Government sets 2031 deadline for EPC B standards in non-domestic buildings

Government confirms EPC B target for larger commercial buildings

The UK government has published its interim response on non-domestic Minimum Energy Efficiency Standards. The update confirms that privately rented commercial buildings over 1,000 square metres in England and Wales will need to reach EPC B by 2031. Smaller buildings below this threshold will remain on the current EPC E minimum. The changes will only take effect once secondary legislation is passed.

This marks a notable shift from earlier policy expectations. Previously, the government had consulted on a trajectory that included an EPC C milestone for 2027. That interim target has now been dropped. Ministers say the revised approach focuses requirements where they deliver the greatest energy and bill-saving benefits. The government estimates that tenants in larger buildings could save £360 million per year by 2031 through lower energy bills.

The announcement provides clarity for commercial landlords and investors. However, it also creates a two-tier system. Larger assets face a clear compliance deadline, while smaller properties continue under the existing minimum standard. For businesses planning capital expenditure on property improvements, this distinction matters.

The policy shift reflects a more targeted approach. Rather than tightening standards across all commercial property, the government has concentrated its efforts on the largest rented buildings. This is where officials believe the energy and cost benefits are greatest. The existing exemptions and the seven-year payback test for measures remain in place, maintaining some flexibility for landlords facing affordability constraints.

What the interim response changes

The government’s interim response removes the proposed EPC C milestone that was scheduled for 2027. Instead, landlords of larger commercial properties now have a single target date of 2031 to reach EPC B. This gives building owners more time to plan and execute improvement works. It also aligns better with typical commercial lease structures, which often run for five to ten years.

Buildings below 1,000 square metres face no new requirements. The current EPC E floor remains in place for these smaller properties. No uplift has been announced for this category. Consequently, landlords of smaller commercial premises continue to operate under the existing regulatory framework. They must ensure their properties meet EPC E when a new lease is granted or renewed, but they face no immediate pressure to improve beyond this level.

The 1,000 square metre threshold creates a clear dividing line. Properties above this size will need to plan for significant investment over the next seven years. Properties below this threshold can defer major energy efficiency projects unless they fall below the current minimum. This size-based approach reflects the government’s assessment of where intervention delivers the best return in terms of energy savings and carbon reduction.

Secondary legislation is still required before these changes take legal effect. The interim response sets out the government’s policy intent, but Parliament must approve the necessary regulations. Until that happens, the current rules remain in force. Landlords should monitor developments, but there is no immediate compliance obligation beyond existing standards.

Why the government revised its timeline

The original consultation timeline pointed toward a stronger standard by 2030. The government consulted on tightening non-domestic MEES in 2019 and 2021. Those consultations explored various options for raising minimum standards across the private rented sector. Industry responses highlighted concerns about the pace of change, the cost of compliance, and the availability of skilled contractors to deliver retrofit work at scale.

Ministers opted for a more targeted timetable in response to these concerns. The revised approach gives landlords and tenants more time to upgrade buildings in ways that suit their financial circumstances. Commercial property investment decisions often involve long planning horizons. A 2031 deadline allows building owners to align improvement works with lease events, planned refurbishments, or broader estate strategies. This reduces the risk of stranded assets and unplanned capital expenditure.

The government also emphasizes that the new approach maintains flexibility through existing exemptions. Landlords can apply for exemptions where improvements are not technically feasible or fail the seven-year payback test. This test requires that the cost of energy efficiency measures can be recovered through energy bill savings within seven years. If a measure does not meet this threshold, landlords are not required to install it. This protects property owners from being forced into investments that do not make commercial sense.

The focus on larger buildings reflects where the greatest energy consumption occurs. A relatively small number of large commercial properties account for a significant proportion of total energy use in the non-domestic rented sector. By concentrating regulatory effort on these buildings, the government aims to deliver meaningful carbon reductions without imposing blanket requirements on the entire market. For smaller businesses renting modest premises, this approach avoids adding regulatory burdens that might affect viability.

Building size determines your compliance deadline

If you rent out a commercial building over 1,000 square metres, you need to plan for EPC B by 2031. This applies to offices, retail units, warehouses, and industrial premises above the size threshold. The requirement covers new lettings and lease renewals. Existing tenancies are not affected until the lease comes up for renewal or a new tenant takes occupation. Therefore, the practical impact depends on your lease portfolio and turnover of tenants.

Buildings below 1,000 square metres remain subject to the current EPC E minimum. This applies when you grant a new lease or renew an existing one. You do not need to improve properties beyond EPC E unless you choose to do so. However, if your building currently sits below EPC E, you must bring it up to this standard or register an exemption before you can legally let it. The exemption register allows landlords to record cases where improvements are not cost-effective or technically feasible.

