Demystifying decarbonisation: Energy Performance Certificates
The energy transition and drive to net zero affects every person and every business. Our cross-practice international team of lawyers at Stephenson Harwood can help you both navigate through these challenges and help your business make the most of the opportunities no matter where you are on your journey.
Part of the journey is understanding the constantly evolving jargon that often surrounds the topic of climate change and energy transition. Our demystifying decarbonisation series breaks down the key terms, policies, regulations and drivers that businesses need to know.
What is an Energy Performance Certificate ("EPC")?
An EPC rates how energy efficient a property is using grades from A, the most efficient, to G, the least efficient. Additionally, it provides recommendations on enhancing energy efficiency.
An EPC is required if:
- a property is being sold or let;
- a building under construction is finished; and
- there are changes to the number of parts used for separate occupation and these changes involve providing or extending fixed heating, air conditioning or mechanical ventilation systems.
What happens during an EPC assessment?
An EPC assessment is conducted by an accredited energy assessor. This process involves an inspection of key factors, including:
- the property's age, size, and materials used in the construction of the property;
- insulation (whether there is cavity wall insulation or loft insulation installed);
- heating systems (including the boiler and heating controls);
- lighting (the number of low energy or energy saving light bulbs); and
- windows (if they are double-glazed or higher).
The collected data is then processed using software to generate a new EPC which remains valid for ten years.
Minimum energy efficiency standards
As part of its strategy to reduce carbon emissions by 2050, the UK government introduced Minimum Energy Efficiency Standards ("MEES"). This initiative is being implemented through a phased approach.
As of March 2025, generally speaking, properties cannot be let (or continue to be let out) if they do not meet the minimum EPC "E" rating. Landlords who do so may face penalties of up to £5,000 for residential properties and £150,000 for commercial properties.
To further improve energy efficiency, the government plans to increase the minimum EPC requirement over the coming years. It is anticipated that, by 2030, all residential rental properties will be required to achieve a minimum EPC rating of "C". For commercial properties, the standard is expected to rise to "C" by 2027 and "B" by 2030 (details of the outcome of a recent consultation that ended on 26 February 2025 are awaited).
Exemptions
Landlords can apply for an exemption to comply with the MEES regulations despite their property not meeting the minimum EPC rating. In the case of commercial properties, the '7 Year Payback' Exemption is available if the cost of implementing improvements exceeds the expected energy savings over a 7-year period. For residential properties, the 'High Cost' Exemption applies when no energy efficiency improvements can be made for £3,500 or less. Additionally, the 'All Improvements Made' Exemption applies when a landlord has completed all relevant energy efficiency improvements (or there are none that can be made), yet the property still fails to meet the minimum EPC rating. These exemptions provide some flexibility for landlords where upgrades would be financially unviable.
Our Energy Transition team
At Stephenson Harwood, we have market-leading expertise in three sectors that will be the key pillars in the energy transition:
- energy,
- transportation and trade, and
- the built and natural environment.
Our Energy Transition team is international, with specialists spread across eight offices in Europe, Asia and the Middle East. When coupled with our strategic relationships with other key independent law firms, this means we can support our clients wherever their business interests are based.
Authored by Janey Chan, Trainee Solicitor, Archie Campbell, Partner and James Styles, Consultant.
