EPC Commercial Property: Green Leases and Energy-Efficiency Improvements

The current Minimum Energy Efficiency Standards (MEES) place the regulatory obligation on the landlord. However, this does not necessarily answer whether the cost of improvements can be recovered from the tenant or whether the tenant must allow access for the works. These issues will depend on the lease and any green lease clauses agreed between the parties. 

What are the current EPC commercial property requirements?

An Energy Performance Certificate rates a building’s energy efficiency from A to G, with A being the most efficient. An EPC is generally required when commercial premises are sold or rented out, when a new building is completed, and following certain changes to the parts of a building used for separate occupation where fixed heating, air-conditioning or mechanical ventilation systems are provided or extended. An EPC is normally valid for ten years. 

The EPC and MEES regimes are connected but perform different functions. The EPC records the building’s assessed energy performance and includes recommendations for potential improvements. The MEES regulations restrict the letting of privately rented non-domestic property that does not meet the required minimum standard. 

Since 1 April 2018, a landlord has generally been unable to grant a new tenancy, or extend or renew an existing tenancy, of covered non-domestic property with an EPC rating below E unless a valid exemption applies. Since 1 April 2023, the EPC E requirement has applied to continuing lettings of covered privately rented non-domestic property, even where there has been no change of tenancy. 

Not every commercial property or tenancy falls within the MEES commercial property regime. The regulations apply to non-domestic rented properties that are legally required to have an EPC. Certain short tenancies of six months or less and tenancies granted for a term of 99 years or more fall outside the regulations, subject to the detailed conditions. 

Where the property is within the regime, the landlord should check that it has a valid EPC rating of at least E or that an appropriate exemption has been registered. Registered exemptions and penalties can be searched on the Private Rented Sector Exemptions Register. 

What EPC reforms are proposed for larger buildings?

The Government has indicated, in its interim response to consultation published in June 2026, that it intends to introduce an EPC B requirement from 2031 for certain larger non-domestic rented buildings, but the necessary legislation has not yet been enacted.  

Under the current proposal, privately rented non-domestic buildings over 1,000 square metres in England and Wales would be required to achieve EPC B from 2031 where this is cost-effective. Buildings below that threshold are intended to remain subject to the existing EPC E minimum. 

The previously proposed EPC C milestone for 2027 will not be taken forward. The Government also intends to retain existing flexibility mechanisms, including the seven-year payback test and available exemptions. 

The proposed 2031 EPC B standard is not yet in force. It will require secondary legislation to pass through Parliament, and further details concerning implementation are still awaited. Landlords and tenants should therefore continue to comply with the current EPC E requirement while considering how the proposed changes may affect future plans for larger buildings. 

For landlords, early consideration may be useful where a building is likely to require substantial work and there are lease renewals, refurbishments, refinancing or sales planned before 2031. Tenants may also need to understand how improvement works could affect occupation, service charges and alterations to the premises.

How do green lease clauses divide responsibility? 

A green lease is a commercial lease containing provisions intended to support or protect the environmental performance of the premises or the wider building. It is not a separate category of lease and there is no single standard set of clauses. 

Green lease clauses may deal with: 

• sharing information about energy and water consumption; 

• installation and use of separate or smart meters; 

• waste management and recycling; 

• restrictions on alterations that could adversely affect the EPC rating; 

• access for energy assessments and improvement works; 

• cooperation over environmental targets; 

• use of sustainable materials; 

• maintenance and replacement of energy-related equipment; and 

• recovery of expenditure through the service charge. 

Some clauses may simply require the parties to discuss environmental measures and cooperate where reasonably possible. Others may impose enforceable obligations or give the landlord wider rights to enter the premises, carry out works and seek to recover the cost.

The wording should make clear what each party is required to do. A general obligation to cooperate may not give the landlord the access or cost-recovery rights needed to undertake substantial improvement works. 

Equally, an unrestricted right to enter the premises could cause material disruption to the tenant’s business. The lease should address notice, timing, protection of the tenant’s property, making good any damage and minimising interference with the tenant’s use of the premises. 

The parties should also consider whether the tenant’s proposed fit-out or later alterations could affect the EPC rating. Changes to lighting, heating, cooling, ventilation, insulation or the internal layout may alter the building’s assessed energy performance. The lease may therefore require information about the proposed works and prevent alterations that would adversely affect the rating. 

Who pays for energy-efficiency improvements? 

The regulatory and contractual positions need to be considered separately. 

The obligation to comply with the non-domestic MEES regulations generally rests with the landlord. However, this does not mean that the landlord can automatically recover the cost of improvement works from the tenant. The right to recover expenditure must be found in the lease. 

A service charge may allow the landlord to recover the cost of repairing, replacing or maintaining existing equipment. Whether it extends to energy-efficiency improvements will depend on the wording. There may be a distinction between repairing equipment and replacing it with a more efficient system that improves the building. 

For example, replacing broken lighting with an equivalent system may fall within repair or maintenance provisions. A wider project to replace working equipment, alter the building and significantly improve its energy rating may be treated differently. The lease may not permit the landlord to recover the cost merely because the project has an environmental benefit.

Tenants should therefore consider: 

• whether the service charge covers improvements as well as repairs; 

• whether any service charge cap applies; 

• whether expenditure must be reasonably and properly incurred; 

• whether the tenant must contribute to works benefiting the whole building; 

• whether the landlord must consult before undertaking substantial work; and 

• whether the lease contains specific exclusions for compliance or improvement costs. 

Landlords should also check whether they have sufficient rights to inspect the premises, obtain energy-use information and carry out the proposed works. A legal obligation to meet an energy standard does not necessarily give the landlord a contractual right to enter premises occupied by a tenant. 

The cost may ultimately rest with the landlord, the tenant or be divided between them. The answer depends on the lease, the nature of the work and whether the cost is recoverable under the service charge or another provision. 

Commercial property EPCs: frequently asked questions 

What is a green lease? 

A green lease is a commercial lease containing provisions dealing with the environmental performance of the premises or building. These may cover energy and water use, data sharing, alterations, recycling, access for improvement works and the recovery of environmental expenditure. A green lease is not a separate legal form of lease. Its effect depends on the particular green lease clauses agreed between the landlord and tenant. 

What is the minimum EPC rating for commercial property? 

For privately rented non-domestic property within the MEES regime, the current minimum rating is generally EPC E unless a valid exemption applies. Since 1 April 2023, this requirement has applied to continuing lettings as well as relevant new tenancies, extensions and renewals. The Government proposes that privately rented non-domestic buildings over 1,000 square metres should achieve EPC B from 2031 where cost-effective. This is not yet in force and requires secondary legislation. Buildings below that threshold are intended to remain subject to EPC E. 

Who is responsible for a commercial EPC: landlord or tenant? 

The person selling or renting out commercial premises is generally responsible for obtaining and making the EPC available. In a standard commercial letting, this responsibility will usually fall on the landlord. The landlord is also generally responsible for compliance with the non-domestic MEES regulations. However, the lease may place related obligations on the tenant, such as providing energy-use information, cooperating with assessments or avoiding alterations that adversely affect the EPC rating. 

Next reads

• Full Repairing and Insuring Lease: Who Pays for Commercial Property Repairs?

• Dilapidations: Seven Steps Before a Commercial Lease Ends

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Disclaimer 

This article is for general information only and is not legal advice. Laws and guidance change and outcomes depend on facts. If you need advice on your situation, please contact us. Grant Saw Solicitors LLP is authorised and regulated by the Solicitors Regulation Authority. 

Last updated: 27 October 2026