MEES, green leases and the “reset”: what the 2026 interim response means for commercial property

In 2023, we wrote about the growing importance of minimum energy efficiency standards ("MEES") in business tenancies. At that time, the direction of travel seemed relatively clear: a staged uplift across commercial property to EPC 'C' by 2027 and EPC 'B' by 2030, driving investment in energy efficiency measures and sharper lease negotiations.

The Government’s June 2026 interim response has disrupted that narrative by introducing a more selective approach.

Slow and targeted

The key points are:

• The planned move to MEES of EPC 'C' by 2027 is no longer going ahead.
• A move to EPC 'B' is still planned, but only for larger buildings over 1,000 sqm and not until 2031. The focus on these buildings is aimed at managing their much greater energy usage.
• Smaller properties will, for now, only need to meet the current EPC 'E' standard with no clear deadline for further improvement.

In simple terms, there is more time and less pressure in the short term, especially for smaller assets.

A two-speed market

This change means the market may split, with larger buildings potentially requiring significant investment to reach EPC 'B' within the next five years and smaller buildings shifting down the priority list for sustainability upgrades.

Better quality, larger assets are likely to be more readily open to improvement (with a consequential increase in value), while smaller or secondary stock may lag behind.  For landlords and investors, this raises practical questions about how to prioritise spending across a portfolio, but it also allows those with diversified assets the breathing space to take a staged approach. For tenants, this may affect which buildings will remain attractive and fit for purpose over the term of a lease.

The response does not impact the existing 'cost-effective' controls and exemptions in place.  Decisions can still be made within the current framework of protective mechanisms to ensure landlords recoup value from expenditure.

The focus for leases

With the backdrop of the previously anticipated changes, the focus for lease drafting has been on more immediate issues such as whether a landlord can enter to carry out works, who pays for improvements and how disruption is managed. Those points still matter, and costs will no doubt remain in contention, but the shift in timing changes the perspective.

With less time pressure, particularly for smaller premises, lease negotiations may become less confrontational in the short term. However, the underlying issue has not gone away; the energy performance of buildings still needs to improve and, for larger buildings, change remains relatively imminent.

The result could be:

• Differing demands depending on the size of the property, with landlords seeking more substantial rights in relation to larger buildings but being more flexible for smaller buildings, allowing for works at a later stage;
• Greater focus on co-operation, appropriately shaping the future approach for the type of asset, rather than one-off obligations;
• More attention on long-term costs balanced with energy savings, especially on longer leases.

Green clauses remain relevant in the drive to net-zero but they could now adapt to manage change over time, rather than solving an immediate compliance problem.

Risk remains

The softer timetable may feel like a relief, but it brings its own risks:

• Delay risk: putting off works now may mean higher build costs later, higher running costs pending improvements, and future time pressures.
• Stranded asset risk: some larger buildings may still struggle to reach EPC 'B' by 2031. Such buildings could become unlettable in the near future, and substantially less desirable in the shorter term.
• Lease risk: tenants may find themselves in buildings requiring major upgrades during the lease term. Tenants will remain reluctant be responsible for the costs of energy efficiency works (either directly or through service charges), while landlords may be keen to pass on the cost of substantial works.

There is also more uncertainty. Without a clear interim milestone, parties need to plan without knowing exactly when or how future rules might tighten (especially for smaller properties not subject to the requirement for EPC 'B' by 2031).

Performance, not just compliance

The government has moved away from treating MEES as the only target.  Even with the slower regulatory timetable, other pressures remain such as energy costs, investor expectations and corporate ESG commitments. Even without MEES, sustainability is high on the agenda for both landlords and tenants in the commercial real estate market.  These market drivers point towards a more practical, performance-based approach, where the focus is not just on EPC ratings, but on a more holistic view of sustainability.

Over time, this could mean more sharing of energy data between landlords and tenants, lease terms that encourage more efficient use of buildings, and closer alignment between legal obligations and sustainability measures.

Looking ahead

The 2026 update is not a step back from MEES, but it is a reset.  There is more flexibility and more time for compliance, but a risk of greater variation across the market and increased uncertainty in how and when other changes will happen.  For the commercial property sector, the key message is that compliance is no longer a single, fixed path strategy and long-term planning now matters more than ever.