European Union: Study On The Use Of Green Lease Clauses In Europe

Last Updated: 20 March 2012
Article by Bruno Duquesne

Introduction & recommendations

In the age of global warming people are increasingly turning their attention to the idea that resources should be used carefully and responsibly. This is particularly the case in the real estate sector as the energy consumption of buildings creates greenhouse gases which in turn contribute to global warming. Moreover, the ever-increasing energy prices mean that there is a greater interest in saving energy.

Governments and the European Union are also conscious of the importance of sustainability. As well as signing the Kyoto Protocol obliging all those who signed it inter alia to commit to ensuring the rise in global temperatures stays below 2%, the EU issued directives to pursue the goal of reducing energy consumption in buildings and promoting the use of renewable energy sources. These directives have been transposed into national law by most of the EU Member States (such as Germany, Belgium, Spain and Romania).

In the meantime, many companies have incorporated sustainability into their marketing and image programmes. As part of"Corporate Social Responsibility" firms have developed a growing environmental awareness.Sustainability issues play a key role in the construction of new buildings as well as in the refurbishment and use of existing buildings.

Buildings which are considered to be sustainable are deemed "green buildings" although there is no generally accepted definition of this term. These are buildings, whether under new construction or refurbishment, which have adapted their systems to limit energy and water consumption, to reduce emissions and the consumption of resources and to use renewable sources of energy.

In this context the focus is shifting more and more towards "green lease" contracts. "Green buildings" on the one hand do not make any sense if the use they are put to cannot be considered "green" at a later point in time while on the other hand they are of significance to prospective tenants because of their vast potential for saving energy and as a proof point for their business' environmental credentials. There is no generally accepted definition of this term either.

As a rule of thumb, lease contracts can qualify as "green lease" contracts if they fulfil stringent and/or mandatory requirements with the aim of improving the energy efficiency of the leased premises. Such green leases typically contain clauses charging operating costs based on consumption via separate metreing, sharing data on energy and water consumption and waste generated by the occupancy of the building on a regular basis or obliging both parties to commit to renewable forms of energy.

Sustainability of a building and the sustained use of the building can be determined by certification. Certification both highlights and promotes the issue of sustainability. The most well-known international certification systems are LEED (USA) and BREEAM (GB) in some countries closely followed by DGNB (GER).

Energy certification plays a role in "green buildings" and "green leases" and provides information on the energy performance of a building, e.g. year of construction, energy consumption, etc.

Recommendations

We have reviewed the legal basis and legal practice in several European countries, summarising them in in this study, which led to the following recommendations on how to draft a green lease:

  • The green lease should regulate the recording and calculation of operating costs based on consumption (especially heating, refrigeration, electricity, water, etc.); in some countries this has already been prescribed by law.
  • The tenant should be obliged by contract to accept the measures undertaken by the landlord (in particular refurbishment) to improve energy efficiency in the building and to promote environmental protection.
  • The contract should grant the landlord the right to pass an appropriate amount of the costs of improving energy efficiency and observing environmental principles onto the tenant or to increase the rent by a reasonable amount.
  • If a building has been certified as "green", the tenant should undertake to observe the certification conditions and act accordingly, e.g. only install elements in the building which are made of energy-efficient and eco-friendly materials.
  • The parties should agree to act in such a way as to save energy and promote environmental protection (e.g. correct conduct as regards heating or refrigeration, water consumption or recycling waste).
  • The landlord should inform the tenant about possible ways to save energy and be environmentally responsible.

We would be pleased to offer you assistance when drafting a green lease.

Austria

1. Issues regarding the building itself

a. Requirements under public building law regarding energy efficiency.
First of all, please note that in Austria no federal building act exists, rather building laws exist on a provincial basis. In general, all provincial building laws and related regulations set forth that new buildings have to meet certain energy efficiency and heat protection criteria. However, some provincial building laws do have more detailed regulations. For instance, the Styrian building act stipulates that in new buildings with over 1,000 square metres of floor space, alternative systems (i.e, decentralized energy provision systems, solar or thermal systems) need to be implemented as long as such systems are feasible from a technical, ecological and economical perspective.

Further, the provincial building regulations set forth that a permit to construct a new building or to set up overall improvement measures of an existing building is only granted to the applicant (i.e. the constructor), if an energy certificate has been provided to the authority.

Moreover, the provinces provide for certain subsidies linked to energy efficiency measures. In particular, public subsidies are granted both, in order to improve the energy efficiency of an existing building (i.e. replacement of old windows, replacement of heating facility and implementation of alternative systems), and for the construction of new buildings (e.g., in case a building has been constructed by way of a passive-house). In order to be granted a certain subsidy, the constructor is usually bound to strictly defined conditions, such as concrete methods or ways of improving energy efficiency. Please note that each province is entitled to set up different subsidy guidelines.

b. Do the regulations applicable under a) only affect new buildings or must all buildings be provided with energy efficiency facilities?
It depends. The provision of an energy certificate to the authority is required when applying for a permit in order to build a new building and when applying for a permit in order to set up improvement measures regarding existing buildings. However, most of the specific energy efficiency measures apply to new buildings.

