Stricter EPC rules are coming for commercial premises

If you're a landlord or tenant of a commercial building, you should be aware of proposals of the UK Government to make significant changes to Energy Performance Certificate (EPC) requirements to put stricter Minimum Energy Efficiency Standards (MEES) into effect for commercial buildings in 2028 and 2030. 

Current EPC Rules 

At present all commercial properties in England and Wales must have an EPC rating of at least level E to be legally let (including those which are already let). Properties rated F or G cannot be let or continue to be let unless a valid exemption is registered with PRS Exemptions Register. 

Available Exemptions under the PRS Exemption Register 

Exemptions can apply where:

1. The expected value of savings on energy bills that the measure (or package of measures) to improve the energy efficiency of a building is expected to achieve over a period of 7 years, starting with the date the installation is completed, are less than the cost of taking such measures.
2. All cost-effective improvements have been made but the required energy efficiency rating is unachievable.
3. The only improvements for the building are cavity wall insulation, external wall insulation or internal wall insulation (for external walls).
4. A qualified expert confirms improvements would devalue the property by over 5%.
5. If the relevant improvements for a building need consent from another party, such as a tenant, superior landlord, mortgagee, freeholder or planning department, and despite best efforts that consent cannot be obtained or is given subject to conditions that cannot reasonably be complied with.
6. If you have recently become a landlord through purchasing a property with a lease in operation.

Commercial exemptions must be registered formally on the government website and can last for up to 5 years, save for the exemption at f), which lasts for up to 6 months only.

A listed building does not automatically qualify for a PRS exemption but could qualify if any relevant energy efficiency improvements carried out would detrimentally alter the character and appearance of the building. 

Changes Coming in 2028 and 2030

The Government has yet to announce its final decision on changes to MEES for commercial buildings. However, government proposals indicate that the following change could be implemented:

• By April 2028 let commercial buildings must meet a minimum EPC rating of C or hold a registered PRS exemption certificate.
• By April 2030 let commercial buildings must meet a minimum EPC rating of B or hold a registered PRS exemption certificate.
• The period of validity of EPC certificates is to be shortened from the current 10 years. Though the period is uncertain at this time.
• The expiry of an EPC will automatically trigger the requirement to obtain a new EPC.
• All listed buildings will be required to have an EPC.

Until government legislation is finalised, these changes remain proposals only and landlords and tenants of commercial buildings should monitor the government website for official announcements. Though the current lack of legislative certainty makes long-term planning challenging, given the government’s net-zero commitments, waiting for full certainty could be costly and it is likely that energy efficiency standards will only become stricter over time. 

Why This Matters 

Non-compliance could prevent landlords from legally letting properties and result in fines up to £150,000. Poor energy ratings can reduce rental income, increase vacancy periods, and diminish the value of a property. 

Tenants may also face disruption from improvement works or need to relocate if upgrades are not undertaken. Tenants should also be aware that some lease provisions may place obligations on them to cooperate with energy efficiency improvements. 

What you can do to prepare

Landlords

• Check your current EPC status: You can verify this on the official EPC register at https://www.gov.uk/find-energy-certificate. 
• Obtain an up-to-date EPC report: This will identify your building’s current energy rating and highlight cost-effective improvements. Engage an accredited commercial energy assessor if required.
• Plan and budget early: Upgrading close to deadlines risks contractor shortages, supply-chain constraints, and higher costs. Early, staged improvements can be more manageable and effective.
• Prioritise impactful upgrades: Focus on improvements that deliver the greatest EPC rating increase, such as enhanced insulation, LED lighting, efficient heating systems, and building management systems. Perhaps consider deep retrofits rather than piecemeal fixes for long-term savings.
• Review and future-proof lease agreements: Confirm landlord rights of access for improvement works. Include clauses that restrict tenant alterations likely to negatively affect EPC ratings, allocate upgrade costs or a proportion thereof of making energy efficiency improvements to the tenant, and control who obtains EPC certificates to prevent conflicting ratings.
• Explore funding and incentives: Check for any government offered grants, loans, and tax allowances to support energy-efficiency projects.

Tenants

• Understand your lease obligations: Review energy performance requirements, alterations, and service charge clauses. Some leases may require cooperation with landlord upgrades or prohibit changes that would harm the EPC rating.
• Engage with your landlord early: If your building has a low EPC rating, discuss with your landlord any upgrade plans to prepare for disruptions if necessary. Beware of getting locked into leases in future where landlords seek variations to recover upgrade costs.
• Assess fit-out impacts: Tenant alterations can significantly influence a building’s EPC rating. Discuss your alteration plans with your landlord to avoid non-compliance risks.
• Consider wider implications: Occupying a building that is not energy efficient may affect the reputation or environmental sustainability commitments of the business, especially for larger tenants or occupiers under regulatory or market pressure. A more efficient building also usually has lower operational costs.

Planning ahead

At Neves Solicitors, our commercial property team has extensive experience advising landlords and tenants. If you would like assistance with your commercial property matters, please do not hesitate to contact us. Call 0330 0945 500, email info@neves.co.uk or complete our Contact Form and we'll get back to you.