New 2031 Energy Efficiency Standards for Non-Domestic Buildings

Government sets 2031 deadline for large commercial buildings

The UK Government has confirmed that non-domestic private rented buildings over 1,000 square metres in England and Wales must reach EPC B by 2031 where cost-effective. Moreover, it has dropped the previously proposed interim EPC C milestone for 2027. Smaller buildings will remain on the current EPC E minimum for now, with no fixed deadline for improvement.

The change was set out in the Government’s interim response to its 2019 and 2021 consultations on strengthening non-domestic Minimum Energy Efficiency Standards (MEES). According to the response, the new approach focuses action on the largest rented buildings. The Government expects this to deliver the biggest gains, including an estimated £360 million a year in energy bill savings by 2031 for tenants in larger buildings.

This policy shift gives landlords and tenants in larger commercial premises more time to plan upgrades. However, it maintains pressure on the sector because the eventual standard is materially tougher than the current minimum. In practical terms, the policy is likely to accelerate investment in insulation, heating, lighting, controls and other fabric improvements in bigger buildings, especially where leases and capital planning need alignment before the new regime begins.

Buildings over 1,000m² face EPC B requirement

The Government’s announcement splits the non-domestic rented sector by building size. Buildings over 1,000 square metres must reach EPC B by 2031 where cost-effective. Buildings under 1,000 square metres remain on the current EPC E requirement, with no fixed deadline for going higher at this stage.

The 2027 EPC C milestone is no longer being taken forward. Consequently, landlords of larger buildings now have a single target date rather than a staged approach. This simplifies planning but compresses the improvement timeline for properties that are currently well below EPC B.

Flexibility mechanisms will continue to apply. The seven-year payback test remains in place, as do existing exemptions. This means improvements must be practical, affordable and cost-effective. Landlords are not required to carry out works that fail the payback test or qualify for an exemption.

The changes will only take effect after secondary legislation passes through Parliament. Therefore, the policy direction is clear but the precise operational rules may still be refined. Landlords should monitor legislative progress rather than assuming the 2031 deadline is already enforceable.

EPC B represents a significant upgrade from current standards

EPC B is materially tougher than the current EPC E minimum. Most commercial buildings currently rated EPC E or D will need substantial work to reach EPC B. This typically includes upgrades to insulation, heating systems, lighting and building controls.

The scale of work required depends on the building’s current performance. For example, a warehouse with single-glazed windows, inefficient heating and minimal insulation may need comprehensive fabric improvements. An office building with good glazing but outdated heating may need less extensive work. Nevertheless, both will likely require capital investment and careful project planning.

The Government has made this a conditional requirement, not a blanket rule. Improvements must be practical, affordable and cost-effective. This matters because many non-domestic buildings have split incentives between landlords and occupiers. The seven-year payback test provides a financial threshold that limits the obligation where costs outweigh savings.

Many non-domestic landlords have mixed portfolios. Some buildings will meet the 1,000 square metre threshold while others will not. Therefore, landlords need to assess their portfolios building by building. They should identify which properties fall within scope and prioritise those furthest from EPC B.

What landlords and tenants should know

Here are the key facts from the Government’s announcement:

• Buildings over 1,000 square metres must reach EPC B by 2031 where cost-effective, with the seven-year payback test and exemptions continuing to apply.
• Buildings under 1,000 square metres remain on the current EPC E requirement, with no fixed deadline for improvement at this stage.
• The 2027 EPC C milestone has been dropped, simplifying the timeline for landlords but removing the intermediate step originally proposed.
• The policy is an interim response and will only take effect after secondary legislation passes through Parliament, so operational details may still be refined.
• The Government estimates the changes will deliver £360 million a year in energy bill savings by 2031 for tenants in larger buildings.

Planning upgrades before the deadline arrives

Landlords with buildings over 1,000 square metres should start planning now. The 2031 deadline may seem distant, but commercial building upgrades typically require long lead times. Consequently, waiting until the late 2020s will compress the timeline and may push up costs.

The first step is to identify which buildings fall within scope. Landlords should measure floor areas carefully, as the 1,000 square metre threshold is a hard boundary. Buildings just over the threshold face the same requirement as much larger properties.

Next, landlords should obtain current EPCs for all in-scope buildings. Many landlords already hold EPCs from previous transactions or lettings. However, older EPCs may not reflect recent improvements. A fresh assessment provides a reliable baseline for planning upgrades.

Once current performance is known, landlords can estimate the work required to reach EPC B. This typically involves engaging an energy assessor or building services consultant. They can model different improvement scenarios and estimate costs. This information helps landlords prioritise buildings and plan capital expenditure.