The same applies to subsidies. Based on the purpose, subsidies may affect both, new and existing buildings.

c. Does the market pay any attention to energy certificates?
Although the owners of buildings are obliged to provide the purchaser or tenant with an energy certificate when selling or leasing the building, the private real estate market does not significantly pay attention to the energy certificate. This may be because there are not significant sanctions for not providing an energy certificate.

d. How popular is certification of buildings (LEED, BREEAM, etc.)?
Currently the certification of buildings is not very popular and certification systems are not really well known in Austria. The slogan "green building" is usually misused and does not refer to officially acknowledged green building standards, rather it refers to advertisement measures. For instance, only in 2010, the first office building has been granted a LEED-certificate in Austria.

2. Issues regarding the use of the building

a. Can the landlord push on the operating costs (mainly for electricity, water, heating) to the tenant following consumption or does that need to be established by the lease? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?

It depends on the type of the building as well as whether measuring facilities in the rental objects are installed or not.

In case of single or two family houses or buildings with not more than two offices the Austrian Tenancy Act ("Mietrechtsgesetz") is not applicable and the parties, therefore, have to agree in the lease contract upon the operating costs. Usually the lessee has to bear the operating costs.

Also for Apartment houses or office/commercial buildings the Austrian Tenancy Act may be applicable. This act stipulates that the operating costs may be charged to the lessee. If so, each lessee's quota corresponds to its share of the building's total floor space. If measuring facilities for each premises are installed, only the factual consumption is relevant. However, the lessor is not obliged to install such measuring facilities. Nevertheless, it is quite common that measuring facilities for each premises in a building are installed for measuring electricity and domestic gas consumption. In that case the lessee constitutes a contractual relationship with the power and gas supply companies. The consumption for public areas of the building (e.g. electricity for the corridors etc.) is partitioned to the lessees according to the aforementioned quota.

b. Does a landlord have the right to perform construction measures to improve the energy efficiency of a building (also against the intention of the tenant). Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial etc.)?
It depends again whether the Tenancy Act is applicable or not. This Act is generally applicable if the building consists of more than two self-contained flats or offices. Basically the lessor is not allowed to affect the lessee's right to use.

If the Tenancy Act is not applicable the lessee is obliged to tolerate only necessary maintenance work. Improvements of the energy efficiency of the building or the leased object are not deemed to be necessary in this regard. In this case conflicting interests have to be balanced ("Interessenabwägung"). If the work does not affect the main interests of the Lessee he has to tolerate the improvement but has the right to a reduction in rent for the duration of disturbance (e.g. construction noise or builder's dust).

If the Tenancy Act is applicable the Lessee is obliged to tolerate the work (also in the property) regarding improvement measures (such as improvement of the energy efficiency) on public parts of the building (e.g. the façade, roof or also the windows). As a consequence of the lessee's obligation to tolerate the disturbance he has a right to adequate compensation.

c. Does a landlord have the right to receive a reimbursement of the costs for the measures under b)? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?
If the Tenancy Act is not applicable the landlord can only receive reimbursement if this has been provided for in the lease.

It the Tenancy Act is applicable a (partial) reimbursement is only possible in compliance with strict requirements stated in the Tenancy Act: according to sec. 16 of the Tenancy Act a temporary rent increase is allowed when the terms (i.e. the works to be done, the costs, the increase and the duration of the increase) are agreed in advance in the lease contract (or in an amendment).

Beyond that there are several public subsidies for the improvement of energy efficiency of buildings (thermal improvement, solar technology, alternative heating methods like geothermal energy etc.).

d. If the respective rights mentioned in b) and c) do not exist by statute, but need to be established by the lease contract: Does a standard for such regulations exist (and what is its content)? Please give examples of typical regulations.
Clauses for reimbursement or rent increase in lease contracts in case of improvements done by a lessor during the lease are not commonly used. This is one of the reasons why lessors do not invest in improvements – because they are not allowed to increase the rent (investor-beneficiary-dilemma – "Investor-Nutzer-Dilemma"). More often it agreed between the parties that an object or a building has to be renovated or reconstructed before the lessee moves into the leased object and, therefore the lessee (or the lessor) makes a contribution to the renovation costs. Clauses where the lessor contributes to the desired renovation works of the lessee might be:

The Lessor shall grant a subsidy for the improvements of the Lessee for the actual expenses of up to EUR xxx (excl. VAT) for the construction of a [definition of improvements e.g. thermal insulation improvements, new heating, thermic insulated windows, solar technology etc.]

The subsidy shall be paid in advance to the Lessee with regard to an amount of EUR xxx (excl. VAT)

  • at the date of making available the Leased Property (see clause x.y.z) – but on the dd.mm.yyyy at the latest – for Lessee improvements, and
  • hand over of an invoice entitling the Lessor for input tax deduction.

In case of a delayed delivery, caused exclusively by lessee, Lessor has to pay only such parts of the subsidy, which have already been paid by Lessee to third parties with regard to the construction works at the [building]. After delivery the lessor has to pay the rest as set out above.

The second part in the amount of EUR xxx (excl. VAT) shall be paid by the Lessor immediately after opening the Leased Property to the public on an escrow account of a mutually agreed escrow agent [...].

The final calculation/settlement of the subsidy (first and second part) payment shall be made fourteen days after

  • final completion of all improvements;
  • proof of the actual expenses incurred by the Lessee, which amount to at least the subsidy amount;
  • handover of an invoice entitling the Lessor for input tax deduction, but in any case not earlier than the date at which the first payment of rent falls due for [the Leased Property]. The interest on the escrow amount, after deduction of the costs of the account and the capital gains tax, shall be paid to the Lessor.

