Global warming is a fact, which means that we all need to be more energy-efficient. That goes for office buildings, too. As from 1 January 2023, it is not possible to make use of an office building if it has not been issued with a valid energy performance certificate (EPC, or ‘energy label’) at level C at least. Many office buildings do not currently meet this requirement, and local authorities are expected to start enforcing the law in the near future. This may result in the imposition of fines and – in some cases – even in the closure of entire buildings. So what do you need to bear in mind if you’re letting an office building? I’ll be answering a number of FAQs in this article, which also contains tips for anyone planning to draft a new lease contract in the near future.
What buildings must have an energy label?
The vast majority of office buildings are required to have a C energy label. An office building is defined as a building, or part of a building, that is used exclusively for accommodating one or more offices and the relevant ancillary spaces. An office is a space used for administrative purposes, for example by a firm of consultants, an insurance company or a firm of accountants. The obligation to possess an energy label applies to the whole building, including all ancillary spaces. An office building may not be subdivided into different spaces in order to circumvent the obligation to have the relevant energy label.
The energy label requirement does not apply to every single office building. Broadly speaking, there are five exceptions to the rule:
- if the usable area of the building (including ancillary spaces) is less than 100 m2;
- if the building in which the office is located is not primarily an office building, i.e. where the amount of space taken up by an office or offices accounts for less than 50% of the total floor space. This applies, for example, to offices located in shops, hotels and restaurants;
- if an office building has been designated as an officially listed building, whether this is as a national monument, a provincial monument or a municipal monument, with the exception of office buildings in a protected urban or village conservation area (of which there are over 400 in the Netherlands), in which case they must have a C energy label;
- if the office building in question is due to be purchased under a compulsory purchase order, demolished or converted into other premises within a period of two years;
- if the investment that is required in order to secure a C energy label will take more than 10 years to recoup.
In the case of rented office space, the landlord (or ‘lessor’) is obliged to present the tenant (or ‘lessee’) with an energy performance certificate. If the building in question does not currently meet the requirements for qualifying for a C energy label, the landlord will have to take action before 1 January 2023 to make the building more energy-efficient. If you’re a landlord and you fail to do so, you may find yourself facing a fine or the closure of your building. And non-compliance may even be classified as a defect in your lease contract.
Could non-compliance be regarded as constituting a defect in your lease contract?
A defect as defined by Dutch tenancy law is any state, property or other circumstance that is not attributable to the tenant and which prevents the tenant from using the property as planned. It is up to you as the landlord to ensure that the tenant is able to use the property as he or she wishes. If the tenant is unable to obtain a permit allowing him or her to occupy the property, this invariably constitutes a defect.
So does a defect arise only once the local authority decides to enforce the law or makes clear that it is planning to do so? No, a defect does not automatically arise if the landlord fails to comply with the obligation to obtain an energy label with the appropriate rating. On the other hand, if there is an unacceptably high risk of the law being enforced, this may well constitute a defect.
Who pays for making the building more energy-efficient?
Who pays for the work depends on the state in which the building was or is to be rented. Most office buildings are leased in shell form, i.e. as just a structure, without any equipment or facilities. In the case of a ‘shell lease’, the tenant is responsible for the interior design, furnishings and fittings. Unless specific arrangements have been made, the landlord remains responsible for ensuring that the structure of the building is energy-efficient, for example by insulating the outside walls and fitting double glazing. The tenant is responsible for all other matters, such as replacing light fittings or fitting LED lamps. The situation may differ in the case of ‘triple net leases’ or ‘casco plus leases’, as they are called.
Can the landlord oblige the tenant to allow work to be carried out on the building?
It is important first of all to distinguish between urgent work and renovation. Urgent work is work that cannot be postponed without causing a problem. The problem in question may take the form of damage to the building or nuisance for the tenant. The tenant must permit urgent work to be carried out.
Renovation is defined as a change that makes the building more attractive for the tenant. Action taken to improve the building’s energy efficiency will in all likelihood make the building more attractive for the tenant. After all, a more comfortable indoor climate will reduce energy consumption, in which case the landlord will be entitled to ask the tenant to agree to a rent increase. The first step is to propose a reasonable increase to the tenant. The tenant is not entitled to reject a reasonable proposal.
Tips for lessors of office buildings
Make sure you take account of the mandatory requirement for a C energy label in any new lease contract you are planning to draft. The important thing is to prevent any future arguments with your tenant. Make clear arrangements in the lease contract about any work that needs to be performed in order for the building to qualify for a C label. Such arrangements could include:
- obliging the tenant to permit the necessary work to be carried out (including urgent work, and excluding any entitlement either to a rent reduction or to compensation);
- designating any refusal to allow necessary work to be carried out as a valid ground for terminating the lease;
- specifying who pays for what, and excluding the tenant’s right of removal;
- forbidding any disinvestments or disposals of assets that could affect the building’s energy rating;
- obliging the tenant to make certain sustainable investments that he or she can recoup during the term of the lease.
Keep your eye on the horizon: A energy label from 2030
It may still seem a long way away, but the government is very probably going to introduce a mandatory requirement as from 1 January 2030 for all office buildings to have an A energy label. In other words, the current requirement for a C label is no more than a stepping stone. Substantial investments will be required if buildings are to qualify for an A energy label – and these will not pay for themselves within a short period of time. They could include fitting solar panels, for example, and installing an indoor climate system as a means of ventilating the building. So make sure you start thinking about energy efficiency in good time – and don’t forget to check whether you’re entitled to a government grant!
Looking for more information on the energy regulations for office buildings?
Feel free to get in touch with me or one of my colleagues from our tenancy law practice.