC B

Commercial landlords across England and Wales are facing increasing pressure to improve the energy efficiency of their properties. With further changes to Energy Performance Certificate (EPC) requirements expected, understanding your responsibilities under the Minimum Energy Efficiency Standards (MEES) regulations is becoming increasingly important.

Although the Government has not yet confirmed revised implementation dates, the direction is clear. Minimum energy efficiency requirements for commercial properties are expected to tighten, and landlords who delay preparing could face significant costs, regulatory penalties, and properties they can no longer legally let.

For commercial landlords, planning ahead will be important to protect property values, manage costs and prepare for future EPC requirements.

What are the current EPC requirements for commercial landlords?

The Minimum Energy Efficiency Standards (MEES) regulations set out energy efficiency requirements for rented commercial properties in England and Wales.

Since April 2023, landlords have been prohibited from continuing to let non-domestic properties with an EPC rating below E, unless a valid exemption has been registered.

Importantly, this requirement applies even where an existing lease has not been renewed, or a new tenancy has not been granted. This means commercial properties with an EPC rating of F or G may already be classed as 'substandard' and cannot legally be let without a valid exemption.

The Anticipated Shift to EPC B

The Government previously proposed raising the minimum EPC rating for commercial properties from E to C by 2027, then to B by 2030.

However, the original timetable has been delayed, and revised implementation dates have yet to be confirmed.

The Department for Energy Security and Net Zero (DESNZ) was expected to provide further clarity by the end of 2025, with industry expectations suggesting that an EPC B rating could become mandatory between 2030 and 2035.

For many commercial landlords, meeting a higher EPC standard could require substantial investment in energy-efficiency improvements, along with careful financial and portfolio planning.

As Jenny Colvin, Commercial Property Partner at Warner Goodman LLP, explains: “While the precise timetable remains uncertain, the direction of policy is unmistakable. Landlords should assume that EPC B will become the required benchmark. Waiting for formal deadlines may leave insufficient time to upgrade assets.”

How could stricter EPC regulations affect commercial property landlords?

Changes to commercial EPC requirements could significantly affect property portfolios across England and Wales.

Industry data suggests that up to 70% of commercial floor space currently has an EPC rating of C or below.

For landlords, the potential risks include:

• Properties becoming legally unlettable if they fail to meet the required EPC rating.
   
• Reduced property values as less energy-efficient buildings become less attractive to buyers and investors.
   
• Financial penalties and enforcement action where properties do not comply with MEES regulations.
   
• Reduced competitiveness as businesses increasingly consider energy efficiency and sustainability when choosing commercial premises.

Energy efficiency is also becoming an important consideration for lenders, investors and larger commercial tenants, particularly where environmental, social and governance (ESG) commitments influence property decisions.

Commercial properties that fail to meet future requirements could become 'stranded assets', meaning they may be difficult to let, sell or maintain at their existing value.

Are there exemptions to commercial EPC and MEES regulations?

Not every commercial property can achieve the required EPC rating. The MEES regulations recognise this by allowing certain exemptions in specific circumstances.

However, these exemptions are limited and must meet the relevant legal requirements.

Common MEES exemptions include:

• Where energy efficiency improvements are not economically viable within a seven-year 'payback' period.
• Where all relevant energy efficiency improvements have already been carried out.
• Where the required improvements would cause damage to the building.
• Where necessary third-party consent, such as from a tenant, lender or superior landlord, has been refused.

How long do MEES exemptions last?

Landlords relying on an exemption need to be aware that:

• Exemptions must be registered on the PRS Exemptions Register.
• Most exemptions are valid for five years.
• Exemptions do not automatically transfer when a commercial property is sold.

This last point is particularly important when buying or selling commercial property.

A buyer cannot simply rely on an exemption registered by the previous owner. Instead, a new owner may be able to claim a six-month temporary exemption while taking steps to comply with the regulations or register a qualifying exemption.

As a result, EPC ratings and existing MEES exemptions are important considerations during commercial property transactions and legal due diligence.

Jenny Colvin explains: “These deadlines aren’t far off. Landlords need to treat these EPC changes as a core risk to their assets. Delay equals expense and potential loss of rental income. The time to act is now.”

How can commercial landlords prepare for future EPC requirements?

Improving a commercial property's EPC rating can involve more than straightforward maintenance work. Depending on the building, upgrades may require structural alterations, significant investment and cooperation from existing tenants.

Alongside assessing their properties' energy efficiency, landlords also need to consider how their commercial leases could affect their ability to carry out improvement works.

From a commercial property law perspective, important considerations include:

• Service charge provisions: Whether the cost of energy efficiency improvements can be recovered through existing lease arrangements.
   
• Rights of entry: Whether the lease allows landlords to access the property to carry out necessary improvements.
   
• Green lease provisions: How lease terms can support energy efficiency and sustainability objectives.
   
• Tenant cooperation: Whether tenants are required to cooperate with improvement works.
   
• Dilapidations and maintenance planning: How future EPC improvements can be considered alongside existing repair and maintenance obligations.

Well-drafted commercial leases can help landlords manage future compliance requirements and reduce the risk of disputes with tenants.

Six steps commercial landlords can take to prepare for EPC B

Although the timetable for future EPC requirements remains uncertain, commercial landlords can take practical steps now to understand their position and prepare their properties.

1. Review your commercial property portfolio

Start by identifying each property's current EPC rating. Properties rated D, E, F or G may need particular attention, allowing you to prioritise buildings that could require energy efficiency improvements.

2. Plan energy efficiency improvements early

Consider what work may be needed to improve each property's EPC rating. Depending on the building, this could include improvements to heating systems, insulation, windows, lighting, building controls or renewable energy installations.

Planning can help landlords budget for the work and consider how improvements may affect existing tenants.

3. Check whether any MEES exemptions apply

Some commercial properties may qualify for an exemption because of financial, structural or other qualifying circumstances. Where an exemption applies, it must be registered on the PRS Exemptions Register before it can be relied upon.

4. Keep clear records of assessments and decisions

Maintain accurate records of EPC assessments, proposed improvements, cost-benefit analyses and any decisions relating to compliance. These records may be important if enforcement action arises or when negotiating commercial lease arrangements.

5. Review your commercial lease terms

Check whether existing leases provide the necessary rights to carry out energy efficiency improvements and whether tenants are required to cooperate. Landlords may also wish to consider how EPC compliance is addressed when negotiating new leases or renewing existing arrangements.

6. Keep up to date with changes to EPC regulations

The Government has been consulting on further reforms to the Energy Performance of Buildings (EPB) regime.

Keeping informed on policy developments and future MEES requirements will help landlords understand when changes may take effect and how they could affect their property portfolios.

Speak to our Commercial Property team

If you are unsure how current or proposed EPC regulations could affect your property assets, our Commercial Property team is here to help.

At Warner Goodman LLP, we provide practical legal advice to commercial landlords on lease arrangements, property transactions and compliance with MEES regulations.

Whether you are reviewing your existing property portfolio, planning energy efficiency improvements or considering the implications of an upcoming transaction, we can help you understand your legal position and plan your next steps.

For further information, contact Jenny Colvin and our Commercial Property team on 023 9275 3575 or email enquiries@warnergoodman.co.uk.