VAT in connection with the subsidy shall be settled by way of transfer (Überrechnung). The Lessor shall not be liable for the improvements. Provided the improvements concern the substance of the building the Lessee will transfer warranty and liability claims against third parties to the Lessor.

e. Which other obligations regarding sustainability (building materials, energy efficiency, waste management etc.) exist? If they need to be imposed by the lease agreement: does a standard for such regulations exist (and what is its content)? Please give examples of typical regulations.
There are no statutory regulations regarding building materials or energy efficiency etc. According to CEN-Standards and Standards of the Austrian Standards Institute ("Ö-NORMEN") architects, engineers and technicians usually observe the state of the art of science and technology stated in these Standards. However, these Standards are not law and the parties can agree upon older (and cheaper) technical standards.

Nevertheless public subsidies (see point 1.a) and b) above) are usually bound to a concrete method or way of energy efficiency improvement (for example the "THEWOSAN"-restoration of improvement of the thermal insulation of the building).

3. Allocation of costs; incentives to improve sustainability of buildings or its use.

Due to existing public subsidies and rising energy prices the erecting of a "green buildings"or the restoration to that standard is getting more and more attractive. However, much more could be done also in terms of private law, especially in tenant law, in order to mitigate the effects of the investor-beneficiary-dilemma ("Investor-Nutzer-Dilemma").

Belgium

1. Issues regarding the building itself

a. Requirements under public building law regarding energy efficiency
The European Energy Performance of Buildings Directive (EPBD) 2002/91/E of 16 December 2002 has been transposed in Belgium, via 3 energy performance of buildings Acts adopted by the Flemish, Walloon and Brussels Region between 2004 and 2007.

By virtue hereof, a minimum energy performance level ("e-level") which indicates the energy efficiency of a building is imposed. This e-level depends on the type of the building and the underlying transaction. Such e-level is determined by a recognized organism, which must issue an energy performance certificate.

In general, a distinction is made between:

  • Construction of new buildings;
  • Large renovations of existing buildings;
  • Public buildings; and
  • Sale or lease of buildings (with a sub distinction between residential and other buildings).

The implementation of the concerned Acts in the 3 regions takes place gradually. Consequently, the status of such implementation is not the same in the three Regions.

b. Do the regulations applicable under a) only affect new buildings or must all buildings be provided with energy efficiency facilities?
See a) above – the regulations concern both the construction of new buildings and the renovation of large existing buildings.

c. Does the market pay any attention to energy certificates?
Pecuniary and even criminal sanctions can be imposed in the event of non compliance with the applicable EPBD regulations.

Market players are becoming more and more aware the energy performance of buildings and the imposed certification. The regulations set out under 1a) provide for a phased implementation in the various Regions.

The e-level certificate, which is already imposed for the lease and sale of residential buildings, will also become obligatory for non residential buildings (such as office buildings), and this implies that a considerable number of old and existing buildings will require considerable renovations and investments to meet the imposed e-level. This will most likely influence the market of real estate transactions and create a specific level of competition.

d. How popular is the certification of buildings (LEED, BREEAM, DGNB)?
In recent years it seems that buildings certification has gained popularity, due to inter alia, to rising demand on the market for "green" buildings, and increased awareness and "corporate responsibility" on the level of the investors.

Today, we see that nearly all important real estate projects market their project with green certification. BREEAM certification is mostly applied.

2. Issues regarding the use of the building

a. Can the landlord push on the operating costs (mainly for electricity, water, heating) to the tenant following consumption or does that need to be established by the lease? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?

No legal obligations exist in this respect and parties to a lease contract have the contractual freedom to determine which party bears which cost and how the invoicing/payment thereof is done.

In practice however, costs for water, electricity and heating will usually be borne as follows:

  • if separate consumption meters are available for the let premises, the subscription to these meters is made by the tenant, who pays the costs directly to the various suppliers; and
  • if separate meters are not available, a fixed amount is determined as provision for these charges, which is then paid by the tenant to the landlord on a monthly or quarterly basis. At the end of each year, a balance is made between the total costs effectively incurred and the provisions paid. Based on this balance, the provisions may then be adjusted downwards or upwards. In the event of multiple tenants, the participation by the tenant in these costs is determined pro rata the surface let by the tenant in the total building or building site.

For residential leases, the law provides that either party may at any time (independent of what is provided in the lease contract) request before the Justice of the Peace the adjustment of the applied provision for the rental charges or the conversion into the effectively borne costs and charges.

b. Does the landlord have the right to carry out construction related measures in order to improve the energy efficiency of a building (even against the will of the tenant)? Is there a distinction between different types of buildings (e.g. residential, office, commercial etc.)?
According to Article 1724 Belgian Civil Code the tenant must consent to the landlord carrying out urgent repair works when this cannot be delayed until the expiry of the lease contract. This applies even if part of the premises cannot be used by the tenant due to these works. If however the execution of these repair works exceeds 40 days, the lease price is reduced pro rata the duration of these works and the part of the let premises cannot be used by the tenant as a consequence thereof.

In the case of residential leases, Article 1724 provides that, if the execution of such urgent repair works causes the residential building to become inhabitable, the tenant may request the dissolution of the residential lease contract.

