As the UK continues to focus on environmental sustainability, the Minimum Energy Efficiency Standards (MEES) are reshaping the landscape for commercial property landlords. In this article, I explore how MEES brings compliance implications and increased investment, but also offers an opportunity for commercial property owners to enhance their portfolio.
Over the past few years, ‘green lease’ clauses have become an industry standard. A green lease incorporates clauses that provide for the management and improvement of the environmental performance of a building by the landlord and the tenant. Both parties agree to undertake specific responsibilities and obligations to minimise carbon emissions arising from the sustainable development, operation and occupation of a property.
Regulatory changes have had a significant impact on landlords, as all buildings across the UK require an Energy Performance Certificate (EPC) unless an exemption applies. Currently, the MEES require new lettings to have a minimum EPC rating of E. Unless an exemption applies, it is unlawful to let a property which fails to achieve this rating.
From April 2023, the MEES were tightened, and existing commercial lettings, unless an exemption applies, also require a minimum EPC rating of E. Failure to comply could mean a penalty of up to 20% of the rateable value of the property, capped at £150,000.
Failure to comply with MEES could lead to significant financial penalties and restrictions on property transactions. Owners must ensure that their buildings meet the required EPC rating to avoid fines and loss of income from being unable to let their properties.
It is worth noting that the UK government proposed in 2021 that newly rented commercial properties would need a minimum EPC rating of C by 2027, with a further increase to a B rating by 2030. While these timelines have not materialised, the tightening of standards is anticipated to take place in the coming years. The government is currently reviewing the responses to a consultation for Reforms to the Energy Performance of Buildings regime, published in December 2024 (ended in February 2025) to inform future policy decisions.
So, how can commercial property landlords make strategic use of the regulations to enhance their property portfolio?
- Remain marketable: energy- efficient buildings attract environmentally conscious tenants and in turn, may command higher rents.
- Save on operational costs: energy-efficient buildings typically have lower operating costs due to reduced energy consumption. Upgrading and implementing energy-saving measures will improve EPC ratings and this short-term effort can translate into longer-term cost savings.
- Attract new tenants: Tenants are prioritising sustainability and energy efficiency. Marketing yourself as a sustainable option could widen the pool of potential tenants.
- Futureproof your investment: MEES is not going away. Taking steps to improve an EPC rating now can help to mitigate risks for the years ahead.
- Contribute to a sustainable future: by complying earlier, commercial landlords can play a part in helping to remain environmentally responsible for future generations.
Focusing on environmental issues is not only a legal requirement, but also a strategic necessity for long-term success. Many commercial landlords are already adopting a mix of green lease provisions that align with both their current needs and their broader sustainability goals.
As businesses adopt Net Zero strategies and evolve their Environmental, Social and Governance (ESG) policies in response to changes in legislation, regulation or the practice of lenders, insurers and other stakeholders in the property market, the demand for green leases is likely to increase. My advice – get ahead of the curve.
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