The Government’s decision to delay reforming Minimum Energy Efficiency Standards (MEES) may have provided breathing space for landlords to improve the efficiency of their buildings, but it has by no means altered the long-term direction of travel. Sustainability is no longer just an environmental consideration. It is becoming a significant factor in commercial property transactions, and day to day at Fisher Jones Greenwood we are seeing sustainability influencing leasing strategies, investment decisions, funding opportunities and long-term asset value.

The delay gives landlords more time to take a considered approach, and we can help clients develop a structured strategy for improving their buildings in a financially sustainable way, while protecting the long-term value of their assets.

What are the new EPC proposals for commercial buildings?

Previously, the Government said it would introduce a minimum EPC rating of C from 2027 for privately rented non-domestic buildings covered by the Minimum Energy Efficiency Standards (MEES). However, that interim requirement will no longer be taken forward.

Instead, the Government is proposing a more targeted approach. From 2031, privately rented non-domestic buildings over 1,000 square metres in England and Wales would be required to achieve an EPC rating of B, where this is cost-effective. Buildings below 1,000 square metres will continue to be subject to the current minimum EPC E standard.

Regulation: Are you prepared for future EPC requirements?

Whilst the timeline may have changed, the overall objective remains clear, to improve the environmental performance of the UK’s commercial building stock.

Therefore, landlords will want to assess:

  • The current EPC rating of their properties
  • What improvements may be required to achieve higher ratings in the future
  • The likely cost and timescale of carrying out those works
  • Whether improvements can be aligned with lease events, refurbishments or planned maintenance programmes

It is often better to plan improvements early rather than wait until regulatory changes become mandatory, to avoid increased costs, reduced availability of contractors and greater disruption to occupiers.

The best outcomes come when landlords contact us early for advice. We can help them understand the implications of their current EPC, identify what needs addressing, consider how works interact with existing leases, understand who has responsibility, and plan around lease renewals, breaks and refurbishment. We can then structure a strategy that minimises both legal and commercial risk.

Green leases: Does your agreement support sustainability goals?

Traditional commercial leases primarily focus on rent, maintenance obligations, repair and occupation. However, when a landlord wishes to improve the EPC rating or environmental performance of a building, lease provisions do not always make this straightforward.

We’re often asked questions including:

  • Who should pay for energy efficiency upgrades?
  • Can improvement costs be recovered through the service charge?
  • Does the landlord have sufficient rights of access to carry out the works?
  • What happens if the landlord and tenant disagree about the necessity of the works or who should bear the cost?

These are precisely the issues we help landlords address when negotiating new leases or reviewing existing arrangements.

Modern leases are increasingly incorporating environmental performance, energy efficiency and Environmental, Social and Governance (ESG) objectives through the use of ‘Green Leases’.

Green Leases contain provisions that encourage landlords and tenants to work together to reduce the environmental impact of a building.

Environmental performance extends beyond EPC ratings and may include:

  • Energy and water consumption
  • Waste generation and management
  • Sustainable procurement
  • The materials used during fit-out works
  • Future refurbishments and alterations

Every Green Lease is different and we tailor these to the specific property and transaction. However, most seek to promote shared responsibility, cooperation and measurable sustainability outcomes.

Whilst not every property requires extensive green leasing provisions, landlords should consider whether their existing lease arrangements support their long-term sustainability objectives and allow sufficient flexibility to improve building performance over time.

Could a property’s value be affected by its sustainability credentials?

At FJG, when advising clients on acquisitions, disposals, leases and property portfolios, we are seeing sustainability become part of the wider commercial conversation.

Investors, purchasers and lenders are asking more detailed questions about:

  • EPC ratings
  • Future compliance costs
  • Energy performance
  • Potential upgrade requirements
  • Long-term sustainability credentials

For landlords, this means considering not only the cost of improving a building, but the potential cost of failing to do so. An inefficient property may become harder to let, attract less interest from buyers or investors, require greater capital expenditure to bring it up to standard, or face greater difficulty securing funding.

We help landlords and investors assess these issues as part of their wider property decisions, so they can understand the risks, plan for future investment and make informed decisions about protecting the value and marketability of their assets.

Building sustainable new developments that are attractive to investors

For developers, sustainability should no longer be viewed as a consideration that can be addressed once construction is underway. With an increasing focus on energy efficiency and Net Zero, developers should be looking beyond today’s minimum compliance requirements and considering how a building will perform throughout its lifecycle.

Looking at heating systems, insulation, lighting efficiency and renewable energy during the design phase is often more cost-effective than carrying out improvements retrospectively.

Developers should also consider whether refurbishment and retrofit projects may provide a more commercially viable and sustainable alternative to demolition and redevelopment.

Ultimately, sustainability should not be viewed as an obstacle to development. When considered from the outset, it can help create higher-quality assets that remain attractive to occupiers, support future rental growth and protect long-term investment value.

Preparing for the future

The requirements around energy efficiency may continue to evolve, but landlords do not need to wait for the next regulatory deadline to act. Taking advice early can help identify potential risks, plan investment and ensure lease arrangements support the long-term performance of the property.

Fisher Jones Greenwood works with landlords, investors and developers to navigate legal and commercial considerations around their properties, helping them make informed decisions and plan with greater certainty.

Landlords, investors and developers can contact our Commercial Property Team on 0845 543 5700, by email [email protected] or complete our online enquiry form here.