New obligations concerning energy efficiency and sustainable development

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Benedict Caldwell
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1 Real Estate e-bulletin, France, n 8, March 2011 Update on the Grenelle reforms regarding real estate CONSTRUCTION Environment and the building sector New obligations concerning energy efficiency and sustainable development - New buildings: 2012 Thermal Regulations ( RT 2012 ) Applicable rules New buildings will have to comply with certain energy efficiency characteristics, regarding inter alia greenhouse gas emissions, water consumption and the production of waste associated with their construction, maintenance, rehabilitation and demolition (L of the French Building and Housing Code). The décret No of 26 October 2010 and the arrêté of 26 October 2010 specify the conditions which must be met by new buildings and new parts of buildings, regarding: (i) primary energy consumption ("Cep max " coefficient) for heating, cooling, the production of hot water and ventilation; (ii) the building s energy requirements ("Bbio max " coefficient) for heating, cooling and lighting; and (iii) maximum temperatures in summer, without an active cooling system, while referring to an arrêté, not yet published, for the definition of the various thresholds and categories. The scope of these regulations excludes, in particular, buildings which have a normal temperature of use equal to or lower than 12 C and temporary constructions with an intended duration of use of less than two years.

2 2. "Cep max " primary energy consumption is on average limited to 50 kwh/m²/year. Variations are provided for, according to a number of criteria. These provisions will apply, in particular for office buildings, to building permit applications and prior declarations of works filed as of 28 October For projects concerning residential property, the deadline is set for 1 January 2013 in the majority of cases. Other instruments will complete the conditions of RT 2012, for example for buildings for commercial or healthcare purposes. Finally, an energy performance report must be carried out at the time of the construction or extension of a building, and delivered to the owner on or before the formal delivery of works. Inspections In order to ensure that these obligations have been met the law requires the following certificates to be provided: Firstly, a certificate confirming that thermal regulations have been taken into account is to be produced by the owner at the time of filing of the building permit application for new buildings (L al. 4 of the French Building and Housing Code), upon completion of the works for the creation of new parts of existing buildings which require a building permit or for rehabilitation works(l and L of the French Building and Housing Code). The certificate is to be issued by a technical inspector (L of the French Building and Housing Code), a certified report engineer (L of the French Building and Housing Code), a body operating in the context of the granting a "high energy performance" label, or an architect. A décret adopted by the Conseil d Etat will lay down the terms for implementing these provisions. Secondly, a certificate confirming that regulations on noise have been taken into account is to be produced by the owner upon completion of the works for new buildings or for new parts of existing buildings which require a building permit (L of the French Building and Housing Code). Finally, a report on the management of waste arising from demolition or substantial rehabilitation works is to be drawn up before the works begin (L of the French Building and Housing Code). Décrets adopted by the Conseil d Etat shall determine the categories of buildings which will be subject to such a report, its contents and the method of carrying it out. New labels New labels associated with RT 2012 will be put in place: a THPE/RT2012 level and a Bepos level.

3 3. Sanctions In the context of criminal proceedings, fines of 225,000 Euros for legal entities and/or works to ensure compliance may be imposed. Existing structures A similar mechanism to the one which has been put in place in the context of RT 2012, while providing for certain variations having regard to the cost of the works compared to the value of the building, will apply to existing buildings. A décret adopted by the Conseil d Etat shall determine, on the one hand the categories of buildings or parts of buildings which will be the subject of this obligation of works and, on the other hand, the nature of the works and the terms of the obligation, as well as the thermal characteristics or energy performance levels which are to be complied with. Works to improve the energy performance levels of existing buildings for tertiary or public service use are to be carried out within a period of 8 years as of 1 January 2012.

4 4. TRANSACTIONS New environmental obligations affecting transactions - Green Appendix The Grenelle II law creates an environmental appendix or green appendix in Article L of the French Environment Code (Code de l'environnement), which is to govern the aims defined by tenants and landlords in order to improve buildings environmental performance. It may provide for limits on energy consumption by the tenant. A décret is to specify the content of this appendix. It will apply to leases concerning premises of over 2,000 sq.m. for use as offices or shops, which are concluded or renewed as of 1 January 2012, or within a period of three years as of 13 July 2010 for current leases. It may be noted that no specific sanction has been laid down for failure to comply with this obligation. In our view, this document will be of particular interest for procedures such as HQE Exploitation certification, setting up an energy performance contract, or the obligation to carry out mandatory works on existing buildings between now and The legal provisions also put in place exchanges of information between the parties concerning the energy consumption of the leased premises and the landlord s access to the leased premises to carry out works to improve energy performance levels. - Energy Performance Report The energy performance report (DPE) sets out the energy consumption of a building, which is either the actual consumption or the estimated consumption according to a standardised use. Previously, a DPE had to be drawn up at the time of sale. The scope of the DPE is now extended to rentals. All new leases, with the exception rural leases and seasonal rentals, are now concerned by the obligation to append a DPE. The DPE must be made available to prospective buyers or tenants as soon as the property is put up for sale or rent, without waiting for the prospect to ask for it. The Law provides that the content of the DPE cannot be relied upon against the lessor (L , paragraph 2 of the French Building and Housing Code), which was already the case for the seller in matters of sale (L of the French Building and Housing Code). It may be noted that no specific sanction has been laid down for failure to append a DPE.

