Acquiring a non-residential building in the Flemish Region? Think about the energy renovation obligation!
In its “Long-term strategy for the renovation of Flemish Buildings” of 29 May 2020, the Flemish Government set the objective of realizing carbon neutrality in the existing non-residential buildings as regards heating, sanitation, cooling and lightening by 2050. To reach this objective, the Flemish Government planned to introduce an energy renovation obligation for non-residential buildings. This renovation obligation has now been further developed in the Royal Decree of 9 July 2021, which entered into force on 1 January 2022. The Flemish Region is thus taking another major step in improving the energy performance of buildings to reduce CO2 emissions.
Scope
The renovation obligation currently only applies to non-residential buildings and non-residential building units (e.g. offices, businesses, hotels, restaurants, catering, etc.) located in the Flemish Region. The actual purpose - residential or non-residential - of the building or building unit at the moment of the passing of the authentic deed determines whether or not the renovation obligation is applicable. The use or the function which is assigned to the building or building unit after the passing of the deed is irrelevant.
The applicability of the renovation obligation is triggered by the transfer of the full ownership or by the establishment of a long-term lease or building right on the buildings set out above. A circular letter dated 17 December 2021 provides further clarification of the scope of the renovation obligation. The renovation obligation is applicable when a new long-term lease or building right is established, as well as when these rights in rem are transferred to a third party. However, the extension of an existing long-term lease or building right on a non-residential building or building unit does not fall within the scope. Lastly, the circular letter also clarifies that a merger[1] or absorption[2] of a company or a legal entity does not qualify as a transfer subject to the renovation obligation.
The applicability will be determined at the moment of the passing of the authentic deed of purchase or the establishment of the long-term lease or building right. The renovation obligation only applies if the authentic deed was passed after 1 January 2022 and the notary should include the renovation obligation and the related conditions in the authentic deed. However, the renovation obligation shall not apply if a non-residential building unit is part of a building that will be demolished within five years of its acquisition.
Content
The renovation obligation is imposed on the new owner or holder of the long-term lease or building right. The renovation obligation includes two types of measures. These measures must be carried out within five years as of the date of the passing of the authentic deed in relation to the acquisition of the non-residential building or building unit.
The first measure consists of a minimum package of energy-saving measures that must be realized in relation to the insulation of the roof, glazing, heating and cooling systems of the building or building unit:
- the roof must obtain a minimum insulation value;
- single glazing must be replaced by high efficiency glazing;
- heating installations more than 15 years old must, in principle, be replaced;
- oil-fired boilers may no longer be replaced by a new oil-fired boiler in case a natural gas system is available in the street; and
- old cooling systems must be replaced.
Secondly, an energy performance certificate must be obtained for the non-residential building or building unit with a minimum energy label. The technical steps to be taken to realize a minimum energy label may be chosen freely. This second measure only applies to non-residential building units which, combined, form a single non-residential building which is transferred as a whole.[3]
This second measure makes a further distinction between small and large non-residential building units. A small non-residential unit is to be understood as “a building unit with a non-residential main destination and with a usable surface area not exceeding 500 m² and where the interconnected ensemble of non-residential building units within the building of which the building unit is a part has a usable surface area not exceeding 1000 m² and does not contain a non-residential building unit exceeding 500 m²”[4]. This last phrase is an addition to the definition of small non-residential building units that has been in force since 20 August 2021. On the other hand, a large non-residential building unit is defined as a non-residential building unit that is not “small”.[5]
An energy performance certificate with a minimum energy performance label C must be obtained as of 1 January 2022 for any small non-residential building unit fulfilling the conditions set out above. Large non-residential building units fulfilling these conditions must, in turn, achieve a minimum percentage of renewable energy of 5%. This renewable energy percentage of 5% must only be achieved by large non-residential buildings if the authentic deed transferring full ownership or establishing the long-term lease or building right is executed as from 1 January 2023.
Penalties
Small non-residential buildings or building units are already required to hold a valid energy performance certificate in case of sale or lease since 1 January 2020. With such a certificate, the new owner or holder of a long-term lease or building right will automatically be required to provide evidence that the renovation requirements have been met within 5 years of the transfer. VEKA (the Flemish Energy and Climate Agency) is able to verify compliance with the renovation obligations by means of checking the energy performance certificate and may impose an administrative fine ranging from 500 to 200,000 EUR in the event of non-compliance. It must be noted that this fine is cumulative to the compliance with the renovation obligations. VEKA may simultaneously set a new implementation period during which the renovation obligations must still be complied with. In the event of further non-compliance, an administrative fine may once again be imposed.
Currently, it is not yet possible to obtain an energy performance certificate for large non-residential buildings, as these certificates may only be issued as of 1 January 2023. Until then, an owner or holder of a long-term lease or building right must verify themselves whether the renovation obligations are complied with. As of 1 January 2023, an energy performance certificate will be required when selling or leasing a large non-residential building and may be used to verify compliance with the renovation obligations.
Future energy obligations for non-residential buildings
The Flemish Government’s “Long-term Strategy for the Renovation of Flemish Buildings” of 29 May 2020 envisages additional measures to further reduce CO2 emissions from non-residential buildings in the short term. For example, as mentioned above, an energy performance certificate will be required when selling or leasing a large non-residential building in the Flemish Region as of 1 January 2023. Subsequently, as of 1 January 2025, every large non-residential building will be required to hold an energy performance certificate, independently of any transfer or lease. Lastly, a minimum energy label will be required for all non-residential buildings as of 2030.
Other regions
In the Brussels Capital Region and the Walloon Region, no renovation obligations are in place yet for non-residential buildings in the event of a transfer. However, both regions have already published a long-term vision on making buildings carbon neutral by 2050. In this regard, the Brussels Capital Region has adopted its renovation strategy called “RENOLUTION” and the Walloon Region has published targets for the energy consumption of buildings in “La Stratégie Wallonne à long terme pour la renovation énergétique des bâtiments”.
[1] Defined in the circular letter of 17 December 2021 as follows: “a ‘merger’ is the transaction whereby two or more companies/legal entities contribute their entire assets to a new company/legal entity”.
[2] Defined in the circular letter of 17 December 2021 as follows: “an ‘absorption’ is the transaction whereby a company/legal entity contributes its entire assets to an already existing company/legal entity, as a result of which the first company/legal entity disappears and the second increases its capital”.
[3] https://energiesparen.be/bouwen-en-verbouwen/niet-residenti%C3%ABle-gebouwen/renovatieverplichting-voor-niet-residenti%C3%ABle-gebouwen/veelgestelde-vragen-over-de-renovatieverplichting.
[4] Art. 1.1.1, §2, 60°/1 Decree of the Flemish Government of 19 November 2010 containing general provisions on energy policy.
[5] Art. 1.1.1, §2, 1° Decree of the Flemish Government of 19 November 2010 containing general provisions on energy policy.