Government Updates Energy Efficiency Rules for Commercial Renting: Key Changes for Landlords and Tenants

The UK government has introduced updated energy efficiency rules for rented non-domestic buildings, setting a clearer path forward for commercial landlords and business tenants.

The revised framework removes previously planned interim deadlines and establishes a definitive target, balancing the need to lower carbon emissions with practical support for smaller businesses.

Key Policy Updates

• Commercial buildings must achieve an Energy Performance Certificate (EPC) rating of B or higher by 2031.

• The previously anticipated interim milestone requiring a C rating by 2027 has been dropped, giving property owners more time to plan improvements.
• Buildings under 1,000 square metres will continue to only require the baseline EPC E rating, providing relief to high street landlords and smaller businesses from immediate, high-cost renovations.

Implementation and Compliance

The formal implementation of these rules requires secondary legislation, which will outline finer operational details. A full consultation response providing deeper insights into the policy is also expected.

Current exemptions remain intact, such as the seven-year payback test (where improvement costs must be recoverable through energy savings within seven years) and the devaluation exemption (if works would harm the property’s market value). Note that these exemptions are tied strictly to the individual landlord and cannot be transferred upon sale.

MEES regulations apply specifically to properties that require an EPC. Certain exceptions—such as very short leases (under six months) or very long leases (over 99 years)—continue to be excluded.

Penalties for Non-Compliance

Landlords who breach efficiency standards face severe financial penalties scaling up to £150,000, calculated using the property’s rateable value. These fines are published publicly, carrying significant reputational risks.

Now that the deadline is confirmed, commercial property investors and developers need to check their portfolios and start prepping. Booking assessments, getting necessary approvals, and planning upgrades early will help you jump the queue before service providers get overwhelmed. It is also vital to check lease contracts, as specific clauses determine what improvements landlords must make and whether any exemptions apply.

 

The author of this article, Luke Logiudice, Solicitor, can be contacted on 01548 845009 or by email atl.logiudice@bartons.co.uk