Environmental issues are now being pushed to the forefront of property law and real estate strategy. Whilst commercial property lawyers have always recommended undertaking environmental searches on property transactions, the stakes have now become higher as a result of the increasing focus on climate change and its potential impact on the site. Whether you’re buying, selling, leasing, or managing property, ignoring climate and energy-related risks could potentially lead to significant legal exposure, financial penalties, or reduced asset value.
This article outlines some of the key environmental considerations that all property stakeholders should be aware of on each property transaction they undertake — including climate risk, the role of green leases, and compliance with the UK’s Minimum Energy Efficiency Standards (MEES).
1. Climate Change and Your solicitor’s obligations:
On the 12th May 2025, the Law Society of England and Wales issued a new practice note on Climate Change and Property, building on the prior guidance note previously issued in 2023. The practice note confirms that solicitors have a professional obligation to consider climate-related risks in property transactions and sets out how solicitors should be advising their clients on these issues.
Whilst a large number of clients may already be aware of the importance of considering climate risks in transactions (and may be highly sophisticated at doing so), the Law Society’s guidance is clearly placing an onus on Solicitors to ensure that all clients are aware of the potential legal impact of climate change risks in all types of property transaction.
Broadly, the Law Society identifies three categories of climate related risks:
- Physical risks – such as ground stability, coastal erosion, flooding, water/heat stress and physical damage to the property from extreme weather events.
- Transition risks – activities related to the UK’s 2050 net zero goal (including potential changes in legislation (such as MEES), changes to government policy and fluctuations in the market). These transitional changes may mean currently compliant properties may no longer comply following future legislative changes.
- Liability or legal risks arising from an actual or potential negative impact from physical or transition risks (such as the additional costs which might be imposed to make a development site more flood resilient or the risk of a penalty arising form failure of a Landlord to comply with MEES requirements).
It should be pointed out that the law society confirms that solicitors are not qualified to advise on physical risks and their non-legal consequences. In those cases clients will be advised to obtain advice from Surveyors, environmental consultants or other suitably qualified professionals.
Property affected by climate risks could suffer reduced value, higher maintenance or insurance costs, and limited future use or development potential. A climate risk search will likely be one of the ways in which both you and your solicitor can assess the potential climate risks associated with the proposed transaction. Alternatively you may have your own building surveyor or other suitable professional who can advise you on these matters.
In practical terms, when you’re buying, financing, or leasing a property, your legal advisor should be explaining to you that climate risks could affect the asset—both today and in the future, albeit the full extent of your solicitors obligations in relation to advice on climate risks should be contained within their letter of engagement.
2. Green Leases: Aligning Landlords and Tenants on Sustainability
More landlords and occupiers are adopting green leases, which are leases that include environmental clauses encouraging or requiring sustainable management of the building.
These clauses might include:
- Agreements to share energy and water usage data
- Requirements to use low-energy lighting and appliances
- Commitments to reduce waste or use sustainable materials during fit-outs
The emphasis with green leases is on both parties working together to achieve sustainability goals, but whether the obligations are expressed to simply set a common intention (“light green”) or whether they are intended to have legal ‘bite’ (“dark green”) will depend on the commitment levels of the respective parties to the transaction.
For tenants, green leases support sustainability targets and corporate ESG goals. For landlords, they can enhance the appeal and value of their property, attract high-quality tenants, and support access to green finance.
However, green clauses should be practical and clearly drafted. For example, it’s important to set realistic targets and clarify who pays for sustainability improvements. A provision requiring a tenant to meet stringent environmental criteria for fit out materials may mean that the cost of the project is no longer viable, so proportionality is the key. When structured well, green leases can be a powerful tool to align environmental goals with commercial interests.
3. MEES: Minimum Energy Efficiency Standards You Can’t Ignore
Since 2018, landlords in England and Wales have been prohibited from leasing commercial or residential properties with an Energy Performance Certificate (EPC) rating below “E”, unless a valid exemption is registered. As of April 2023, this ban extended to all ongoing leases—not just new ones.
Currently, if you own or are acquiring a property with an EPC rating of F or G, you may be unable to lease it legally without investing in energy efficiency improvements. Looking ahead, the government is proposing to raise the minimum EPC rating to a C in 2027 but ultimately to a B rating by 2030.
Failure to comply can lead to fines of up to £150,000 per property and reputational damage – we have seen the first fine issued in the case of John Anthony Turnbridge v The London Borough of Islington.
During transactions, your legal adviser should review the EPC ratings, check for existing or required improvements, and assess whether MEES exemptions apply. Consideration should be given to who bears the cost of upgrades—especially in relation to the grant of leases which are likely to run beyond 2027.
Whilst the government is still currently considering how the implementation of an EPC rating of B will work, I would be urging Landlords to consider the energy efficiency status of their current portfolios and consider what rights they may need to negotiate to gain access to the properties to carry out any relevant upgrading work. Tenants should be ensuring that the costs of energy efficiency upgrades aren’t being included in service charge provisions.
Conclusion
Environmental issues are reshaping the property landscape, both for clients and their legal advisers. No matter what role you play in a property transaction, it’s vital to understand how climate risk, green lease obligations, and MEES regulations affect your interests and the transaction itself. Solicitors and advisors play a key role in helping you manage these risks, spot opportunities, and stay ahead of potential legislative changes.
Contact us
You can contact Rebecca Cleal for assistance on any of these issues by e-mailing Rebecca at rcleal@prettys.co.uk
You can also view our other commercial property services here.