Calculating the floor area requires careful measurement. The 1,000 square metre threshold is based on the building’s total internal floor area. If you own a multi-tenanted building, you need to consider the whole building size, not individual unit sizes. A retail parade with several small units could exceed the threshold when measured as a single building. Conversely, a standalone unit within a larger development may fall below the threshold if it operates as a separate building with its own entrance and services.

The distinction between building and unit matters for compliance. If you own multiple small units in different locations, each below 1,000 square metres, they remain on the EPC E standard. However, if you own a single large building subdivided into smaller lettable areas, the whole building may be caught by the EPC B requirement. This creates complexity for landlords with mixed portfolios. You may face different compliance deadlines for different properties depending on their size and configuration.

Lease events trigger compliance obligations. When a new lease is granted or an existing lease is renewed, the building must meet the relevant minimum standard. This means landlords need to plan improvement works around lease expiry dates. If you have a large building with a lease due for renewal in 2030, you need to complete EPC B works before that renewal date. If your lease does not expire until 2032, you have slightly more time. However, waiting until the last moment creates risk. Contractor availability, planning approvals, and practical constraints mean you should start planning well in advance.

Commercial impact for landlords and tenants

Energy efficiency improvements require capital investment. Upgrading a large commercial building to EPC B typically involves works to heating systems, lighting, insulation, and building controls. Costs vary significantly depending on the building’s current condition and construction type. A modern office block currently rated EPC C may require relatively modest upgrades. An older warehouse rated EPC E may need substantial works to fabric and services. Landlords need to commission surveys and cost assessments to understand the investment required for each property.

The seven-year payback test provides a ceiling on mandatory expenditure. If a proposed measure costs more than the energy savings it generates over seven years, you can apply for an exemption. This protects landlords from being required to make uneconomic investments. However, the test is based on energy bill savings, not rental value uplift. A measure that improves the building’s marketability or tenant appeal may still be commercially attractive even if it fails the payback test. Landlords should consider both regulatory compliance and commercial positioning when planning works.

Tenant demand for efficient buildings is increasing. Corporate occupiers face growing pressure to report and reduce their carbon footprint. Many businesses now include energy performance in their property selection criteria. Buildings with poor EPC ratings may become harder to let, even if they meet minimum legal standards. Consequently, landlords may find commercial advantage in upgrading buildings ahead of regulatory deadlines. Early action can secure tenants, avoid voids, and protect rental income.

Service charge implications also matter. In many commercial leases, landlords recover the cost of building improvements through service charges. However, lease terms vary. Some leases cap service charge contributions or restrict what can be recovered. Landlords planning major energy efficiency works need to review their lease documentation carefully. If lease terms prevent cost recovery, the landlord bears the full cost of compliance. This affects the financial viability of improvement works and may influence decisions about which buildings to upgrade and when.

Public sector tenants and suppliers face additional considerations. Many government contracts now require suppliers to demonstrate environmental credentials. Procurement Policy Note 06/21 requires suppliers bidding for major central government contracts to publish carbon reduction plans. Operating from energy-efficient premises can support compliance with these requirements. Similarly, businesses in supply chains for large corporations may face environmental performance criteria from their customers. An EPC B building provides evidence of commitment to energy efficiency that can support tender responses and supplier assessments.

Planning your compliance approach

Start by understanding your current position. Commission EPC assessments for all commercial properties you own or manage. Identify which buildings exceed 1,000 square metres and therefore face the 2031 deadline. For these larger properties, review their current EPC ratings and identify the gap to EPC B. This creates a baseline for planning improvement works.

Next, map your compliance timeline against your lease portfolio. Note when existing leases expire or come up for renewal. Properties with leases expiring before 2031 may require earlier action. Properties with longer leases provide more time for planning. However, remember that improvement works take time. Securing planning approvals, appointing contractors, and completing construction can easily take 12 to 18 months for major projects. Therefore, properties with 2030 lease expiries need action by 2028 at the latest.

Consider commissioning detailed energy audits for your priority buildings. A full audit identifies specific measures needed to reach EPC B and provides cost estimates. It also highlights measures that meet the seven-year payback test and those that do not. This information helps you plan expenditure and identify where exemptions may be available. Some measures, such as LED lighting upgrades, typically deliver quick payback. Others, such as full facade insulation, may take longer. A phased approach can spread costs and align works with planned maintenance cycles.

Explore funding options for improvement works. Various schemes provide grants or low-cost finance for energy efficiency projects. The availability and terms of these schemes change over time, so regular review is necessary. Some local authorities offer support for commercial building improvements. Industry bodies and business groups sometimes provide access to collective purchasing schemes or preferred contractor arrangements. These can reduce costs and streamline project delivery. However, public funding often comes with conditions. You may need to meet specific technical standards or reporting requirements to access support.

