EPC B is coming

The government's latest MEES announcement finally gives landlords clarity on the destination. The challenge now is using the next five years wisely, before future EPC methodology and Part L changes make the route to compliance even harder. In this article, Shane Banger, outlines how to use the next 5 years wisely...

Commercial MEES: clarity emerging on EPC B, and how landlords should use the transition period

The government’s interim response, published on 18 June 2026, finally settles where the energy efficiency bar will sit for rented commercial buildings, and when. This article sets out what has changed and what owners of larger buildings should now be doing about it.

Clarity at last on commercial MEES

After more than six years of consultation and shifting trajectories, the government has confirmed the shape of the strengthened Minimum Energy Efficiency Standards (MEES) regime for rented non-domestic property in England and Wales. The approach is a deliberately targeted one.

The confirmed position is as follows:

• From 2031, all privately rented non-domestic buildings over 1,000 square metres will need to reach EPC B, where this is cost-effective
• Buildings below 1,000 square metres will stay at the existing minimum of EPC E, with no set deadline to go beyond it
• The interim EPC C milestone previously proposed for 2027 has been dropped. Landlords and tenants now have more time to plan improvements around their buildings and their leases
• The existing flexibility mechanisms remain in place, including the seven-year payback test and the registered exemptions.

One important caveat applies. These changes will only take legal effect once secondary legislation has passed through Parliament, and the full government response, with detail on how the 1,000 square metre threshold will be defined, is still to come. This is an interim statement of direction rather than the final rulebook.

The rationale is about energy bills and energy security. The government estimates that the targeted approach could save tenants in the largest rented buildings up to £360 million a year in energy costs by 2031, while also reducing demand on the energy system. The logic is to concentrate the heavy lifting on the assets where it delivers most, and to give smaller landlords and SMEs room to upgrade over time

What the new rules mean for landlords and tenants

The confirmed direction will inform how leases are written and how capital is planned. Underpinning both is the ‘cost-effectiveness’ test.

Lease implications

Dropping the 2027 milestone takes immediate pressure off, but 2031 is closer than it looks once lease events are mapped against it. While the detail of the new regime is still being finalised, landlords should review upcoming lettings, renewals and lease expiries now to understand which assets may require intervention before the new standard takes effect.

Lease drafting becomes critical in delivering compliance. Owners will need to revisit green lease provisions, particularly rights of access to undertake works and controls on tenant alterations that could otherwise undermine an EPC rating. In multi-let buildings, this becomes more complex, as improvements often need to be phased across several lease events and occupiers, carefully managed to avoid disruption, voids, or unintended dilapidations exposure.

Early legal review of service charge provisions is also essential, as the distinction between repair, refurbishment and improvement will determine the extent to which costs can be recovered from tenants.

For tenants, there is a clear potential upside in the form of reduced energy costs and greater resilience against price volatility, but this relies on constructive engagement. Occupiers of larger buildings should anticipate, and ideally support, early engagement from landlords around access arrangements and coordinated upgrade strategies.

Five years to prepare: a practical roadmap to EPC B

The government’s confirmation of EPC B as the future minimum standard for larger rented commercial buildings provides something the industry has lacked for several years: certainty.

While the removal of the proposed 2027 EPC C milestone relieves immediate pressure, it should not be mistaken for a reason to delay. For many assets, particularly older office buildings, retail schemes and industrial stock, moving from an EPC D, E or even C rating to EPC B will require careful planning, significant capital investment and a clear understanding of how EPC ratings are derived.

The key point is that EPC compliance is ultimately driven by the building’s asset rating. The most successful strategies will therefore focus on measures that improve the EPC itself, rather than simply reducing operational energy consumption.

Start with the EPC

The first step should be establishing an accurate baseline. Many commercial EPCs currently in circulation were produced several years ago using limited building information, default assumptions or outdated services data. Before committing to major expenditure, owners should understand whether the existing EPC genuinely reflects the building’s current specification.

A detailed review of the existing EPC and underlying model can often identify opportunities to improve the rating through more accurate modelling inputs alone. Heating and cooling plant efficiencies, lighting specifications, controls strategies, glazing performance and renewable technologies are frequently represented using assumptions where evidence was unavailable at the time of assessment.

Once the current position is understood, landlords can identify the gap between their existing rating and EPC B, allowing a targeted improvement strategy to be developed.

Understanding what drives an EPC

Unlike operational energy ratings, EPCs are based on the calculated energy performance of a building under standardised occupancy assumptions. As a result, measures that reduce actual energy consumption do not necessarily improve the EPC.

The most influential factors are typically:

• Heating and cooling system efficiency
• Building fabric performance
• Lighting efficiency
• Renewable energy generation.

For many buildings, particularly those with ageing gas-fired services, the largest improvements are achieved through plant replacement. The continued decarbonisation of the electricity grid means that high-efficiency heat pump systems are becoming increasingly attractive from an EPC perspective, often delivering significantly greater improvements than would have been possible under previous methodologies.

Lighting upgrades also remain one of the most cost-effective routes to EPC improvement. In industrial, logistics and retail assets, replacing older lighting systems with modern LED installations can provide meaningful EPC gains at relatively modest capital cost.

Where building fabric performance is poor, upgrades to insulation, glazing and air permeability can further improve the building’s modelled energy demand. However, these measures are often more capital intensive and should be considered alongside planned refurbishment cycles.

Increasingly, rooftop solar photovoltaic systems are becoming a key component of EPC improvement strategies. For buildings with suitable roof space, solar PV can make a substantial contribution towards achieving EPC B while also reducing occupier energy costs.

Different sectors, different EPC pathways

Although the objective is the same, the route to EPC B varies significantly between sectors.

Offices

Key measures: Replace ageing heating and cooling plant with heat pumps and high-efficiency systems. Combined with LED lighting and solar PV, this can deliver substantial EPC improvements.

Industrial and logistics

Key measures: Removing gas-fired warehouse heating and maximising rooftop solar PV. Large roof areas and relatively simple servicing strategies often make logistics assets some of the most straightforward buildings to improve.

Retail

Key measures: Lighting upgrades remain one of the most cost-effective EPC improvement measures, often supported by HVAC replacement and solar PV where suitable roof space exists.

Use the transition period while today’s solutions still work

The five-year lead-in period should not be viewed as five years of inactivity. In reality, many of the most effective EPC improvement measures require long-term planning, capital budgeting and alignment with lease events.

Landlords should also be mindful that the regulatory landscape is continuing to evolve. The forthcoming changes to Part L of the Building Regulations are expected to place even greater scrutiny on fossil-fuel heating systems, while future EPC methodology updates are likely to further reward low-carbon technologies and electrification.

As a result, measures that improve EPC ratings today may not deliver the same relative benefit in the future, particularly where buildings remain reliant on gas-fired heating. Early planning allows owners to make investment decisions that not only achieve EPC B by 2031 but are also more resilient to future regulatory change.

The direction of travel is clear: buildings that continue to depend on fossil-fuel heating are likely to face increasing regulatory pressure. The transition period therefore provides an opportunity not simply to comply with EPC B, but to develop a longer-term decarbonisation strategy that avoids costly retrofit programmes later in the decade.

Having already supported numerous clients in achieving EPC B ratings through detailed energy modelling and scenario testing, Hollis can provide a clear, asset-specific roadmap to compliance, allowing owners to plan ahead and avoid costly surprises as the 2031 deadline approaches.

This article reflects the government’s interim response of 18 June 2026. The final requirements, including how the 1,000 square metre threshold will be defined, will depend on the full government response and the passage of secondary legislation. We will update this guidance as the detail is confirmed.