Posted Tuesday 21st July 2026
Energy efficiency remains firmly on the agenda for the property sector, and whilst the pace of reform has shifted in recent years, the direction of travel is clear. Landlords, developers and investors are facing increasing pressure to understand how future energy efficiency requirements could affect their properties and portfolios.
Current Minimum Energy Efficiency Standards (MEES) prevent landlords from letting most commercial properties with an EPC rating below E unless an exemption applies. Whilst proposals to increase minimum standards have not yet been implemented, many in the market expect energy performance requirements to remain a key area of focus for future regulation.
Why should property owners be paying attention?
For many years, EPCs were largely viewed as a compliance issue. Today, they are becoming increasingly important from both a legal and commercial perspective.
A property’s energy performance can affect:
Increasingly, investors, lenders and occupiers are looking beyond current compliance and considering how assets may perform against future standards.
Key legal considerations for landlords
Do your leases allow improvement works?
One of the most common issues landlords face is ensuring they have sufficient rights to carry out works aimed at improving energy efficiency.
Questions worth considering include:
Older leases often contain limited access rights and may not have been drafted with sustainability upgrades in mind.
Can improvement costs be recovered?
Many landlords assume the cost of energy efficiency improvements can be passed through the service charge. However, this is not always the case.
Careful consideration should be given to:
The position will vary from lease to lease.
Are tenant alterations adequately controlled?
Alterations carried out by tenants can affect a building’s energy performance.
Landlords may wish to review whether existing lease provisions provide sufficient control over alterations which could negatively impact EPC ratings or future compliance requirements.
What should developers and investors be considering?
For investors and developers, energy efficiency should form part of the wider due diligence process.
Before acquiring or developing an asset, key considerations may include:
For older building stock in particular, any future tightening of energy efficiency requirements could have cost and asset management implications.
What should property owners do now?
Whilst future regulatory changes remain uncertain, practical steps can be taken now:
Proposed reforms
Commercial property
On 18 June 2026, the government published an update on raising the MEES benchmark for non-domestic rented properties, confirming the government’s intention to implement the following measures:
• From 2031, all non-domestic rented buildings over 1,000 square metres must reach an energy efficiency rating of EPC ‘B’, where cost effective.
• Buildings below 1,000 square metres will continue to be subject to the current minimum standard of EPC ‘E’.
• There will no longer be an interim milestone of EPC by 2027, to give landlords and tenants more time to improve the efficiency of their buildings in a way that suits their buildings and leases.
• The existing flexibility mechanisms, including the seven-year payback test and exemptions, will remain in place, meaning that even if higher EPC standards are introduced, landlords will not be required to carry out improvements in every case. The seven-year payback test is an exemption under the MEES Regulations that provides that landlords are not required to carry out energy efficiency improvements if the expected energy cost savings over a period of seven years would not equal or exceed the cost of installing the measures.
Residential property
On 23 September 2024, the government announced that they would consult on proposals for private and social rented homes to achieve EPC ‘C’ or equivalent by 2030. Secondary legislation which confirms this higher MEES requirement is expected to come into force in 2027, requiring compliance by 1 October 2030. There are currently no such proposals in relation to properties that are not rented.
On 21 January 2026, the government confirmed that the MEES Regulations will be amended to implement a higher standard for most residential properties, using new metrics to be introduced to EPCs. Following confirmation of the final policy on new EPCs and how the Home Energy Model (the government’s new methodology for assessing the energy performance of homes) will calculate new EPC bands, the government will confirm how the target of an EPC ‘C’ will be expressed on the new EPC certificates. Most residential properties will be required to meet a dual-metric standard using the new EPC metrics.
Conclusion
The detail of future EPC reform may still be evolving, but energy performance is becoming an increasingly important legal and commercial consideration.
For property owners, the priority should be ensuring that portfolios, lease structures and asset management strategies are capable of responding to future change. Taking stock now is likely to put landlords and investors in a far stronger position if and when further reforms are introduced.
This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.
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