ESG in Real Estate - Green Leases expert guide in Czech Republic

EPCs must be issued for new buildings, buildings undergoing major renovations, and buildings that are sold or rented out. The certificate provides a rating of the building's energy efficiency and is mandatory for transactions. EPCs detail the energy performance of a building, recommendations for improvement, and an indication of the potential savings that could be made by implementing the recommendations. EPCs rate buildings on a scale from A (very efficient) to G (inefficient), based on their energy consumption. Buildings are required to achieve a certain minimum rating to be compliant. The exact requirements can vary depending on the type of building (e.g., residential vs. commercial, new build vs. existing). For new buildings, the Czech Republic follows the EU directive requiring that all new buildings constructed after 2020 be Nearly Zero-Energy Buildings (NZEB), with a very high energy performance where the nearly zero or very low amount of energy required should be covered to a significant extent by energy from renewable sources. When existing buildings undergo major renovations, the renovated parts must meet minimum energy performance requirements. This includes improving the thermal insulation of the building envelope and updating heating, cooling, and lighting systems to more energy-efficient models.

The Energy Performance of Buildings Directive (EPBD) requires that all new buildings must be nearly zero-energy buildings since 2021 (public buildings since 2019).

Green leases are becoming more common in the Czech Republic, driven primarily by market demand rather than regulation. These leases typically cover energy efficiency, water conservation, waste reduction, and indoor environmental quality. Green lease provisions are more prevalent in commercial leases, less in residential settings. Green lease provisions are not specifically regulated but are increasingly adopted by parties seeking to improve building sustainability.

Institutional investors and financing institutions in the Czech Republic are showing a growing interest in green lease provisions as part of their environmental and sustainability criteria. While there is no single market standard for green lease drafting, best practices include clauses on energy efficiency, resource conservation, and sustainability certifications. Due diligence may review the presence or absence of green lease provisions during acquisitions or refinancing, but it is not yet a market standard.

Enforcement of green lease provisions typically relies on contractual agreements between landlords and tenants, with legal recourse available for non-compliance.

Building certifications such as LEED, BREEAM, WELL, and others are increasingly popular and common in the Czech Republic, driven by market demand for sustainable and efficient building practices. These certifications are often documented in lease agreements or building management policies, detailing the responsibilities of landlords and tenants in maintaining certification standards.

Regarding alternative energy supply systems like rooftop photovoltaic systems, specific regulations may apply, but there isn't comprehensive legislation. Installation considerations would include compliance with building codes and potential grid connection requirements.

Regulations related to soil artificialization or biodiversity concerns impacting new builds or refurbishments are present but not extensive. Enforcement typically falls under environmental or planning authorities, ensuring compliance with relevant laws and regulations. Recently, the Czech Government accepted a significant amendment to the existing environmental legislation, which aims to encourage the development of brownfield and lower quality land while protecting the highest quality agricultural land. The development of large warehousing and retail projects on the highest quality agricultural land will be prohibited, and the price for developing such projects on lower quality land will increase notably.