Parties are however free to exclude or limit the application of this provision in their lease contract.

For the execution of works which have the intention to increase the energy efficiency of the building, Article 1724 will not apply as in most cases such works will not be considered as "urgent repairs which cannot be delayed until the expiry of the lease". Consequently, the landlord does not have the right to carry out such works unless this is explicitly provided for in the lease contract.

c. Does the landlord have a right to receive reimbursement of the costs made for the measures under lit. b)? Is there a distinction between different types of buildings (e.g. residential, office, commercial, etc.)?
No, unless specifically provided in the lease contract.

d. If the respective rights mentioned in b) and c) are not provided by statute, but need to be provided in lease contract: does a standard content exist (and what is its content)? Please give examples of typical regulations.
No standard clauses exist, parties have complete contractual freedom.

e. Which other obligations regarding sustainability (building materials, energy efficiency, waste management etc.) exist? If they need to be imposed by the lease agreement: does a standard for such obligations exist (and what is its content)? Please give examples of typical regulations.
No legal application. Parties have contractual freedom to provide specific obligations in their lease contract.

3. Allocation of costs; incentives to improve sustainability of buildings or its use

Economical incentives:

  • Reduction of the energy costs for the parties with a possible reduction of the rent for the tenant
  • Building in a better general state (higher value on the market)
  • Compliance with legal requirements

Tax incentives:

By virtue of Article 145.24 of the Belgian Income Tax Code, a tax reduction is granted to the owner, tenant, usufruct holder or emphyteotic lease holder of a residential building, who makes investments for a better rational use of energy:

15% tax reduction

  • replacement of boiler
  • replacement of water and heating system through solar energy
  • installation of photovoltaic panels to transform solar energy in electricity

40% tax reduction

  • isolation of the roof
  • installation of a double glazing energy audit

Bosnia and Herzegovina

1. Issues regarding the building itself

a. Requirements under public building law regarding energy efficiency.
FBiH: In recent years the Federal Ministry for Physical Planning has introduced a limited number of rulebooks with regards to the energy efficiency (Rulebook on Technical Requirements for Thermal Protection of Buildings and the Rational Use of Energy ( the "Rulebook on Technical Requirements") , and the Rulebook on Energy Certification of Buildings ("Rulebook on Energy Certification").

RS: According to the Article 59 Law on Spatial Planning and Building, every building must fulfil safety and technical standards during its construction and use and energy efficiency is prescribed as one of the standards which must be fulfilled.

b. Do the regulations applicable under a) only affect new buildings or must all buildings be provided with energy efficiency facilities?
FBiH: The technical standards prescribed by the Rulebook on Technical Requirements apply to the construction of new buildings and to the reconstruction of existing buildings. Pursuant to Article 5 of the Rulebook on Energy Certification every new object and every existing object which is a subject to sale or lease must have an energy certificate.

RS: Article 59 Law on Space Planning and Building applies to objects which will be constructed.

c. Does the market pay any attention to energy certificates?
FBiH: The owners of the buildings are obliged to provide an energy certificate to the purchaser or lessee of that particular building or premises. However, implementation of this obligation is still low. According to information obtained from the competent Ministry, they are currently in the process of introducing the relevant parties (real estate agencies, public notaries) to meet these particular obligations.

RS: According to the information from the competent Ministry, the regulations regarding the energy certificate are in the process of being prepared. They are currently preparing a draft Law on energy efficiency which should be adopted in the following year.

d. How popular is certification of buildings (LEED, BREEAM, etc.)?
FBiH: According to our information from the competent energy efficiency improvement agencies the LEED and BREEAM certification standards still have not been introduced in the Bosnian and Herzegovinian real estate market. The aforementioned rulebooks prescribe for other certification standards which are generally in accordance with the EU directives from the particular field (i.e. ISO standards).

RS: Please refer to answer 1.c.

2. Issues regarding the use of the building

a. Can the landlord push on the operating costs (mainly for electricity, water, heating) to the tenant following consumption or does that need to be established by the lease? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?
FBiH/RS: There are two laws which govern the obligations on lease agreements (Law on Obligation Relations and the Law on Lease of Buildings and Premises). The Law on Obligation Relations is a basic law and it applies to the lease of residential premises. The Law on Lease of Business Premises applies to the lease of offices, commercial and business premises. The Law on Lease of Business Buildings and Premises was taken from the previous system and is therefore not very sophisticated, especially in matters regarding energy efficiency. However, pursuant to this law the parties may agree on how operating costs are charged. In the event that the parties have not agreed, the obligation of payment of the operating costs is borne by the tenant.

b. Does a landlord have the right to perform construction measures to improve the energy efficiency of a building (also against the intention of the tenant). Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial etc.)?
FBiH/RS: According to the Law on Lease of Business Buildings and Premises a tenant is obliged to allow the landlord to make reparations on the premises which are necessary. The landlord is obliged to conduct those reparations in time and in a way which will not disturb the tenant and his business activities. Energy efficiency measures are measures which could be considered necessary reparations, therefore the tenant has to allow such works.

c. Does a landlord have the right to receive a reimbursement of the costs for the measures under b)? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?
FBiH/RS: If a landlord has carried out energy efficiency measures, it is possible to charge those costs to the tenant through the increase of rent. However, a tenant is not obliged to accept this change of the lease contract unless it has already been agreed (i.e. the parties have agreed that in the case of the improvement of building/premises the landlord has the right to increase the rental fee).

