MEES update: Government interim response confirms EPC direction for commercial property

Since 1 April 2018, landlords have been prohibited from granting new leases or extending or renewing existing leases of non-domestic property where the Energy Performance Certificate (EPC) rating falls below an E.  Since 1 April 2023, this requirement has also applied to existing lettings, unless a valid exemption has been registered.  Last week, the Government published an interim response to the 2019 and 2021 consultations on strengthening non-domestic MEES in England and Wales.  The announcement, published on 18 June 2026, confirms a revised and more targeted approach: larger privately rented non-domestic buildings are proposed to move to a minimum EPC B standard from 2031, where cost-effective, while smaller buildings are expected to remain subject to the current EPC E requirement.

EPC thresholds

The current minimum threshold for non-domestic lettings remains an EPC rating of E.  However, the Government’s interim response published on 18 June 2026 confirms that it intends to introduce a higher minimum standard of EPC B from 2031 for privately rented non-domestic buildings over 1,000 square metres in England and Wales, where cost-effective.

Although the interim response describes this as applying to “larger” privately rented non-domestic buildings, a 1,000 square metre threshold is relatively modest in practice — roughly one seventh of a football pitch or, with Wimbledon soon upon us, around four tennis courts. Buildings below 1,000 square metres are expected to remain subject to the current minimum standard of EPC E.  The previously proposed interim EPC C milestone for 2027 will not be taken forward.  This will provide landlords and tenants more time to improve the efficiency of their buildings in a way most suitable for their building and lease agreements.  The interim response noted the government’s intention to retain existing flexibility mechanisms and exemptions.  The objective being to ensure that only improvements that are practical and affordable are required.  The proposed EPC B requirement for larger buildings will only take effect if and when the necessary secondary legislation has been passed.

Current exemptions and penalties

Exemptions must be registered on the Private Rented Sector Exemptions Register before they can be relied upon and once registered, will apply until the sale or transfer of the asset.

For non-domestic properties, the current exemptions include:

• 7-year payback exemption – the cost of recommended works would not be recovered through energy saving over seven years.
• All improvements made exemption – all relevant works have been carried out but the property remains below EPC E.
• Wall insulation exemption – expert advice confirms that recommended wall insulation would negatively impact the building structure or fabric.
• Third party consent – all necessary consents cannot be obtained for the works.
• Devaluation – where an independent surveyor confirms that the works will reduce market value by more than 5%.
• Temporary new landlord exemption – available in specific limited, circumstances.

The enforcement risk is significant where a landlord lets or continues to let a sub-standard property in breach of the MEES regulations.  For non-domestic properties, penalties can include financial penalties of up to £150,000 depending on how long the breach lasts.

A summary of the updated guidance.

The May 2026 update of the government’s non-domestic private rented property: minimum energy efficiency standard guidance for landlords did not change the current minimum EPC threshold and mainly reflected the new online service for registering exemptions and penalties.  The further interim announcement published on 18 June 2026 is more substantive.  It confirms that the Government intends to strengthen MEES for larger privately rented non-domestic buildings by requiring EPC B from 2031, where cost-effective, while retaining EPC E for buildings below 1,000 square metres Further detail on the proposals, including implementation of the 1,000 square metre threshold, is expected in the Government’s full response to the consultations and in updated guidance.  Until secondary legislation is passed, the current EPC E standard remains the legal requirement.  For landlords, investors and occupiers, the recent government announcement reduces some immediate uncertainty by removing the 2027 EPC C milestone, but it does not remove the direction of travel.  Larger assets should be reviewed well ahead of 2031 to understand whether they fall within the proposed 1,000 square metre threshold, whether improvement works are likely to be cost-effective, and how those works can be aligned with lease events, refurbishment programmes and capital expenditure planning.