Green lease law and regulation in France

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.

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).

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.

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.

A landlord is not obliged to charge operating costs (service charges), regardless of the type of building. The landlord and the tenant have to agree upon the service charges in the lease contract.

In the case of a lease of an office, industrial or commercial space they have to agree upon which services the landlord will provide and what price the tenant has to pay. Generally the tenant pays the service charges in advance and each year this amount will be set off with the effective costs.

In case of execution of a residential lease contract governed by the Act of 6 July 1989, only certain expenses, listed in a schedule to the decree of 26 August 1987, may be recovered from the lessee.

In any event, only those expenses expressly referred to may be borne by the lessee, and the clauses related to the service charges are interpreted in favor of the person assuming the obligation, i.e. the lessee.

Under Article 1723 of the French Civil Code, the lessor may not, during the term of the lease, change the form of the leased premises and may not accordingly carry out any works without the lessee’s consent. However, Article 1724 of the French Civil Code provides an exception and enables the lessor to make urgent changes that can not be postponed until the end of the lease contract.

Nevertheless, Articles 1723 and 1724 of the French Civil Code are not mandatory provisions; the parties to the lease contract may expressly depart from the provisions and enable the lessor to carry out works for the improvement of the building’s energy performance, without the lessee’s express consent.

Furthermore, Article L.125-9 paragraph 2 of the French Code of the Environment states that the lessee shall enable the lessor to access the leased premises, with a view to the completion of the works for the improvement of the building’s energy performance. However, no decree has so far been published in order to define the boundaries of the obligation on the lessee.

If the cost of the works carried out by the lessor were to be borne by the lessee, pursuant to the lease contract, then the lessee must reimburse the cost of the works.

The cost of the conformance works requested by the administrative authorities must be expressly provided for in the lease contract. If this is not stipulated in the lease contract the cost of the works shall be borne by the lessor.

From 1 January 2012 it will be necessary to insert an environmental appendix into all lease contracts executed or renewed in respect of premises of more than 2,000 square metres used as offices or retail stores. With regards to current leases, such an appendix shall be mandatory, under the same restrictions, effective from 14 July 2013 (Article L.125-9 of the French Code of the Environment).

Article L.125-9 stipulates that the environmental appendix may provide for obligations applicable to the lessee in order to limit the leased premises’ energy consumption. Article L.125-9 refers to an implementing decree that will define the contents of such obligation however this has not yet been published.

The allocation of the costs and works must be provided for specifically in the lease contract.