The Impact of the French Climate Law on Real Estate Professionals
Impact of French Climate Law on Real Estate Professionals

Since its introduction on August 22, 2021, the French Climate and Resilience Law has been making waves. Promising to accelerate ecological transition in all aspects of our daily lives, it clearly aims to combat poorly insulated and energy-consuming housing. It has even established a set of sanctions that will come into effect progressively from 2022 to 2034: a gradual ban on renting energy-intensive properties, increasing or indexing their rents, legal action against landlords for non-compliance with the new decency criteria, compelling property owners to carry out necessary renovations, and granting damages and interests in favour of tenants. In short, a war has been declared on energy-inefficient homes. The focus now shifts to accelerating energy renovations with the goal of achieving carbon neutrality.

With over 300 articles, this new law impacts all real estate professionals in France. For professionals in the sector, the first direct consequence is undoubtedly the increased obligation to provide more accurate information to buyers and tenants regarding the energy performances of their property. Since January 1, 2022, this strengthened duty of information must be reflected in real estate advertisements for sales or rentals, specifying the energy performance rating and greenhouse gas emissions rating of the properties. Energy expenses must also be included in all sales agreements and lease contracts.

The objective is to standardize practices within the profession, which will have to assimilate all these changes and provide this information on a regular basis.

Struck at the core of their duty to inform and advise, professionals, whether specialized in rentals or transactions, will have to be even more vigilant. It is not enough to merely fulfil the obligations of disclosure.

To fully grasp the significance, let us recall that the initial duty to inform and advise aims to compensate for the knowledge gap between the professional, an expert in their field, and the client. Consequently, it is essential to carefully consider the information provided to clients regarding the intricacies of the properties they intend to purchase or rent. Failure to comply with this duty constitutes a real lapse and undoubtedly holds the professional liable. While case law has widely acknowledged that the presumption of knowledge cannot extend to everyone and everything, it is now stricter on the matter. Furthermore, given the current trend, it is highly likely that it will show no leniency towards professionals who are unaware of the implications of the Climate Law. It is expected of them to be capable of conveying clear and sufficient information to clients, clarifying, correcting, and updating it as necessary.

The heavier obligation of providing advice adds to the professional’s responsibility of aligning the proposed property with the client’s needs or intended use. They are also required to advise clients on the appropriateness of their decisions. This is where the challenge lies, as the duty to advise implicitly includes the obligation to discourage a bad transaction or at least to warn against any potential risks.

As we can see, professionals must exercise extreme vigilance regarding the information and guidance they provide to clients concerning the sale, acquisition, and rental of energy-consuming properties. They will now need to consider the impact of energy consumption on the property’s value due to the required renovations and the connected costs. In other words, they will need to focus on the “green value” of real estate, especially considering its potential significant impact on the final financial framework and consequently on the intended mortgage.

Therefore, how should one guide their client? Towards an average renovation cost per square meter or rather towards an estimated budget for the works? The solution may lie in the energy audit that will be mandatory as of September 2022 before the sale of properties with an energy performance rating of class F or G. Complementary to the energy performance diagnosis (DPE) that identifies energy deficiencies in a property, this audit will not only provide simple recommendations but concrete proposals for works aimed at reducing the building’s energy consumption. The proposed renovation solutions may involve the building’s structure, thermal insulation, heating, ventilation, lighting, or hot water production systems.

The estimation of costs for these works should be specified, as well as their theoretical impact in terms of energy savings. However, it is crucial to ensure the quality of the audit’s execution. The Ministry of Housing promises to work towards harmonizing the methods and content requirements. This may be the key to guaranteeing the professional’s responsibility.