UK: Europe Signals Transformational Change: Real Estate 2050

Last Updated: 26 April 2011
Article by Paul Sheridan and Valentina Keys

There are far reaching ramifications for Real Estate contained in the EU "Roadmap for moving to a competitive low carbon economy in 2050" (the 'Roadmap')(see our lawnow). It not only endorses and expands upon existing legislative and policy changes but also highlights to other sectors (particularly ICT, energy, technology, construction, academia and others) how real estate is a vehicle for business development opportunities.

The real estate sector has been the subject of legislative and policy scrutiny for sometime in terms of its impact on energy security and greenhouse gas emissions. Legal and policy attention in this sector is well ahead of, for instance, the transport sector (see our lawnow for this sector). To this extent the Roadmap endorses and enhances these developments. What the Roadmap does is to leave no room for doubt that in terms of sectors which can make the most impact in the shortest period of time – real estate stands out.

The EU Commission's position is that through improvements in energy performance of buildings, there is a huge low-cost and short-term potential to reduce emissions in the sector by as much as 90% by 2050. Bearing in mind that this sector is near the top in terms of energy consumption and emissions, it is easy to see how it is intended to be regarded by the EU Commission as a prime vehicle for economic transformational change in the EU.

There needs however to be some care when it comes to the EU's plans. Many Member States are busy developing their own plans and policies. Whilst these generally point in the same direction, confusion and conflict could arise.

Recast Energy Performance of Buildings Directive

On 18 May 2010 the original Directive was recast and strengthened. In truth, Member States did not implement the original Directive appropriately and certainly showed a lack of ambition. One of the most important changes brought about by the Recast Directive is the introduction of the concept of "cost–optimal level". This concept (akin to life-cycle costing) is alien to current real estate financial modelling. Full details of what "cost-optimal level" entails is not yet available but it is shaping up to be have some game changing implications (Cost-optimal has been the subject of earlier LawNows and will be the subject of future articles).

'Nearly zero energy buildings'

In addition to various other requirements, the recast Directive requires all new buildings to be 'nearly zero energy' by 31 December 2020 save for new buildings occupied and owned by public authorities where the date is 2 years earlier, namely 31st December 2018. This is another concept that is not yet fully developed and needs to be watched closely

Energy Efficiency Plan 2011

In this Plan, the European Commission stressed that energy efficiency lies at the heart of EU's Europe 2020 Strategy for smart, sustainable and resource efficient economy. The Plan sets out that the greatest energy saving potential lies in buildings and focuses on specific instruments and measures which have the ability to trigger the renovation process in public and private buildings.

Public sector: to lead by example: refurbishments and procurement

The Plan looks to the public sector to lead by example. From 2012 onwards, the European Commission proposes that Member States should include energy efficiency standards in public procurement for relevant public buildings and services. A Communication on "Sustainable Construction" setting out the strategy on how to 'green' this sector and boost its competiveness at the same time is to be published at the end of 2011. The European Commission's position is that it would be appropriate for public authorities to at least double the current renovation rate of its buildings. A legal instrument to effect this is shortly to be proposed by the EU Commission under which public authorities will be required to refurbish at least 3% of their buildings (by floor area) each year. The refurbishment will be expected to bring the particular building up to the level of the best 10% of the national building stock.

Similarly, when public bodies rent or purchase existing buildings, there will be a requirement to rent or buy only in the best available energy performance class.

Landlord and Tenant

This is a difficult issue. The Plan identifies that the interests of landlords and tenants differ markedly and in real terms forms a barrier to greater take up of energy performance measures. The barrier is that neither party wishes to bear the costs if the other party receives the benefit. As part of the Plan the Commission has pledged to bring forward legislative provisions requiring Member States to introduce measures in line with national property law to address this issue.


Transition to energy-efficient technology is inextricably linked to behaviour change and consumer actions. The European Commission pledges to ensure that consumer interests are properly taken into account in technical work on labelling, energy saving information, metering and the use of information and communications technology ("ICT"). To ensure that consumers receive accurate and up to date information on their energy use the Commission will shortly revise the legislative framework for energy efficiency policy to address this.

Smart technology

In addition to setting stricter efficiency standards for central heating and air-conditioning, computers, consumer goods, pumps and building components the European Commission plans to ensure that smart grids and smart meters serve as a backbone for smart buildings and smart appliances. This is to be done by further developing smart grids and by permitting energy service companies ("ESCOs") and ICT providers to offer services to consumers to track their energy consumption at frequent intervals (in situ or remotely through via the internet/smart phones) and possibly by making it possible for energy bills to indicate consumption for individual appliances. It is also envisaged that ESCOs and ICT providers will offer consumers the convenience and energy saving potential of remotely turning appliances on and off. It is anticipated that future buildings and refurbishments will contain much smarter systems and technology.

Smart Cities and Smart Communities

In 2011 the European Commission has pledged to launch a Smart Cities and Smart Communities initiative in order to develop the European framework for excellence in innovative low-carbon and efficient energy solutions at the municipal level. This initiative is aimed at supporting large scale demonstration projects involving urban mobility and ICT. Greater deployment of 'green infrastructure' is also envisaged.


The changes proposed work at so many different levels. On paper, the EU Commission's position is profound in many respects. Some might say breathtaking in places. However bearing in mind the unambitious stance adopted by most Member States with regard to the original Energy Performance of Buildings Directive there must be a question mark over how Member States will react to these proposals. Having said this, law and policy has developed quite considerably over the intervening years and importantly what is now understood so much more clearly than was the case even a couple of years ago, is the sheer size of the opportunities presented for European economies as a whole by the upgrading of the built environment. This could be a very important influencing factor on how much of the EU Commission's Plans are implemented.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 19/04/2011.

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