The government has changed course on energy standards for rented commercial buildings in England and Wales. As of 18 June 2026, according to its interim response, the interim 2027 milestone will not proceed and a stricter EPC B standard is now pointed at 2031 for larger buildings only.
For London landlords, occupiers and investors, the practical question is what is binding now, what is still only a plan, and how to read the gap between the two.
What did the government announce in June 2026?
On 18 June 2026 the government published an interim response to two earlier consultations, from 2019 and 2021, on strengthening the Minimum Energy Efficiency Standards (MEES) for the non-domestic private rented sector. The headline points, as the page sets them out:
- The previously proposed EPC C milestone for 2027 will not proceed.
- Privately rented buildings over 1,000 square metres are expected to reach EPC B “where cost effective”, with 2031 as the implementation date.
- Buildings below 1,000 square metres stay on the current EPC E minimum, with no set deadline to go beyond it.
- The existing seven-year payback test and exemptions remain in place.
- The policy applies in England and Wales.
The government said the targeted approach could deliver up to £360 million in bill savings for tenants in larger non-domestic buildings by 2031. It described that figure as subject to refinement as the policy develops.
How does this differ from the earlier plan?
The 2021 consultation was built around the idea of “EPC B by 2030” as the future regulatory trajectory, a position the 2019 consultation had already tested. The interim response replaces that with a later date and a narrower scope.
| Earlier trajectory | June 2026 interim response | |
|---|---|---|
| Interim step | EPC C proposed for 2027 | Will not proceed |
| Long-term target | EPC B by 2030 | EPC B, where cost effective, from 2031 |
| Buildings covered | Privately rented non-domestic buildings | Those over 1,000 sq m for EPC B |
| Smaller buildings | Within the wider proposal | Remain at EPC E |
Because the interim response says the change needs secondary legislation to pass through Parliament, 2031 is a stated direction of travel rather than law.
What is actually binding on landlords today?
The rule that applies now is the EPC E minimum. According to the government’s landlord guidance, since 1 April 2018 landlords of non-domestic rented property have only been allowed to grant a new tenancy, or extend or renew an existing one, if the property has at least an EPC E rating, unless they have registered a valid exemption. From 1 April 2023 the requirement applies to all privately rented non-domestic properties, even where nothing about the tenancy has changed.
Enforcement sits with local authorities. The guidance names local weights and measures authorities as the enforcers. It also points to a public Exemptions Register where anyone can search for exempt properties and for penalties issued to non-compliant landlords. This guide does not set out penalty amounts, so check the current guidance before relying on any figure you have seen elsewhere.
Why does the 1,000 square metre line matter in London?
A threshold of 1,000 square metres splits the market in a way that matters in a city of many small floorplates. Much of what London’s smaller businesses rent is a floor or two of a converted building, a shop unit or a workshop. Those lettings stay on EPC E under the current proposal.
Larger floorplates are different. Whole-building lettings, big offices, large retail units and bigger warehouses are the premises where the EPC B expectation would bite. This article does not have a verified London breakdown of how many rented buildings sit above or below the line, so it would be wrong to guess at the numbers. Landlords with larger buildings can check their own assets against the threshold.
Does the seven-year payback test protect landlords from costly upgrades?
The interim response keeps the existing seven-year payback test, and that test is central to how far any landlord has to go. According to the government’s exemptions guidance, the EPC E letting prohibition does not apply if the cost of buying and installing a recommended improvement, or package of improvements, does not meet a simple seven-year payback test. A measure passes only if the expected value of the energy-bill savings over seven years, starting from completion, is at least the cost of repaying it.
A worked example
Take a hypothetical package of measures costing £30,000 that is expected to save £3,500 a year on energy bills. Over seven years the savings come to £3,500 × 7 = £24,500. That is below the £30,000 cost, so the package fails the test and would not have to be installed. If the same package cost £24,000, the £24,500 of savings would exceed it and the test would be met. The figures are invented to show the mechanism and are not drawn from any real building.
What do landlords have to do to claim an exemption?
An exemption is not automatic. The guidance says it must be registered on the PRS Exemptions Register before it can be relied on. For the payback exemption, evidence includes copies of three quotes for the work from qualified installers, plus a copy of the cost calculations used to show the test is failed.
Exemptions are time-limited. The payback exemption lasts five years, after which the landlord must try again to improve the rating, and a further exemption may be registered if that cannot be achieved. If a landlord has installed every cost-effective improvement and the building still falls short, the “all improvements made” exemption is the relevant route, and it also lasts five years.
The landlord guidance lists other exemptions, including third-party consent, property devaluation and a six-month window for someone who has recently become the landlord. It also says the regulations do not apply to tenancies of no more than six months, with limited exceptions, or to terms of 99 years or more.
What should tenants and buyers be asking now?
Tenants cannot assume the landlord is responsible for everything, but they can ask sensible questions before signing. Those include the building’s current EPC rating, whether any exemption is registered and when it expires, and whether the landlord has plans for upgrades. A tenant in a building over 1,000 square metres may want to know how the landlord is thinking about the 2031 direction, because that affects lease length and running costs.
Buyers and lenders face a similar due-diligence question. A building on a short exemption, or one whose upgrade case is marginal under the payback test, carries a different risk from one already at a good rating. Whether the market prices that difference consistently is something to watch rather than assume.
Is the delay good news for London property?
It is mixed. A later date and a narrower scope give owners of larger buildings more time to plan capital spending, and the retained cost-effectiveness safeguards mean the requirement is tied to what is practical and affordable. For owners of older stock in London, which is the kind of building the capital’s market has been repositioning, conversion and refurbishment decisions already involve weighing building quality.
Yet the same delay removes a firm deadline, and the direction is not yet law. Anyone who stops planning because the date moved risks being caught by a short timetable once legislation arrives. The government has said legislation and updated guidance will follow at the earliest opportunity, but it has not given dates in the interim response.
This also fits a theme in the capital’s office market, where quality has become the dividing line between space that lets and space that struggles. Energy performance is one part of what makes a building desirable to an occupier. For occupiers weighing location and building choice, running costs are part of the equation too.
Where the energy rules leave London’s commercial market
The picture for now is straightforward. EPC E is the rule today, with exemptions and a payback test softening it, and EPC B for larger buildings from 2031 is a stated intention awaiting legislation. Smaller premises are not in scope for the higher standard.
The sensible reading for a London landlord or tenant is to know the current rating, understand which exemptions apply and when they lapse, and treat 2031 as a probable direction rather than a certainty. The full government response and the secondary legislation will settle the detail, so the next publications are worth watching.
This article is general information, not legal, tax or financial advice. Rules and proposals can change, so check current government guidance for your own circumstances.
Sources: GOV.UK