d. If the respective rights mentioned in b) and c) do not exist by statute, but need to be established by the lease contract: Does a standard for such regulations exist (and what is its content)? Please give examples of typical regulations.
FBiH/RS: As we already mentioned the Law on Lease of Business Buildings and Premises is the law that was adopted 30 years ago. Therefore it does not contain any precise provisions regarding energy efficiency. Energy efficiency matters are still in the process of being introduced into Bosnia and Herzegovina's legal system. Therefore the standard for such regulations does not exist. However, as stated above, the parties may contractually agree to establish the right of reimbursement for the improvement of energy efficiency in the particular building or premises.

e. Which other obligations regarding sustainability (building materials, energy efficiency, waste management etc.) exist? If they need to be imposed by the lease agreement: does a standard for such regulations exist (and what is its content)? Please give examples of typical regulations.
FBiH: There is a new law on building materials which was adopted in 2010. As stated above the competent Ministry recently issued the several rulebooks with regards to energy efficiency. However those regulations do not prescribe any obligations on lease contracts, except that every new object and every existing object which is a subject to sale or lease must have an energy certificate.

RS: Please refer to answer 1.c.

3. Allocation of costs; incentives to improve sustainability of buildings or its use.

FBiH/RS: The best way to arrange the allocation of costs is to agree upon such costs before the execution of the lease contract. It could be done with an introducing paragraph in the lease contract which will cover the question of allocation of costs and any future changes with regards to these costs.

Bulgaria

1. Issues regarding the building itself

a. Requirements under public building law regarding energy efficiency.
All developments must be planned, performed and further maintained as per the legislative requirements and the technical specifications for ensuring, among others, the energy efficiency of the construction and heat preservation of buildings (Spatial Development Act 2001).

All buildings (private, state or of municipal ownership) with a total built-up area of more than 1,000 square metres must be certified. The energy efficiency certification of buildings is performed by the Energy Efficiency Act 2008 after an energy efficiency audit under the same Act.

If the examined building does not meet the energy efficiency requirements, the owner(s) of the building must bring the building into compliance with the aforementioned requirements within three years of the date of the acceptance of the results of the energy efficiency examination.

Under the Energy Efficiency Act, the owner of the building must obtain an energy efficiency certificate for the building as of the third year of its "exploitation" (date of operation), and not later than the sixth year. Prior to obtaining such certificate, the energy efficiency of the building is certified by the energy efficiency passport of the building which is part of the building's technical passport.

The energy efficiency certificate of the building is updated upon the performance of any and all activities leading to improvements in the energy efficiency characteristics of the building. The energy efficiency certificate of the building is valid for up to 10 years.

b. Do the regulations applicable under a) only affect new buildings or must all buildings be provided with energy efficiency facilities?
As mentioned above, all operational buildings with a built-up area of more than 1,000 square metres must be examined under the Energy Efficiency Act.

Exceptions to this rule are provided for in limited cases, for instance:

  • buildings and cultural values falling within the scope of the Cultural Heritage Act and the Protected Areas Act;
  • places of worship of the legally registered religious denominations in Bulgaria;
  • temporary buildings with a planned time of use of two years or less;
  • farm buildings of agricultural producers, used for agricultural activity;
  • manufacturing buildings;
  • residential buildings which are intended to be used as such for less than four months of the year;
  • stand-alone buildings with a gross floor area of less than 50 square metres.

c. Does the market pay any attention to energy certificates?
If the lease contract is subject to registration, upon letting of the building or a part of it, the landlord is under an obligation to provide the tenant with a copy of the energy efficiency certificate of the building or with a copy of the building's technical passport. When selling a building it is a legislative requirement that the energy efficiency certificate must be transferred between owners.

d. How popular is certification of buildings (LEED, BREEAM, etc.)?
It is not very popular. According to public information there is only one building that has LEED certification. There is no information for buildings certified under BREEAM certification.

2. Issues regarding the use of the building

a. Can the landlord push on the operating costs (mainly for electricity, water, heating) to the tenant following consumption or does that need to be established by the lease? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?
Under the applicable legislation, there is no explicit regulation for the charging of operating costs by the landlord. Such provisions may be included in the lease contract. Usually, no distinction is made between the different types of buildings.

In general, there are two ways for charging operating costs by the landlord. The first option is for the landlord to transfer all measuring devices and accounts with the operating companies to the tenant and the tenant to pay the operating costs directly to the supply companies.

Alternatively, the landlord and the tenant may agree in the lease contract that the tenant pays a service charge, covering the operating costs. The service charge is usually calculated by the landlord on the basis of the leased area and the current operating costs. The actual amount of the service charge is calculated at the beginning of each year for the previous year and, depending on the real costs, any overpayments are deducted from the next advance payment of the service charge or any underpayments are paid by the tenant.

b. Does a landlord have the right to perform construction measures to improve the energy efficiency of a building (also against the intention of the tenant). Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial etc.)?

Under the applicable legislation, during the lease term the landlord is under an obligation to perform major repairs of the leased premises. The repairs shall not be related to the normal wear and tear of the premises or caused by the tenant wilfully. Also, the landlord must ensure undisturbed use of the leased premises by the tenant during the term. Therefore, any construction measures undertaken by the landlord for the improvement of the energy efficiency of the building which are not considered as major repairs of the building may be performed only with the consent of the tenant.

