Daryl Norkett, director of real estate proposition at Shawbrook, suggests that landlords shouldn’t drag their heels when it comes to reviewing what it would take to improve a property’s energy efficiency rating.

How does Shawbrook operate in the property sector?

Shawbrook’s client base is typically SMEs with loan facilities between £200,000 and £50 million. We have a natural synergy with commercial property as we do a higher loan to value than traditional banks, while we also offer interest-only loans with a long-term commitment and offer bridging loans to facilitate refurbishment projects.

What green financing propositions can you offer commercial customers?

We tend not to use the term ‘green finance’ too heavily – not because we’re avoiding it, but because sustainability is already built into the way we work. Our focus is on helping customers achieve their goals, whether that’s keeping buildings compliant or making improvements that improve the year-round comfort and cost effectiveness for tenants. We reward our Buy-To-Let customers for making these improvements too as their mortgage arrangement fees are lower for properties with an A, B or C EPC rating. If a dedicated green finance product is the right route, we’ll consider it – but most customers are simply looking for effective, workable solutions that help them move forward.

How important are EPCs in your decision-making process?

EPCs are one of several factors we consider, but their importance varies depending on the type of property and borrower. In parts of the market – such as prime offices with corporate tenants – they can be critical, especially where sustainability targets are central to the occupier’s strategy. In other cases, such as smaller, owner-occupied commercial spaces, other considerations like location, operational costs, or accessibility may take priority. We assess EPCs within the wider context of the borrower’s plans and the property’s role in supporting their business.

How might new rules around non-domestic MEES impact commercial landlords?

There’s already a clear divide emerging in the market – perhaps even two or three tiers – as we move towards tighter energy efficiency standards, such as a future EPC B requirement under MEES. On one side are institutional investors, often guided by sustainability commitments, statutory reporting obligations and access to funding, which support their decisions to invest in upgrades. On the other are SME landlords with limited access to capital. For them, the case for investing in energy efficiency can be less clear, especially where the return on investment is uncertain or where exemptions under MEES are available.

The wider market is in a holding pattern, with many waiting for greater clarity before acting. For commercial landlords in particular, it can be difficult to know whether investing now will protect value or lead to unnecessary spend. Much of the sector is looking for direction and confidence about what’s coming next – and that certainty will be key to unlocking progress.

What challenges are there in the residential sector?

Delays around EPC deadlines have driven inaction for a lot of landlords. There will be a £15,000 cap for buy-to-let properties, but landlords worry that if they spend money now on energy improvements, it won’t count towards the £15,000 – and again, that will drive inaction as it makes them nervous. While they should see capital growth in London and the South East, where the case for spending £15,000 will be straightforward, I’m really worried about areas where you can buy a terraced house for £80,000 and you don’t get as much capital growth. In this case, it’s hard to see why you would spend that and wouldn’t sell up instead because of the high cost – and if that reduces rental supply, it’s a real issue. There also might be other challenges around getting builders and suppliers, making it hard to get work done in time, while letting agencies won’t want to work with landlords who aren’t compliant.

What advice do you have for commercial landlords and business owners?

It’s admittedly difficult for some buildings to implement improvements such as solar PV where the roof isn’t connected or owned by the owner, or where there’s no outdoor space to fit an air source heat pump, while limitations or restrictions under a lease can also prevent a landlord from being able to carry out improvements and comply with MEES obligations.

However, we’re coming up to crunch time, so the best thing to do is to seek advice about how you can improve your EPC rating. If that cost is palatable, the improvements are feasible, you can get access to that money and the property is worth the investment, it’s maybe best to make those improvements now and lock in a good EPC rating, which is valid for 10 years, under the current rules.