The Minimum Energy Efficiency Standards (MEES) were introduced on 1 April 2018 to improve the energy performance of commercial buildings, which account for around 20% of the UK’s carbon emissions. With the Government’s target of net zero by 2050 and 60% of today’s buildings expected to remain in use by then, improving energy efficiency is crucial. Businesses are facing increasing pressure from customers wanting to ensure ESG credentials throughout their supply chain and whilst companies are addressing energy usage and emissions in their own operations, there has been little co-operation to date between landlords and tenants as to how to decarbonise commercial premises and who should bear the cost of this.

Key Challenges 

• It has been illegal for a landlord to let (or continue letting) commercial premises with an Energy Performance Certificate (EPC) rating of F or G since 1 April 2023 (unless the property is excluded from the requirement to have an EPC or an exemption is registered). 
• This minimum rating is expected to increase to C in 2027 and B in 2030 and whilst developers of new commercial premises are therefore looking to achieve a minimum rating of at least B the question of how to upgrade existing stock remains an issue.
• The obligation to upgrade the EPC rating of a property rests with the Landlord under the MEES and so this can be addressed when an existing lease comes to an end but it is not so easy if an existing lease term extends beyond 2027/2030 or an existing tenant wishes to renew, as there may not be an opportunity for the Landlord to carry out upgrade works whilst the Tenant is in occupation. 
• Many older leases do not address the need for works to improve the environmental performance of the premises and without a specific right to enter the premises to carry out works, landlords are reliant upon their tenants agreeing to works being carried out whilst they are in occupation – something they may not want due to the potential disruption to their business. 
• The question of who bears the cost of the upgrade is also a key issue. 
• Currently there is an exemption from carrying out the works needed to increase the EPC rating if a landlord is unable to obtain third-party consent (e.g. tenant, freeholder, planning authority) for the improvement works or such consent is given subject to conditions which the landlord cannot reasonably comply with, however such exemption only lasts for 5 years and simply ignoring the issue is not a long term solution. 
• Although compliance with the MEES rests with landlords at the moment, tenants will also need to consider the regulations when seeking to sublet or assign a lease.

Solutions 

Whilst older leases may have limited provisions in relation to energy performance there has been a noticeable change in current lease negotiations, with landlords incorporating obligations on Tenants to consider and improve the environmental performance of business premises and to shift the financial burden of compliance onto tenants by the introduction of “Green Lease” clauses. 

So what are Green Lease Provisions? 

Green lease provisions are clauses in commercial property leases that promote the improvement of environment performance and energy efficiency of business premises.   These may include obligations relating to energy efficiency, water usage, waste management, use of materials, commuting/travel plans or other net zero objectives.  Depending on the degree of obligation required by the landlord, green lease provisions can be classed as “light green”, “medium green” or “dark green” with the latter being the most onerous. There is no specific limit in the use of such classes and a landlord may require a combination of all three. Provisions that are legally binding and require the tenant to contribute costs towards environment performance improvements are considered as dark green. A more collaborative approach towards achieving environment performance improvements, which are not legally binding are considered light or medium green depending on how they are documented.

The way in which such clauses are drafted will vary and depend on the landlord’s requirements for the property, its capabilities, its appetite or its ESG criteria. To date landlords have mainly been concerned with maintaining or increasing the EPC rating given the legal penalties for letting substandard premises (see Part 1 of this series of articles on the MEES Update 2025: Stricter Rules, Higher Standards and Key Deadlines), and many are not actively enforcing the green lease provisions despite requiring such terms in their leases. However, as the focus on climate change becomes more socially and legally important, it is anticipated that more landlords, especially those with larger property portfolios, will look to incorporate wider EP obligations and seek to enforce their terms.  

Types of obligation

Some of the larger institutional landlords have already created their own bespoke EP  but the scope of these obligations is still a matter for commercial negotiation.  There are however some precedent provisions available:

1. The Model Commercial Lease (MCL), developed by a working group commissioned by the British Property Federation, provides a series of standardised templates for commercial leases and related agreements, with a view to reducing negotiation between the parties.  The most recent versions of the MCL, published in 2025 have increased the use of green lease provisions, following the revamped publication of the Green Lease Toolkit by the Better Buildings Partnership in early 2024.  

2. The BBP’s Green Lease Toolkit, developed by various members in the environment sector, law firms and industry experts provides landlords and tenants with model green lease clauses.    Interestingly, the new versions of the MCL have incorporated more green lease provisions but not to the extent proposed by BPP Green Lease Toolkit.  

Examples of provisions that may be included in a commercial lease include the following:   

Management of the EPC Rating 

• Most current leases already include an obligation on the tenant to co-operate with the landlord to provide access or data to enable the landlord to commission a new EPC.  
• They may also prohibit a tenant from commissioning its own EPC or (if legally required to obtain one, e.g on assignment or underletting, or following certain works) require the Tenant to use the Landlord’s EPC assessor.  

Although these provisions do not require any improvement in the environmental performance of the property, they ensure that the landlord retains control of the current EPC rating.    