No distinction is drawn between different types of buildings.

c. Does a landlord have the right to receive a reimbursement of the costs for the measures under b)? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?
No such standard exists in Bulgaria.

d. If the respective rights mentioned in b) and c) do not exist by statute, but need to be established by the lease contract: Does a standard for such regulations exist (and what is its content)? Please give examples of typical regulations.
No such standard exists in Bulgaria.

e. Which other obligations regarding sustainability (building materials, energy efficiency, waste management etc.) exist? If they need to be imposed by the lease contract: does a standard for such regulations exist (and what is its content)? Please give examples of typical regulations.

The applicable spatial development, waste management and other legislation imposes a number of requirements for the construction and operation of buildings. For example, as per the Spatial Development Act, only materials which are in compliance with the technical specifications as determined in the Technical Requirements towards Products Act 1999 may be used in the construction process.

There are no standard regulations when such obligations are regulated by the lease contract.

3. Allocation of costs; incentives to improve sustainability of buildings or its use.

No explicit regulations exist in legislation. The parties must agree on this in the lease contract.

Croatia

1. Issues regarding the building itself

a. Requirements under public building law regarding energy efficiency.
According to Art. 15 of the Spatial Planning and Building Act (Croatian: "Zakono prostornom uređenju i gradnji"; Official Gazette "Narodne Novine" 76/07, 38/09, 55/11 and 90/11) (the "SPB Act") every building needs to fulfil certain energy efficiency requirements and has to be designed, constructed and maintained in a manner that allows the preservation of the required energy efficiency requirements during the term of its use.

The energy efficiency requirements to be met by a building have been determined by means of the By-Laws on Energy Certification of Buildings (Croatian: "Pravilnik o energetskom certificiranju zgrada"; Official Gazette "Narodne Novine" 36/10) (the "By-Laws").

The SPB Act also determines the requirements needed to obtain an energy certificate (Croatian: "certifikat o energetskim svojstvima zgrade") prior to obtaining a use permit and prior to the change of ownership or lease of the building.

b. Do the regulations applicable under a) only affect new buildings or have all the buildings be provided with energy efficiency facilities?
According to By-Laws every newly constructed building needs to obtain an energy certificate. The above obligation also refers to existing buildings being sold; rented or obtained on the basis of a leasing (such buildings need to obtain the certificate before the Republic of Croatia becomes a member of the European Union). The By-Laws allow for a number of exceptions (e.g. buildings sold or rented to a spouse or close family members, buildings with surface area of less than 50 square metres, buildings constructed for a two years period of use or less, and buildings of religious significance etc.).

c. Does the market pay any attention to energy certificates?
No, so far not at all.

d. How popular is certification of buildings (LEED, BREEAM, etc.)?
According to information received from the Green Building Council of Croatia, not a single building in Croatia has obtained either one of the internationally recognized certificates of energy efficiency, but there are a couple of buildings in the process of obtaining these certificates.

Issues regarding the use of the building

a. Can the landlord push on the operating costs (mainly for electricity, water, heating) to the tenant following consumption or does that need to be established by the lease? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?
There is no explicit provision in the Croatian Law providing that the landlord has to charge operating costs. This is usually agreed in the lease contract (along with rent and other matters).

b. Does a landlord have the right to perform construction measures to improve the energy efficiency of a building (also against the intention of the tenant). Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial etc.)?
The Croatian Obligations Act (Croatian: "Zakon o obveznim odnosima"; Official Gazette "Narodne Novine" 35/05 and 41/08) refers to residential premises, however, does not explicitly mention any repairs concerning energy efficiency. However the SPB Act requires the maintenance of a building in a manner that allows for the preservation of energy efficiency, therefore the following general provision of the Obligations Act may be applied and the landlord is obliged to keep the premises in such state as appropriate for its agreed use and for that purpose the tenant needs to allow repairs. However the landlord is not allowed to make repairs which are not required for the use of the without the consent of the tenant should this obstruct the use of the premises.

In the case of a lease of offices (defined in the Act on Lease and Sale of Office Space (Croatian: "Zakon o zakupu i prodaji poslovnog prostora"; Official Gazette "Narodne Novine" 91/96, 124/97, 174/04 and 38/09)) the lessor has the right to make repairs for the purpose of lowering energy costs. Three months prior to commencing the repairs, the lessor has to notify the lessee in writing of the repairs and of any change in rent. The lessee is entitled to terminate the lease contract within two months from the day of receiving the notification.

c. Does a landlord have the right to receive a reimbursement of the costs for the measures under b)? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?
As stated above, the Obligation Act does not explicitly mention any repairs concerning energy efficiency therefore any reimbursement would have to be contractually agreed.

In the case of offices and commercial spaces if the lessor/landlord has carried out energy efficiency repairs he only has the right to increase the rent and no reimbursement is possible (unless already agreed).

d. If the respective rights mentioned in b) and c) do not exist by statute, but need to be established by the lease contract: Does a standard for such regulations exist (and what is its content)? Please give examples of typical regulations.
No standard for such regulations exists.

e. Which other obligations regarding sustainability (building materials, energy efficiency, waste management etc.) exist? If they need to be imposed by the lease agreement: does a standard for such regulations exist (and what is its content)? Please give examples of typical regulations.
Art. 14 of the SPB Act provides for only a general rule on the substantial requirements which need to be fulfilled during the planning and construction of a building, which include among other things the saving of energy and thermal protection.