5 5. - Property ads: energy label Since 1 January 2011, the efficiency classification of the building must also be stated in property advertisements (L of the French Building and Housing Code). It may be noted that no specific sanction has been laid down for failure to comply with this obligation. - Ground pollution The Grenelle II law imposes new obligations in matters of ground pollution. Where information made public by the State pursuant to the new Article L of the French Environment Code show a risk of pollution of the ground affecting land which is the subject of a transaction, the seller or lessor of the land is obliged to inform the purchaser or tenant in writing. That failing, the purchaser or tenant may, within a period of two years as of the discovery of pollution making the premises unfit for their intended use, bring proceedings for the rescission of the contract, obtain restitution of part of the sale price or rent, or demand the renovation of the premises at the expense of the seller or lessor if the cost is not disproportionate to the sale price or rent. A décret adopted by the Conseil d Etat is to define the terms and methods for the implementation of these provisions.

6 6. TOWN PLANNING The greening of town planning documents and taxation Local and regional town planning documents now include provisions in favour of sustainable development. Specific provisions are adopted to increase the density of constructions, by allowing increases in construction rights and taxing under-density. - Town planning reform The rules relating to the territorial coherency schemes (schémas de cohérence territoriale - SCOT), town planning documents adopted at the regional level, and local town planning regulations (plan local d urbanisme - PLU), adopted at the level of the city, are to be completed in order to fight against urban spread and to preserve natural resources. As a consequence, these documents may be amended in order to impose rules concerning the location, minimum density and energy efficiency of constructions, particularly in matters of commercial town planning. These new provisions entered into force on 13 January 2011 but are not applicable to SCOTs and PLUs which were being drafted or revised at that date. The building permit or development permit, or the decision taken on the basis of a prior declaration, cannot oppose the use of renewable materials or building methods and materials which make it possible to avoid the emission of greenhouse gases, the installation of systems to favour the retention of rainwater or the production of renewable energy corresponding to domestic consumption requirements of the occupiers of that building or that part of a building in question. These provisions, also in force since 13 January 2011, are not applicable in safeguarded sectors (secteurs sauvegardés), in the vicinity of historic monuments, on a listed or classified site, or in a national park. - Exceeding general density Energy-efficient constructions may derogate from the rules concerning the density and size of constructions, in a proportion which has been increased from 20% to 30%. Constructions located in protected sectors, such as constructions in safeguarded sectors, in the vicinity of historic monuments, on a listed or classified site, or in a national park, which were previously excluded from the scope of the derogation, will benefit from the same derogation pursuant to Law No of 5 January 2011, but limited to 20%. These derogations may be combined to derogations granted for social housing by a resolution of the municipal council or other competent body, provided that this does not have the effect of increasing the building rights by more than 50%.

7 7. As was the case beforehand, it is possible to benefit from these derogations, in urban zones or zones to be urbanised, where the municipal council or the competent instance in town planning matters adopts this derogation for a duration which must be more than two years, after having submitted the proposal to the general public for a period of one month. The entry into force of these provisions shall be subject to the adoption of a décret by the Conseil d Etat, which will determine the performance criteria and facilities taken into account. - Tax for under-density The Corrective Finance Law for 2010 (Law No , 29 Dec. 2010) has created a payment for under-density for applications for town planning authorisations which are filed as of 1 March As for the payment for exceeding the statutory density limit, new Article L of the French Town Planning Code (Code de l'urbanisme) allows cities and inter-city public establishments competent in town planning matters to institute a minimum density threshold for constructions, below which the under-density tax will be due. The adoption of such a tax automatically repeals any tax for exceeding the statutory density limit. The density of a construction is defined as the ratio between the adjusted gross floor area (SHON) of a construction and the constructible surface area of the land on which the construction is located. This payment is equal to the product of half of the value of the land multiplied by the ratio between the additional floor area needed for the construction to attain the minimum density threshold and the floor area of the construction arising from application of the minimum density threshold, but cannot exceed 25% of the value of the land.

8 8. CO-OWNERSHIP New obligations for an environmental report and new provisions concerning works The Grenelle II law now requires an energy report or audit, depending on the coownership, to be carried out. It requires certain questions to be recorded on the agenda and relaxes rules concerning the majority for votes at general meetings. An energy performance report (DPE) must be carried out for buildings equipped with a collective heating or cooling system, before 1 January If the main use of the building is residential, in a co-ownership which has at least 50 lots and where the date of filing of the building permit was earlier than 1 June 2001, the DPE is replaced by an energy audit. The content and terms for carrying out this audit are still to be defined by a décret adopted by the Conseil d Etat. Co-ownerships which have been the subject of a DPE or energy audit must include the question of a plan for energy-saving works or an energy performance contract on the agenda of the next general meeting of co-owners. Decisions on this subject are adopted by a simple majority. As of the present time, questions must be put on the agenda concerning works enabling the recharging of electric or hybrid vehicles, and the implementation of the newly instituted right to require the transfer of ownership to public authorities of certain properties concerned by plans for the prevention of technological hazards. Decisions on this subject are adopted by a simple majority. In addition, the provisions concerning majority votes at general meetings have been amended, so that works for energy-saving purposes or to reduce greenhouse gas emissions, or the installation of energy meters or heating cost counters other than those mentioned above, shall be adopted by an absolute majority, with the possibility of a second vote by simple majority. These works may include works of collective interest carried out in areas which are exclusive to an owner which is a real innovation at the expense of the co-owner of the lot in question, with the co-ownership exercising the powers of owner until the delivery of the completed works.

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