New MEES Proposals: A More Targeted Approach for Commercial Property

The Government has now published its interim response to earlier consultations on reforming the Minimum Energy Efficiency Standards (MEES) regime for non-domestic privately rented property in England and Wales. While long awaited, the announcement confirms a more targeted approach than previously proposed, with reform focused on larger buildings and a longer timeframe for compliance.

Key proposals

The interim response indicates that:

• From 2031, privately rented non‑domestic buildings over 1,000 sq m will be required to achieve EPC B, where cost‑effective;
• Smaller properties will remain subject to the current EPC E minimum, with no immediate uplift;
• The proposed interim EPC C milestone (proposed to come into force in 2027) will not be implemented, extending the lead‑in period; and
• Existing flexibilities, including the seven‑year payback test and exemptions, will be retained.

Key takeaways

1. A more targeted approach: The targeting of larger buildings of over 1,000 sq m reflects the disproportionate energy use such premises contribute nationally and signals a key shift in policy. This will provide welcome relief for landlords of smaller premises who, until now, may have been concerned over the extent of future capital expenditure required for energy efficiency improvements.
2. One goal, one date: The key date is now 2031. This is one year later than previously anticipated, with the anticipated interim step to EPC C in 2027 abandoned. The removal of the interim jump will be welcomed and criticised in equal measure. Whilst there is now one clear target (and more time to reach it), many landlords have already taken steps to secure an EPC C ahead of the 2027 deadline the market was expecting. Such improvement strategies may now need to be revisited.
3. A more collaborative approach: One of the more positive aspects of the announcement is the Government’s express commitment to engage with stakeholders to “get the detail right” before implementation. This reflects a more collaborative and consultative approach than has been evident in some recent reforms, for example, the changes earlier this year to upwards-only rent reviews, where stakeholder engagement was notably limited. For investors and developers, this suggests there may still be meaningful scope to shape how the new regime operates in practice, particularly in relation to transitional arrangements and cost allocation.
4.  The uncertainty continues: Despite welcome clarity in some areas, a number of important questions remain - particularly in relation to the proposed 1,000 sq m threshold. The announcement refers to “buildings” over 1,000 sq m, but provides little further detail on how this will be applied or measured. It is currently unclear whether the threshold will operate at a building level only, or whether a sub-1,000 sq m unit forming part of a larger asset would be caught. The announcement also states that the requirement for EPC B will apply “where cost-effective”. While the detail is yet to emerge, this language echoes the existing seven-year payback test, and it seems likely that any 'cost-effectiveness' assessment will build on (or sit alongside) that established mechanism. Whether the test will be recalibrated to reflect today's prices, and how it will interact with the EPC B threshold in practice, remains to be seen.
5. Impact of lease negotiations: With greater certainty over the proposed standards and timings for implementation, landlords are likely to require more robust rights to enter let premises in order to carry out energy efficiency improvement works and for their tenants to cooperate with them in respect of such works. How the cost of these improvements should be shared continues to be a thorny issue between landlords and tenants, and the Government announcement provides no suggestions as to whether they will legislate for this in the future.

In summary, the announcement provides hugely welcome clarity on the direction of travel of the country’s energy efficiency journey. That said, there are still many unanswered questions, and it is made clear that secondary legislation will be required for these changes to take effect. As with previous MEES reforms, the devil will be in the detail. Given the delays in progressing the initial consultations (the first dating back to 2019), the market would be forgiven for a degree of scepticism as to how quickly that detail will emerge.