A chilly draught is blowing through the commercial property market, as tightening EPC rules mean landlords must seal the gaps in energy performance before key deadlines shut them out of future lettings.
Under current proposals, the minimum EPC (Energy Performance Certificate) rating for commercial properties is set to increase from E to B, with legal prohibitions on letting non-compliant buildings.
For many landlords, this will demand significant investment and forward planning to avoid regulatory penalties or stranded assets.
What’s changing and what’s at stake
The Minimum Energy Efficiency Standards – MEES – set performance requirements for properties to be legally let in England and Wales. The aim is to improve the energy efficiency of the nation’s building stock and help the UK reach its net zero targets.
Since April 2023, landlords of non-domestic let property must ensure their building has at least an EPC of E, even when there has been no renewal or assignment of the lease. Without an exemption, buildings rated F or G may already be categorised as substandard.
And those standards are expected to tighten. While the original timetable to increase from EPC rating E to C in 2027, then to B in 2030, has been pushed back, the Department for Energy Security and Net Zero (DESNZ) is expected to confirm new deadlines by the end of 2025.
While we’re waiting to hear from DESNZ, it is unclear whether the interim milestone of EPC C will remain part of the framework, but EPC B does remain projected as the future benchmark and will most likely be required between 2030 and 2035.
It may seem a long way away, but these changes carry real financial and operational implications, as a large proportion of commercial stock could fail to meet the new standards, without urgent upgrading.
Reports suggest up to 70% of commercial floor space in England and Wales is currently rated C or below, putting an estimated £700 billion of assets at risk of becoming underused or unlettable.
A range of MEES exemptions may be available, but each has tight conditions. These include situations where upgrades are not economically viable within a seven-year “payback” period; where all reasonable improvements have already been carried out; where required works would damage the building; or where third-party consent, such as from a tenant or lender, is refused.
Landlords should also be aware that exemptions under MEES are not permanent or transferable. Any exemption registered on the PRS Exemptions Register lapses automatically when the building changes ownership. This means that a buyer cannot rely on the previous landlord’s exemption, but new landlords can apply for a six-month temporary exemption while they make improvements or register a further valid exemption.
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.
To speak with Tamzin about a commercial property related matter, please call 01483 887766, email info@hartbrown.co.uk or start a live chat today.
*This is not legal advice; it is intended to provide information of general interest about current legal issues.
