/Insights

SBEM 2022 Update: What Commercial Landlords Must Know About EPC Changes

If your commercial Energy Performance Certificate (EPC) was issued before June 2022, it may no longer reflect your building’s true energy efficiency or meet upcoming Minimum Energy Efficiency Standards (MEES).

Changes to the commercial EPC calculation methodology in June 2022 have made assessments significantly more rigorous, with many properties now receiving lower ratings than they did under the old system, especially buildings burning fossil fuels (gas and oil) for heating. The very good news for landlords with buildings that use electricity for winter heating is that their EPC grades can often improve by simply reassessing the existing EPC using the government’s latest software.

For commercial landlords and property investors with gas or oil burning buildings, this could mean unexpected compliance risks, leasing restrictions, and reduced asset value.

What is SBEM?

Simplified Building Energy Model (SBEM) is the UK Government’s approved software used to calculate energy performance and generate commercial EPCs. It models a building’s energy consumption for heating, cooling, lighting, and hot water to produce an energy efficiency rating from A (most efficient) to G (least efficient).

What changed in the SBEM 2022 update?

In June 2022, the UK Government introduced a major update to the SBEM software used to generate commercial EPCs. The SBEM 2022 update brought the methodology in line with updated Building Regulations and national decarbonisation goals.

Key changes included:

Updated Part L Building Regulations (focusing on energy performance)
Revised carbon factors to reflect the decarbonisation of the UK electricity grid, a result of Britain’s substantial offshore wind industry, a national success story
More accurate modelling of building services, insulation, and lighting
Tougher standards aligned with net zero carbon goals

The result of the SBEM 2022 update

EPCs issued under the new SBEM 2022 methodology are generally less favourable, especially for older or inefficient buildings using fossil fuels for heating. However, all-electric heated commercial buildings are already seeing more favourable grades just by updating the draft EPC in today’s software. Vital has reassessed buildings on Oxford Science Park that were previously EPC Grade E but by simply reassessing in the current software, the building jumped to a Grade B. The asset management client was delighted with our work.

Why are pre-June 2022 commercial EPCs misleading?

If your commercial EPC was issued before June 2022, the rating may no longer be valid for decision-making. The SBEM 2022 update fundamentally changed how buildings are assessed, meaning older certificates don’t reflect current methodology or compliance requirements.

It may not reflect current MEES requirements

EPCs are central to MEES compliance. MEES for commercial property is expected to increase from Grade E to Grade B by 2030. An EPC issued before the SBEM 2022 update might show Grade D or E, but under today’s standards, the building could fall to F or G.

Letting a non-compliant property is illegal and could trigger penalties of up to £150,000 under MEES regulations.

You may face leasing or sale issues

Tenants, buyers, and lenders are increasingly EPC-aware. Older EPCs may be rejected during lease negotiations, refinancing, or due diligence. A certificate issued before the SBEM 2022 update may not satisfy stakeholders who require current compliance evidence.

Portfolio risk is high for large landlords

Portfolios with dozens of EPCs issued before 2022 may contain hidden risks. This could affect capital planning, Environmental, Social and Governance (ESG) compliance, and asset performance tracking.

How does the SBEM 2022 update affect my EPC rating?

The SBEM 2022 update affects buildings differently depending on their heating fuel source. Buildings using gas or oil for heating generally see lower ratings due to updated carbon factors. All-electric buildings often see improved ratings due to the decarbonisation of the UK electricity grid.

A building rated Grade D in 2021 using gas heating might now rate Grade E or F under the SBEM 2022 update. Conversely, an electrically heated building rated Grade D in 2021 might now achieve Grade C or even B with no physical changes to the property.

When do I need to update my commercial EPC?

Commercial EPCs are valid for 10 years, but you should consider reassessment if your certificate was issued before June 2022, especially if you plan to let, sell, or refinance the property. Given that MEES requirements are tightening to Grade B by 2030, understanding your building’s rating under the SBEM 2022 update is essential for compliance planning.

What should landlords and asset managers do?

1. Audit your EPCs

Check all EPC issue dates and heating sources
Flag any certificates issued before June 2022 for review

2. Reassess key properties

Commission updated EPC assessments using the latest SBEM software. Vital always carries out draft EPC assessments which are private and confidential for our clients.
Focus on really understanding how your building is heated in the winter, is it already an all-electric building?
Gas and oil are now deemed “high CO2 pollution fuels” and will impact the EPC Grade
Buildings assessed before June 2022 that are using electricity as the heating source could improve just by being reassessed using the updated SBEM software

3. Plan for minimum EPC Grade B compliance

With MEES tightening in the next 5 years, invest in:

Fabric-first upgrades (insulation, glazing)
Heating, Ventilation and Air Conditioning (HVAC) system improvements, e.g. changing gas boilers to electric boilers and electric air conditioning splits
LED lighting and occupancy sensors
Smart controls and metering
Heat pump integration

4. Update stakeholders

Inform asset managers, tenants, and finance teams about EPC status
EPCs will play a larger role in ESG strategies and valuation

Summary: Commercial EPCs before June 2022, act now to avoid risk

EPC Issued	Risk Level	Recommended Action
Before June 15, 2022	High	Reassess under SBEM 2022
After June 2022	Lower	Review for MEES minimum Grade B planning

Don’t wait until the 2030 MEES deadline hits, reassessing EPCs now helps you stay compliant, reduce tenant churn, and protect asset value.

At Vital Direct we specialise in helping clients to ensure their buildings are EPC and MEES compliant. Call us today on 0345 111 7700 and let us help you assess your commercial rental portfolio.