No standard for such regulations exists in Croatia.

3. Allocation of costs; incentives to improve sustainability of buildings or its use.

Allocation of costs and incentives to improve sustainability of buildings should be regulated in the underlying lease contract.

Czech Republic

1. Issues regarding the building itself

a. Requirements under public building law regarding energy efficiency.
Current legislation:
The Czech Republic energy efficiency legal framework is spread across several legal Acts. These give general guidance on the implementing of legislation (Decrees – in Czech vyhláaky) and numerous detailed Czech technical norms (in Czech: normy ČSN). Certain technical norms are legally binding and are therefore mandatory others however are for guidance purposes only; nevertheless they tend to be respected by the industry.

Article 156 of the Construction Code states that the materials used in construction shall be only those which guarantee energy savings and heat insulation. The implementation of the Technical Requirements on Constructions Decree expands the direction given by the Construction Code and states that construction shall be designed and constructed in a way as to minimise energy consumption.

Article 6A of the Energy Management Act implements the Energy Performance of Buildings Directive 2002 (EPBD). This Act sets out the essential requirements of the Energy Performance Certificate. In principle, the owner of the property is obliged to ensure that the energy performance of the building is met. The details are described in several Decrees and Czech technical norms. Once the requirements are met an Energy Performance Certificate is issued. This certificate is mandatory for all new buildings.

Important prospective amendments:

In 2010 the EPBD was amended by the EPBD II, this established ambitious energy saving requirements including the requirement of constructing "almost zero-energy building" by 2020. Amendments to the Energy Management Act, Decrees and Czech technical norms are being prepared to transpose the requirements set out by the EPBD II by summer 2012.

b. Do the regulations applicable under a) only affect new buildings or have all the buildings be provided with energy efficiency facilities?
Regulations applicable under a) affects only new buildings, but only in cases of obtaining the Energy Performance certificate. As of 2009, the certification is obligatory for new and for existing renovated buildings having a total floor area exceeding 1,000m2.

c. Does the market pay any attention to energy certificates?
Energy awareness is increasingly growing, nevertheless it is still rather low. There remains a relatively low number of sustainable buildings being constructed, but the market is beginning to see "green" buildings as a possible competitive advantage for the future. Public discussions regarding energy efficiency are becoming more frequent and various industry associations including the Czech Green Building Council have been established, aiming to promote sustainable constructions.

d. How popular is certification of buildings (LEED, BREEAM, etc.)?
The certification has become increasingly popular. Recently the first ever office development has achieved LEED Platinum – the highest possible pre-certification, which was also used as a strong marketing tool by the developer. According to the market news the majority of newly prepared projects will be aiming to achieve LEED or BREEAM certification.

As well as LEED and BREEAM the SB Tool CZ certification method has been recently introduced by the Czech experts, having standards adapted to the specific Czech environment and norms.

2. Issues regarding the use of the building

a. Can the landlord push on the operating costs (mainly for electricity, water, heating) to the tenant following consumption or does that need to be established by the lease? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?
A landlord does not have to charge operating costs, but it is usual that it does under the lease contract. Under Czech laws rent and service charges must be separated. In the vast majority of services, the method of charging operating costs (and defining of what is an operating cost) is agreed in the lease contract.

There are small legal differences between the types of buildings (i.e. apartments, commercial premises and other properties), however this does not have a substantial impact on the necessity to state the method of the operating costs charge. In practice, certain residential contracts include use of some services (typically use of water and waste disposal) in the rent, while it is market standard for the tenant in commercial premises to be charged separately for all operating and service costs.

b. Does a landlord have the right to perform construction measures to improve the energy efficiency of a building (also against the intention of the tenant). Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial etc.)?

Generally no, unless an unlikely situation takes place where a building is genuinely endangering safety, health and/or the environment. In such a case the construction office may order the owner to carry-out specific construction measures, which have to observe current construction requirements. In this way the energy efficiency of a building might be improved. Commercial leases usually give a right to the landlord to make improvements, but the works should not hinder the lessees' use of the property.

c. Does a landlord have the right to receive a reimbursement of the costs for the measures under (b)? Is there a distinction drawn between different types of buildings (e.g. residential, office, commercial, etc.)?
No, there is no such legal right for reimbursement. Reimbursement will depend upon the bargaining power of the landlord and tenant as to whether any energy efficiency improvements will be reflected in the increased rent.

d. If the respective rights mentioned in (b) and (c) do not exist by statute, but need to be established by the lease contract: Does a standard for such regulations exist (and what is its content)? Please give examples of typical regulations.
There are no such regulations. If the landlord carries out energy-saving alterations, we would recommend it to attempt to renegotiate the rent.

e. Which other obligations regarding sustainability (building materials, energy efficiency, waste management etc.) exist? If they need to be imposed by the lease contract: does a standard for such regulations exist (and what is its content)? Please give examples of typical regulations.

There are no other major obligations regarding sustainability other than those outlined above.