Engage with tenants early in the process. Building improvement works can cause disruption. Tenants need notice to plan around construction activity. In some cases, works may require temporary relocation or adjustments to working arrangements. Good communication reduces complaints and protects landlord-tenant relationships. It also creates opportunities to discuss lease terms. If major works are planned, you may be able to negotiate lease extensions or rent reviews that reflect the improved building quality. This can improve the commercial return on your investment.

Key facts about the updated standards

• Commercial buildings over 1,000 square metres in England and Wales will need to reach EPC B by 2031 under the government’s interim response on non-domestic MEES.
• The previously proposed EPC C milestone for 2027 has been dropped from the policy timeline.
• Buildings below 1,000 square metres will remain on the current EPC E minimum with no new uplift announced at this stage.
• The changes require secondary legislation before they take legal effect, so the current EPC E minimum remains in force until Parliament approves new regulations.
• Existing exemptions and the seven-year payback test for energy efficiency measures continue to apply, providing flexibility for landlords facing affordability constraints.
• The government estimates that tenants in larger buildings could save £360 million per year by 2031 through lower energy bills resulting from improved energy efficiency.
• Compliance obligations are triggered at lease events, meaning landlords must ensure buildings meet the relevant standard when new leases are granted or existing leases are renewed.

Aligning property strategy with regulatory requirements

The move to EPC B for larger buildings creates both risk and opportunity. Properties that currently fall well short of this standard may face significant investment requirements. However, buildings that already meet or approach EPC B could see their market position strengthen. Occupier demand for efficient space is rising. Buildings that offer lower running costs and better environmental performance have a competitive advantage. Forward-thinking landlords can use this regulatory change as a catalyst for improving their portfolio quality.

Portfolio rationalization may be appropriate for some property owners. If you own a mixed portfolio of large and small buildings, you might consider selling assets that face high compliance costs and reinvesting in properties that already meet future standards. This approach can reduce your overall capital expenditure while maintaining or improving your rental income. However, it requires careful analysis of market conditions, tenant demand, and transaction costs. Professional valuation advice helps ensure you make informed decisions.

For businesses that occupy rather than own commercial property, this policy affects your lease negotiations. Landlords planning major improvement works may seek rent increases or service charge contributions to fund compliance. You should understand what works are planned and how costs will be allocated. In some cases, you may be able to negotiate green lease terms that share the benefits of energy savings between landlord and tenant. This can make improvement works more financially viable for landlords while protecting your interests as an occupier.

The policy environment continues to develop. This interim response sets the direction for non-domestic MEES, but further changes may follow. The government has indicated it will keep the policy under review and may adjust requirements based on market conditions and progress toward net zero targets. Businesses should monitor policy developments and be prepared to adapt their property strategies accordingly. Regulatory risk is now a permanent feature of commercial property ownership and occupation.

Our net-zero program helps businesses understand their carbon reporting obligations and develop practical compliance strategies. For organizations managing commercial property portfolios, we provide support on energy efficiency planning, carbon reduction, and regulatory compliance. If you need to assess your buildings against the new standards or develop an improvement plan, we can help you navigate the technical and commercial considerations.

Where to find detailed guidance and support

The Department for Energy Security and Net Zero published the interim response on non-domestic MEES in January 2025. This document sets out the government’s policy intent and explains the rationale for the revised timeline. It also provides detail on how the new standards will apply and what exemptions remain available. This is the primary source for understanding the government’s current position.

The government’s guidance on MEES for landlords explains the current regulatory framework and compliance obligations. While this guidance primarily covers domestic property, the principles and processes also apply to non-domestic MEES. It includes information on the exemption register, enforcement, and penalties. Landlords should familiarize themselves with this guidance to understand their obligations.

For technical information on Energy Performance Certificates, the government’s EPC service provides access to the EPC register and guidance on commissioning assessments. You can search for existing EPCs on your buildings and find accredited assessors to conduct new surveys. Understanding your buildings’ current ratings is the first step in planning compliance with future standards.

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 set out the current legal framework for MEES. These regulations establish the EPC E minimum and the exemption framework. Secondary legislation will amend these regulations to introduce the EPC B requirement for larger buildings. Until that secondary legislation is approved, these 2015 regulations remain the controlling legal text.

Industry bodies such as the British Property Federation and the Royal Institution of Chartered Surveyors provide commentary and practical guidance for property professionals. These organizations represent landlord and professional interests and often publish briefings on regulatory changes. They can be useful sources for understanding market responses and practical implementation challenges. However, always refer to official government sources for definitive regulatory information.