Lease structures also matter. Many commercial leases place responsibility for certain works on tenants. Landlords should review lease terms to understand who is responsible for heating, lighting and fabric improvements. In some cases, landlords and tenants may need to negotiate cost-sharing arrangements to align incentives.

Timing is important because the extra time to 2031 may help avoid rushed or uneconomic retrofits. Landlords can align upgrade works with lease events such as renewals or rent reviews. This reduces disruption and may allow costs to be recovered through rent more easily than mid-lease improvements.

Cost-effectiveness and exemptions remain central

The Government has retained the cost-effectiveness principle that underpins current MEES rules. Improvements must meet the seven-year payback test unless the landlord can fund them without borrowing. This protects landlords from uneconomic obligations and recognises that some buildings cannot cost-effectively reach EPC B.

The seven-year payback test compares the cost of improvement measures against the energy bill savings they generate. If the payback period exceeds seven years, the landlord is not required to carry out the work. This applies measure by measure, so some improvements may be required while others are not.

Exemptions will continue to apply. These cover situations where improvement is impractical or impossible. For example, buildings with heritage constraints may be unable to install external insulation. Buildings where all cost-effective measures have been installed but EPC B remains out of reach may qualify for an exemption.

Landlords should document their assessment of cost-effectiveness carefully. If challenged, they will need to show that they considered available measures and applied the payback test correctly. This means obtaining quotes, modelling savings and retaining records.

Split incentives between landlords and occupiers remain a complicating factor. In many commercial leases, tenants pay energy bills directly. Therefore, the landlord funds the improvement but the tenant receives the savings. The payback test uses energy bill savings to assess cost-effectiveness, but these savings accrue to the tenant. This can make improvements uneconomic for landlords even when they would benefit tenants substantially.

The Government acknowledges this issue but has not changed the fundamental structure of MEES. Landlords and tenants may need to negotiate arrangements that share costs and benefits more equitably. For example, a landlord might fund improvements in exchange for a modest rent increase, or a tenant might contribute to capital costs in exchange for lower energy bills.

Smaller buildings stay on EPC E for now

Buildings under 1,000 square metres remain on the current EPC E requirement. The Government has not set a deadline for these properties to reach higher standards. This provides certainty for landlords of smaller commercial premises in the short term.

However, the Government has not ruled out raising standards for smaller buildings in future. The interim response focuses on larger buildings because they offer the biggest opportunity for energy savings. Smaller buildings may face higher standards later, but not under this policy package.

Landlords of smaller buildings should not assume they can ignore energy performance indefinitely. Market pressure is increasing as occupiers seek lower running costs and better environmental performance. Buildings with poor EPCs may become harder to let even if they meet minimum legal requirements.

Additionally, other policies may affect smaller buildings. For example, business rates relief is increasingly linked to energy performance in some areas. Tenants may also face their own reporting obligations under schemes such as the Energy Savings Opportunity Scheme or Streamlined Energy and Carbon Reporting. These factors may drive demand for better-performing buildings regardless of MEES requirements.

Secondary legislation will set operational details

The Government’s announcement is an interim response, not the final legal change. The 2031 standard will depend on the successful passage of secondary legislation through Parliament. Consequently, the policy direction is clear but the precise operational rules may still be refined.

Secondary legislation will set out the technical details of the new requirement. This includes definitions, measurement methods, compliance procedures and enforcement arrangements. It may also clarify how the cost-effectiveness test will be applied and how exemptions will work in practice.

Landlords should monitor legislative progress over the coming months. The Government has not yet published a timetable for introducing secondary legislation. However, given the 2031 deadline, legislation is likely to be introduced well in advance to allow time for compliance.

During the legislative process, there may be opportunities for industry to comment on proposed rules. Trade bodies and industry groups often provide input during consultation periods. Landlords with concerns about specific aspects of the policy may wish to engage through these channels.

Once secondary legislation is in force, enforcement will follow the existing MEES framework. Local authorities have enforcement powers and can issue financial penalties for non-compliance. Penalties can be substantial, so landlords should treat the 2031 deadline as a firm requirement once legislation is in place.

Further information and official guidance

The Department for Energy Security and Net Zero published the interim response to the non-domestic MEES consultation setting out the revised timetable and policy approach. This document provides the most authoritative source on the Government’s current intentions.

Landlords should also consult the existing MEES guidance on gov.uk, which explains current requirements, exemptions and compliance procedures. While this guidance covers domestic properties, the principles are similar for non-domestic MEES.

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 set out the current legal framework for MEES. These regulations will be amended by secondary legislation to implement the 2031 EPC B requirement for larger buildings.

For practical support on carbon reduction and compliance, our net-zero program helps businesses understand their obligations and plan improvements. We also offer ESG compliance support for businesses navigating environmental regulations.