- 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?
Under the Energy Performance of Buildings Regulation, it is mandatory to obtain an Energy Performance Certificate when buying or selling a building or property. This certificate provides details of the energy efficiency rating of the building or property, along with suggestions for improvement.
For newly constructed buildings, individuals or organisations that have received training in issuing EPCs from the Union of Turkish Chambers of Engineers and Architects (“UCTEA”) or relevant professional chambers are considered qualified to issue EPCs.
Certain documents are required in the application process, including architectural project, thermal insulation project, electrical project, mechanical installation project (heating, cooling, ventilation).
The EPC is valid for 10 years from the date of issue. The EPC is made up of 7 categories from A to G, with A being the most efficient and G being the least efficient. New buildings are required to achieve at least a C rating on the EPC, which indicates a moderate level of efficiency. On the other hand, from 1 January 2023, all buildings over 5,000 square metres will be required to have an EPC rating of at least B and to obtain at least 5% of their energy consumption from renewable sources such as solar panels, wind power or heat pumps.
2. Is there any legislation requiring new or existing buildings to satisfy ESG requirements?
A number of legislative measures related to energy efficiency and ESG (environmental, social and governance) are relevant considerations for developers and investors in the logistics and industrial sectors when selecting project locations. These include the Energy Efficiency Act No. 5627 and the Environmental Protection Act No. 2872, which establish energy efficiency and environmental protection criteria to be considered in the selection of project locations.
In addition, the Energy Performance of Buildings Regulation, which aims to achieve net-zero emission buildings by 2053, will gradually make it mandatory for buildings to be more energy efficient and to use renewable energy sources.
The primary legislation for assessing the vulnerability of a building to natural disasters and its ability to withstand such disasters is the Turkish Building Seismic Regulation. This sets the basic framework for ensuring the safety of buildings throughout Türkiye and provides detailed guidance on assessing natural hazards and strengthening the resilience of buildings. In addition, the Environmental Impact Assessment Regulation, which complements the Environmental Law No. 2872, sets out the technical and procedural guidelines for assessing the environmental impact of real estate projects. As a standardised measure or metric for evaluating the energy efficiency of buildings, the EPC is widely used. The EPC uses a rating system based on a building’s energy efficiency like mentioned above.
The Regulation on Green Certificates for Buildings and Developments establishes the “Green Certificate Commission” within the Ministry of Environment and Urbanisation, which is responsible for supervising the green building and development system and defining the procedures and principles. Accredited “Assessment Foundations” approved by the Ministry will assess and certify the environmental, social and economic performance of buildings and developments according to assessment guidelines.
Under the scheme, building owners can apply for green certificates from assessment foundations approved by the Green Certificate Commission. Upon receiving applications, these assessment foundations will conduct assessments based on prescribed guidelines and record relevant data in the National Green Building Information System.
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 currently regulated by Turkish law and are not widely used in Türkiye, although there are lease agreements that include provisions to improve the environmental sustainability of the leased property or specific clauses that convert a standard lease into a green lease. However, with the growing emphasis on sustainability principles by Turkish companies, the number of green leases is expected to increase. In addition, given its desire to harmonise with EU directives, Türkiye is expected to follow the EU example in regulating eco-renting.
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?
The aim is to promote “green” investments that contribute to environmental goals, especially the fight against the climate crisis, the efficient use of resources and the promotion of environmentally friendly technology.
Accordingly in Türkiye “Guidelines on Green Debt Instruments, Sustainable Debt Instruments, Green Lease Certificates and Sustainable Lease Certificates” (the “Guidelines”) is published by the Capital Markets Board. The Guidelines is based on the Green Bond Principles endorsed by the International Capital Markets Association (ICMA) and adopted by EU countries through the European Green Deal. It also sets out the principles and procedures for issuing green debt instruments and green leases. Entities wishing to issue green debt instruments will need to comply with the requirements set out in the Guidelines, in addition to existing debt issuance regulations.
The Guidelines aim to diversify the green financing instruments within its scope. For example, various capital market instruments such as asset-backed, mortgage-backed, project-linked, real estate certificates and blue bonds can be considered as green capital market instruments if they meet the criteria outlined in the Guidelines and if the issuer fulfils its obligations. The issuer must confirm that the issuance will comply with the principles outlined in the Guidelines where the proceeds shall be used exclusively for the financing or refinancing of new or existing green projects that meet the definition of a green project as set out in the framework document. Before the issuer can call the bond a “green bond”, an external assessor must verify that the bond complies with the Guidelines.
In addition, the issuer will be required to disclose the following information to investors together with the legal framework document.
- The environmental sustainability objectives of the eligible green projects;
- Information on the types of eligible green projects; and
- Information on the processes used to identify and manage potential environmental and social risks associated with green projects.
In addition, issuers are encouraged to include the following in the framework document:
- The alignment of eligible green projects with the issuer's overall environmental sustainability goals, strategies and policies;
- Information on labels, certificates, taxonomies, standards, compliance and exclusion criteria for project selection, where available.
5. How are green lease provisions enforced?
The main piece of legislation relating to lease agreements is the Turkish Code of Obligations No. 6098, which sets out the general provisions applicable to lease agreements. It is possible to include special provisions in lease agreements; however, such provisions cannot be contrary to the mandatory provisions of the Turkish Code of Obligations. In any case, green lease provisions are currently not popular.
Furthermore, a lease with a green lease clause will be assessed under the Turkish Code of Obligations No. 6098. In this context, its enforceability will be within the contractual framework. In other words, a breach of the green lease clause will be considered a breach of contract.
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?
While LEED certification is mostly found in Istanbul, Ankara and Izmir, there is an increase in the number of green certified projects in provinces such as Adana, Konya and Erzurum. According to 2019 data, the number of green certified buildings in Türkiye is 217. Approximately 77% of the building stock in Türkiye is not insulated, which clearly shows the insufficiency of certification in Türkiye.
Türkiye has established YeS-Tr certification within this framework; YeS-Tr, the National Green Certification System, is a system that allows the certification process to be carried out online.
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)?
Typically, unlicensed renewables are allowed to produce up to 5 MW. The ones wishing to install solar panels on their roofs are subject to the provisions of the Regulation on Unlicensed Production of Electricity in the Electricity Market. The application procedure for unlicensed production of electricity from renewable energy sources is governed by the Regulation on Licensed Production of Electricity from Renewable Energy Sources, with applications being submitted to the relevant grid operator.
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?
In Türkiye, there are currently no specific legislative requirements to address soil artificialisation or biodiversity concerns directly affecting new construction or refurbishment. It's worth noting, however, that these concerns can still be addressed through contractual agreements.
In the absence of specific legislation, parties involved in construction projects can include clauses in their contracts to regulate and address land reclamation and biodiversity concerns. These contractual provisions may include specific requirements, guidelines or commitments to maintain soil quality, mitigate the effects of soil artificialisation and protect or enhance biodiversity in the project area. Therefore, failure to comply with the terms of the agreement in relation to soil amelioration or biodiversity concerns could constitute a breach of contract.