Control of Alterations, Repair and Reinstatement 

• In addition to the above provisions, a landlord may prohibit any alterations which would, or may reasonably be expected to, have an adverse effect on the asset rating in any existing EPC for the Property and/or on the environmental performance of the property, the building or the building management systems (BMS).  
• Sometimes this may also impact the reinstatement provisions, so that if the tenant has undertaken alterations that have improved energy performance, it could be prohibited from removing such alterations at the end of the Term.   
• Green Lease provisions go further and may require the tenant to use sustainably sourced materials in any fitout, alterations, repairs or even in the yielding up works undertaken at the property.  
• Such provisions may also require the tenant, or even both parties, to apply circular economy principles to any work they undertake.   Circular economy principles focus on maximising the retention of materials so that they are reused, repurposed or recycled. This aims to extend the life cycle of construction and other materials thereby reducing or eliminating unnecessary waste.
• A landlord may even go so far as to require a tenant to consider a hierarchy of sustainable sources in undertaking works, starting with the most sustainable option then working down through other sources, if a more sustainable option is not feasible.  The object of such provisions should not be prohibitive however and a tenant will want to ensure that these obligations only apply where it is reasonable and does not materially increase their costs. 

You may wonder why the landlord would care to impose such restrictions on fitout or alterations since a tenant is required to remove its alterations at the end of the term?  There are many reasons, for example a landlord may align its brand to be environmentally conscious to attract investors, or they may want to develop eco-friendly properties or simply the see the value that energy efficiency may add.  Demand for eco-friendly commercial properties is on the increase as tenants look for energy efficiency and lower utility costs.  Furthermore, in developing such properties, landlords can demand a higher rent and increase the investment value of their portfolios.  There is little value in a landlord spending money to develop eco-friendly commercial properties only to then permit the tenant to undertaken works that may undermine such value.     

Data Sharing and Metering 

• Most green lease clauses allow a landlord to collect energy performance data from the tenant in respect of its use of the property.   The type of data collected may vary from energy and water usage to other data on recycling, waste and mode of travel.   This data will enable the landlord to monitor the overall environmental performance of the building or estate, develop improvements and set targets.   
• The landlord may also have a right to install additional meters at the property to take data readings.
• Whether the tenant will then be under a legal obligation to use the data collected to reduce its carbon emission and improve the energy performance will be a matter for negotiations between the parties.   Instead, the landlord may simply share the data with suggestions on how energy reduction can be achieved, in hope that the tenant is socially motivated to reduce costs.

This may not be an issue for larger and medium sized tenant companies, who are already required to provide annual reports on greenhouse gas emissions, energy consumption and energy efficiency action  pursuant to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410).   The question of how the data is stored and who it is shared with does however need to be considered.  

Collaboration and Co-operation 

• These provisions require the collection of data as detailed above but also include provisions encouraging the parties to work together to reduce a property/building’s environmental impact, meet any ESG targets, and potentially lower operating costs.   The extent of the obligation will vary, depending on whether the landlord requires a light green approach or something more substantial.   For example, the landlord may simply require regular meetings to discuss the data collected and what the parties can do to maintain or promote environmental performance with the tenant being free to incorporate such strategies if it wishes to.  Alternatively, the landlord may require the tenant to incorporate agreed strategies to improve its carbon footprint and improve environmental performance in its use of the property at the tenant’s cost.     
• The MCL creates an obligation on the parties to cooperate with each other to identify environmental performance improvement strategies.  The parties must nominate individuals to attend any environmental forum meetings set up by the landlord.

Service Charge 

• Generally a service charge is collected by the landlord to maintain the upkeep of the structural and common parts of a building or estate.  A landlord may also look to use the service charge fund to undertake environmental performance improvements. Some leases will specifically include this as a cost to which the tenants must contribute but a landlord may be able to recover these costs under the general “sweeper” clause which allows the landlord to provide services, which could include improvements works, in the interests of good estate management, on the grounds that the improvement in environmental performance will lead to cost savings for the tenants.   Care should be taken by tenants in agreeing such provisions to ensure that the landlord does not use the service charge fund to make improvements that benefit the landlord’s long-term investment more than the tenant’s short-term interest in the building or estate.    
• The MCL includes auditing environmental performance of the building and, where reasonable and cost-effective to do so, implementing the recommendations of any environmental management plan within the service charge provisions.

Right of Access 

• One of the more controversial green lease provisions is the inclusion of rights of access for the landlord to undertake environmental performance improvements during the term of the Lease.    The obligation to improve the EPC rating of a property rests with the Landlord but under the MEES a landlord can rely on the third-party consent exemption as a reason not to carry out works to improve the EPC rating of a sub-standard property, if such third party eg the tenant, refuses its consent to the works. A landlord may however want to improve the rating and may therefore require access rights to carry out works to enable it to improve the EPC rating to ensure it complies with the MEES minimum requirements. However such works are not being undertaken when the property is vacant.  Although a tenant may be happy for the landlord to improve the energy efficiently of the property, the question of who carries out the works, how such works are carried out so as to minimise disturbance to the Tenant and who bears the cost of such works needs to be agreed.  
• The MCL includes access rights where the tenant consents to the Landlord undertaking improvement works but provides that such works are carried out at the landlord’s cost. The MCL also provides that the landlord will not be responsible for any interruption in the supply of any service due to the landlord carrying out works intended to improve the environmental performance or any other environmental rating including the EPC rating works.   

Final Thoughts

This is a developing area and changes can be expected until there is a standardised approach to managing carbon emissions in commercial premises. In the meantime, tenants should conduct thorough due diligence before signing a lease, ensuring the property meets the minimum compliance requirements and that the lease terms do not unfairly impose EP related costs on them. However, a more collaborative approach between landlords and tenants is needed. A carve out of all EP costs may be desirable from a tenant’s perspective, but it may be better all round to agree shared cost provisions, balancing financial responsibilities, if improvements will reduce underlying energy costs and allow for sustainable workplaces to be created for the future.