Don’t MEES this: Key changes to EPC and energy efficiency standards – is your lease ready?

The government’s 18 June 2026 update on Minimum Energy Efficiency Standards (MEES) for non-domestic property confirms a reset, not a retreat.

The written ministerial statement provides long awaited clarity for landlords, occupiers and investors of the minimum standard and date for compliance.

What are the key changes?

The headline change is a move away from a blanket requirement for all non-domestic properties to achieve EPC B. Instead:

• Larger properties (over 1,000 sqm) will need to achieve EPC B by 2031 subject to the familiar exemptions (cost effectiveness, consents, etc).
• Smaller properties (below 1,000 sqm) will remain subject to the current EPC E minimum standard.
• The previously proposed EPC C milestone in 2027 will not be implemented.

Existing flexibility remains. In particular, landlords can still rely on exemptions where improvements to an EPC rating are not cost-effective. These exemptions ensure that landlords are only required to undertake works that are practical and economically viable and where consents from tenants or superior landlords or regulators are available.

EPC rules continue as before. Commercial building EPCs will continue to have a single energy efficiency rating. Changes to residential EPCs do not apply. The government’s consultation response in spring 2026 on EPC reform also clarified that listed buildings and those in a conservation area require EPCs. See paragraphs 68-70 within section 3. For MEES purposes though, the special nature of such buildings reduces the requirements and provides exemptions for alterations that would be inappropriate for protected buildings.

What remains to be clarified?

As things stand, there are some areas of uncertainty too; for example, it is not clear:

• Whether there will there be a transitional period for existing EPCs that are rated below a “B”.
• What does “building” mean?
• If the 1,000 sqm threshold operates at a building level only, or whether a sub-1,000 sq m unit forming part of a larger asset (such as a floor in an office block) would be caught.
• How the “cost effective” test will be applied in the context of achieving EPC B.
• When or even whether smaller buildings’ EPC rating might need to improve.

The new regime will be introduced through secondary legislation, with further detail and clarity expected in the government’s forthcoming consultation response. 

Why has the approach changed?

The government has framed this as a more pragmatic and proportionate policy that recognises the diversity of the commercial property stock.

The key drivers appear to be:

• Targeting impact – focusing on larger buildings where energy savings are greatest, with estimated tenant energy savings of £360m annually by 2031.
• Reducing burden on SMEs – the absence of a deadline for smaller assets to reach EPC B is intended to give SMEs and high street landlords additional flexibility.
• Supporting investment planning – by removing the interim 2027 deadline, the government hopes to reduce short‑term compliance pressure and allow for more realistic planning and delivery of upgrades.
• Retaining flexibility – continuing to recognise cost and viability constraints.

Overall, the intention is to balance decarbonisation objectives with market realities and energy security, while still signalling continued progression towards higher energy standards.

Asset management and leasing: What should landlords do now?

Although the removal of the 2027 milestone provides some breathing space, the 2031 EPC B requirement for larger buildings is a significant challenge and early planning will be critical. Landlords should now:

1. Segment your portfolio

• Identify assets over 1,000 sqm.
• Flag those below EPC B.
• Map likely upgrade complexity and cost.

2. Build a phased upgrade plan

• Align required improvement works with lease events such as break dates and expiry dates.
• Prioritise “quick wins” vs major retrofit assets.
• Factor in contractor availability and lead times. Avoid deferring decision making as many buildings will require multi-year upgrade programmes, and contractor availability may become constrained as demand increases.

3. Get your leases MEES-ready with active asset management

• Ensure rights of access for works.
• Strengthen tenant cooperation obligations and obligations not to do anything which would compromise an improved EPC rating.
• Use green lease provisions to allocate cost and responsibility for improvement works.

4. Stress-test exemptions early

• Don’t assume the “cost effective” test will be easy to meet.
• Start building evidence now.
• Consider other exemptions such as consents.

5. Develop your retrofit strategy

• Achieving EPC B will, in many cases, require more than incremental change, particularly for older properties. Common measures may include:
  • Upgrading building fabric (insulation and glazing).
  • Improving heating and cooling systems (including low-carbon alternatives).
  • Enhancing building controls and energy efficiency systems.
• For let buildings, retrofit programmes will need to take account of tenant occupation and lease terms, such as any access constraints placed on the landlord. Proactive engagement with occupiers will be key.

What should tenants do now?

1. Expect more landlord intervention

• Upgrade works are likely during the term.
• Engagement will be needed on timing and access – consider proactive questions if landlords delay and significant works are likely.

2. Review lease exposure

• Check service charge provisions.
• Understand how upgrade costs may be recovered.
• Watch for new green lease obligations in renewals.

3. Use this as a cost control opportunity

• Improved buildings = lower energy bills.
• Potential to align with ESG and reporting requirements.

Investment considerations

MEES will remain a key consideration in transactions. Large assets below EPC B are likely to be more closely scrutinised, with pricing reflecting anticipated upgrade costs, risks and disruption.

There may also be increasing divergence in value between compliant and non-compliant assets. A potential two-tier market between larger regulated stock and smaller assets may emerge. This may affect investment in properties, potentially favouring sub 1,000 sqm assets to avoid stricter regulation.

At the same time, there may be opportunities to add value by improving energy performance. Investors who view sustainability spending as a way to remain competitive, compared to those who view it with a compliance lens only, are likely to reap the rewards by way of tenant retention and long-term portfolio resilience.

For investors, understanding an asset’s EPC trajectory will be increasingly important in shaping acquisition and asset management strategies.

Risk and compliance

While further detail is awaited, the existing regime already restricts the letting of non-compliant properties with an EPC rating below an E and provides for financial penalties, as well as reputational risk through publication of breaches.

The overall direction has been confirmed: energy performance requirements will continue to tighten, and compliance will remain a core consideration for commercial property owners and occupiers.

Future-proofed assets: Don’t MEES out

The updated proposals provide greater flexibility, but not less responsibility. Retrofit programmes will take years, not months, so strategies need to evolve now to factor MEES requirements into investment and asset management decisions.

With 2031 approaching and further detail expected, early action will put businesses in a far stronger position to manage cost, risk and disruption.

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