3. Allocation of costs; incentives to improve sustainability of buildings or its use.

If the landlord wishes to share its efficiency costs with the tenant we would certainly recommend negotiating the details in the lease contract. Unless it has been previously agreed the landlord will not be able to unilaterally share these costs with the tenant.

Property owners can apply for various discretionary subsidies aimed to promote and subsidise energy savings alteration e.g. the Green Savings programme. However, at the moment the eco-subsidies are usually not targeted at commercial (but residential) buildings.

France

1. Issues regarding the building itself

a. Requirements under public building law regarding energy efficiency
The Act of 3 August 2009 ("Grenelle I Act") has set national targets related to environmental policy. In particular, the Grenelle I Act has set an energy consumption reduction target for the building sector, i.e. a reduction by at least 38% between 2012 and 2020.

In accordance with Article 4 of the Grenelle I Act, the Thermal Regulations (the "2012 TR") were adopted in order to limit the consumption of primary energy in new buildings to a maximum of 50 kWhEP/sqm/year, while promoting a material technological and industrial change for all of the construction and related equipment sectors, a satisfactory energy quality level of buildings, regardless of the selected energy system, and a technical and economic balance between the energies used for heating and producing hot water for sanitary purposes.

These national targets were endorsed by the Act of 12 July 2010 (the "Grenelle II Act") which contains a national commitment to the environment.

b. Do the regulations applicable under a) only affect new buildings or do all buildings have to be provided with energy efficiency facilities?
All buildings must comply with a number of energy standards, particularly since the passing of the Grenelle I and II Acts. The 2012 TR shall be applicable to all building permit applications filed with regards to new buildings from the tertiary sector, the public sector and certain residential buildings (effective from November 2011) and with regards to all other types of new buildings (effective from 1 January 2011).

c. Does the market pay any attention to energy certificates?
The market is increasingly attentive to energy consumption and management issues.

An energy performance diagnosis ( "EPD") was created and is provided for in Article L.134-3 of the French Construction and Housing Code. It is a requirement that the EPD document must be appended to the sale contract of any properties (since 1 November 2006) and to any lease contract upon its execution or renewal (since 1 July 2007). The EPD is valid for a period of 10 years.

This document is aimed at increasing the value of properties emitting only a small quantity of gases having greenhouse effects. Therefore, the objective is to encourage owners to carry out insulation works and to replace obsolete equipment with new items with greater efficiency (e.g. condensation boiler) or to install renewable energy production equipment (e.g. solar panel, wood burner, etc.).

The EPD document contains the following information: a description of the building's main features and its thermal equipment; an estimate of the annual energy consumption and cost and a classification of the consumption per square metre according to the "energy label" principle (scale from A to G); an indication of the quantity of CO2 issued because of the said consumption with a classification according to a "climate label" scheme; and recommendations in order to control energy consumption, in particular with respect to the works that might need to be carried out in order to improve the building's energy performance. The reading of the diagnosis is facilitated by a twin label and by a euro-denominated estimate.

Since 1 January 2011 it has been mandatory to display the EPD in advertisements (e.g. in a newspaper, website or in a show window) when selling or renting property.

Non-compliance with the obligations may give rise to criminal sanctions, i.e. the fine applicable to fifth-class offences. However the EPD is not mandatory as regards to the following properties: temporary constructions whose scheduled utilization period is no more than 2 years; self-standing buildings where the gross built area does not exceed 50 square metres; agricultural, crafts or industrial buildings that only require a small quantity of energy for heating, sanitary hot water production or cooling purposes (the buildings must not be used for residential purposes); and historical buildings and places of worship.

Furthermore, in the case of the rental of properties, the lessor must attach to the lease contract the lead exposure risk report (Articles L.1334-5 and L.1334-7 of the French Public Health Code )and the statement of natural and technological risks (Articles L.125-5, R.125-23 to R.125-27 of the French Code of the Environment). However the obligation to provide a lead exposure risk report applies only to properties used, in whole or in part, for residential purposes and built prior to 1 January 1949.

d. How popular is certification of buildings (LEED, BREEAM, etc.)?
The certification of buildings has become increasingly popular and necessary in order to ensure the optimal profitability of new constructions.

In order to seek validation of the ecological nature of the construction or renovation of buildings, project owners may have the projects certified by several approved institutions. There is a certification for each type of building i.e. individual house, collective housing units, and tertiary buildings.

In France, the most popular certifications are as follows:

  • the Qualitel certification, which applies to the new housing and grouped (collective and individual) housing sectors, as well as to retirement and student residences;
  • the Habitat & Environnement certification, which takes environmental protection into account throughout the housing unit's life cycle. This certification is issued by CERQUAL and applies to new housing projects of grouped collective and individual buildings;
  • the Patrimoine Habitat & Environnement certification is reserved for the renovation and rehabilitation of buildings existing for more than ten years;
  • the NF individuelle démarche HQE® certification issued by Cequami, which requires a building performance of at least 10% above the regulatory levels or at least 5% above the said standards (in case of reliance on renewable energies);
  • the NF Bâtiments tertiaires-Démarche HQE® certification issued by Certivea;
  • the NF Logement certification; and
  • the Effinergie certification aimed at promoting low-consumption constructions, i.e. either new buildings consuming less than 50 kWh/sqm/year or renovated buildings consuming less than 80 kWh/sqm/year for heating, lighting, ventilation or sanitary hot water production purposes.

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