MEES Update: What the revised timetable means for Commercial Property

The Government’s interim update to Minimum Energy Efficiency Standards (MEES) in the non‑domestic Private Rented Sector shifts the timetable for commercial property, while leaving the broad direction of travel intact. The removal of proposed interim milestones gives landlords and investors greater flexibility and reduces some of the immediate compliance pressure.

However, the value of that extra time fully depends on how well it is used. Energy performance remains central to running costs, occupier demand, sustainability objectives and overall asset performance. The shift in timing gives more space to plan, but also places greater emphasis on investment timing, portfolio strategy and how assets are positioned to meet future demand.

How MEES has evolved

EPC ratings (A-G) form the basis for MEES compliance in a non-domestic property.

From 1 April 2018, landlords of non-domestic rented properties have only been permitted to grant a new tenancy, or to extend or renew an existing tenancy, where the property has a minimum EPC rating of E, unless a valid exemption has been registered.

From 1 April 2023, this requirement was extended to all privately rented non-domestic properties, including those where there has been no change in tenancy.

The 2019 and 2021 consultations proposed a phased approach to tightening MEES standards, targeting an EPC B by 2030, with an interim milestone of EPC C by 2027.

Interim response: what has changed?

Key points include:

• The interim response focuses on larger premises, with the aim of reducing energy costs, improving energy efficiency, strengthening resilience to future energy shocks, and reducing carbon emissions.

• Buildings below 1,000 sqm are expected to remain at a minimum EPC E standard, reflecting a more flexible approach - particularly for SMEs and high street landlords - with no set deadline for improvement beyond this level.

• From 2031, privately rented non-domestic buildings over 1,000 sqm will be required to achieve an EPC rating of B, where this is cost-effective.

• It confirms that improvements must remain “cost-effective”, with existing mechanisms – including the 7-year payback test and other exemptions – continuing to apply.

• The previously proposed interim EPC C milestone (2027) will not be pursued, providing greater flexibility for landlords and tenants to align improvements with planned refurbishment or lease events.

What hasn’t changed?

The overall direction of travel remains unchanged, with an expectation that higher standards will still be achieved over the longer term.

The carbon-based Environmental Impact Rating (EIR) will remain the headline metric for non-domestic EPCs, supporting the net zero transition, and providing consistency in how performance will be assessed.

What does it mean for landlords and investors?

Short-term relief

The removal of the proposed interim EPC C requirement provides a degree of short-term relief, reducing immediate regulatory pressure on landlords.

A widening gap between landlord and occupier behaviour

Market behaviour is already shifting, with a continued flight to quality as occupiers increasingly target higher-performing, energy-efficient properties with EPC A or B ratings, or require a clear improvement pathway. This is typically driven by ESG objectives, a desire to avoid future capital expenditure, and sensitivity to operational energy costs.

In contrast, despite the market opportunity, landlord behaviour is likely to remain mixed, often driven by availability of capital and visibility of future income. Some are progressing improvement strategies where capex is available and longer-term cashflow is secure, while others are reluctant to commit expenditure in the absence of immediate regulatory drivers or certainty of return. Continued policy refinement may lead some owners to defer investment decisions, potentially resulting in a divergence between occupier expectations and landlord action.

Timing & cost risk

There is a clear case for acting proactively rather than reactively. As deadlines approach, pressure on supply chains and contractors is likely to increase, which may drive up costs and constrain delivery. A planned, phased approach may therefore reduce risk and spread costs.

Lease negotiations are evolving in response. Service charge caps are being used in some cases to limit tenant exposure to improvement costs, while ensuring that essential landlord-led works remain deliverable.

Penalties for non-compliance remain aligned with the existing MEES framework, where fines are linked to rateable value and duration of breach, with maximum penalties of up to £150,000 per property. While these provisions have not been updated in the interim response, enforcement risk may increase over time as scrutiny on EPC ratings intensifies and the legislative landscape continues to evolve.

Points of uncertainty

The interim response does not clarify how the 1,000 sqm threshold is to be applied in practice, whether at whole-building level, by reference to the area covered by an EPC, or at transactional or tenancy level. The method of measurement is also not defined, which may be material in practice where floor areas are marginal in relation to the threshold.

More broadly, the response provides a direction of policy but not the operational or practical detail, leaving a degree of uncertainty - particularly for multi-let assets. Any changes relating to an EPC B requirement will only take effect following the successful passage of secondary legislation.

What should property owners do now?

The revised timetable gives property owners a chance to take a breath and take stock. A portfolio-wide review is a sensible place to start. Landlords should review and assess current EPC ratings across their holdings, identify lower rated assets that may be more exposed to future regulation and balance short-term compliance with longer-term asset strategy.

The question is not just whether an asset can meet regulatory requirements today, but whether it is well positioned to capture future demand and respond to evolving occupier expectations. With a clear view in place, owners are better equipped to make informed decisions about how investment strategies are aligned and delivered proactively. Used effectively, the additional time should support more cost-efficient, strategic decision-making, rather than a reactive response closer to compliance deadlines.