ESG in Real Estate - Green Leases expert guide in Luxembourg
- Do EPCs need to be provided on sales and lettings and if so, are there any statutory minimum requirements?
- Is there any legislation requiring new or existing buildings to satisfy ESG requirements?
- How widespread are green lease provisions? Are they regulated or market driven? What areas do green leases commonly cover? Do they apply to both residential and commercial leases?
- What do institutional investors and banks/other financing institutions require in terms of the green lease drafting? Is there any market standard approach to green lease drafting? Do you report on the lack of any green lease provisions in your due diligence reports on an acquisition or refinancing?
- How are green lease provisions enforced?
- How widespread is the certification of buildings (e.g. LEED, BREEAM, NABERS, WELL etc.)? Are they regulated or market driven? How is this documented between the Landlord and Tenant?
- Are there any additional regulatory requirements that need to be met or contractual provisions that need to be considered regarding the installation of alternative energy supply systems (e.g. rooftop photovoltaic systems)?
- Are there any regulations relating to soil artificialisation or other biodiversity concerns which impact on new builds and/or refurbishments? How are they enforced?
jurisdiction
1. Do EPCs need to be provided on sales and lettings and if so, are there any statutory minimum requirements?
Yes, in Luxembourg it is mandatory, to provide an Energy Performance Certificate (the “EPC”) on sales and lettings. The EPC certificate must be provided (i) to the interested buyer or the interested tenant, upon request and (ii) upon the effectivity of the sale or let, to the new owner or tenant. The requirements related to EPC are governed by the Grand Ducal Regulation of 9 June 2021, as amended.
The Grand Ducal Regulation also provides minimum requirements for new buildings, in terms of, inter alia, (i) winter thermal insulation, (ii) summer thermal protection, (iii) building air-tightness, (iv) measures to avoid thermal bridges, (v) hot water, heat and cold distribution pipes and ventilation ducts; (vi) cold and hot water tanks, which must be met for the building to qualify as a “Nearly Zero Energy Building”.
Finally, it is to be noted that EPC remains valid for a period of 10 years as from the date of issuance.
2. Is there any legislation requiring new or existing buildings to satisfy ESG requirements?
In case of an expansion or a material transformation of an existing building, specific requirements pertaining to NZEB must be met, in accordance with the Grand Ducal Regulation of 9 June 2021, as amended.
Any new building must meet the criteria to qualify as NZEB.
3. How widespread are green lease provisions? Are they regulated or market driven? What areas do green leases commonly cover? Do they apply to both residential and commercial leases?
Green leases are not regulated under Luxembourg law. Green lease provisions are still rare and, as not regulated specifically, may be implemented in commercial leases, for both residential and commercial leases.
4. What do institutional investors and banks/other financing institutions require in terms of the green lease drafting? Is there any market standard approach to green lease drafting? Do you report on the lack of any green lease provisions in your due diligence reports on an acquisition or refinancing?
Although financing institutions in Luxembourg shows an increasing interest in the inclusion of sustainable indicators in their offer, there is no exact data nor specific requirements in terms of green lease drafting.
5. How are green lease provisions enforced?
Green lease provisions are agreed contractually, so that the parties involved will be bound by the terms of the contract under the governing law. The enforcement will differ on a case-by-case basis, depending on the terms of the contract. Depending on the drafting of the specific clause, infringement to the green lease clauses may be considered as a breach of contract i.e. remedies or specific liability provisions contractually agreed.
6. How widespread is the certification of buildings (e.g. LEED, BREEAM, NABERS, WELL etc.)? Are they regulated or market driven? How is this documented between the Landlord and Tenant?
In Luxembourg, besides the mandatory classification of buildings via EPC, international certifications of buildings are commonly used, such as BREEAM, WELL Building standard, regarding the well-being of the users.
These are not subject to Luxembourg requirements but are rather market-driven.
7. Are there any additional regulatory requirements that need to be met or contractual provisions that need to be considered regarding the installation of alternative energy supply systems (e.g. rooftop photovoltaic systems)?
Beside the minimum requirements for new buildings provided by the Grand Ducal Regulation of 9 June 2021, as amended, relating mostly to energy efficiency solutions, there are no additional regulatory requirements or contractual provisions regarding the installation of alternative energy supply systems.
However, the government offers state support to fund the installation of photovoltaic systems, covering up to fifty (50) percent of the total cost, subject that specific conditions are met. This funding may be available to individuals and legal entities who have full and unrestricted ownership of a building, whether residential or not, situated in Luxembourg.
Recently, the maximum threshold of funding was raised to up 62,5% to support the construction and operation of electricity production plants using solar energy in Luxembourg for all request submitted prior to 30 June 2024.
8. Are there any regulations relating to soil artificialisation or other biodiversity concerns which impact on new builds and/or refurbishments? How are they enforced?
Beside the minimum requirements for new buildings provided by the Grand Ducal Regulation of 9 June 2021, as amended, relating mostly to energy efficiency solutions, there are no additional regulatory requirements or contractual provisions regarding the installation of alternative energy supply systems.
However, the government offers state support to fund the installation of photovoltaic systems, covering up to fifty (50) percent of the total cost, subject that specific conditions are met. This funding may be available to individuals and legal entities who have full and unrestricted ownership of a building, whether residential or not, situated in Luxembourg.
Recently, the maximum threshold of funding was raised to up 62,5% to support the construction and operation of electricity production plants using solar energy in Luxembourg for all request submitted prior to 30 June 2024.
