The impact on real estate of Portugal’s new energy certification rules – Abreu Advogados

The regulatory movement towards the rating of real estate in respect of its environmental impact and sustainability is now one of the most important issues facing Portuguese developers and property owners.

The pursuit of efficiency and improvement is, from the health point of view, one of the first steps to take in this direction. With this in mind, many policies have been implemented and are anticipated to help better protect public health by preventing or reducing exposure to pollutants with risks to human health, namely breathing dysfunctions, lung cancer, asthma and other allergies.

The EU has sought to identify public needs and to tackle these issues by focusing on indoor air quality and on the energy performance of buildings, through Directive 2002/91/EC of the European Parliament and Council of 16 December 2002. Portugal has transposed this directive through the enactment of a series of laws and regulations between 2006 and 2007, but which mainly entered into force in January 2009.

From this date, all properties must have an energy certificate – which will remain valid for 10 years – issued by the relevant qualified and certified experts, for the purposes of purchase and sale, leases and urban leases. A failure to present a valid certificate can lead to the imposition of a fine.

In the event of a purchase and sale deed, a lease or an urban lease contract being undertaken with the presentation of a valid energy certificate, a building proprietor may face a fine between €250 – €3,741 (in the case of an individual), and between €2,500-€44,892 (in the case of a legal entity).

Although the absence of the certificate does not prevent any legal act from being executed (for instance the signing of sale or lease contracts), it may however result in the above penalties – applied by the Directorate General for Energy and Geology (DGEG) and/or the Portuguese Environmental Agency further to an inspection.

Portuguese real estate market players seem however to have only now woken up to the implications of the new regulation and the requirements for energy certification. The result is that several complaints are already being handled by the competent authorities in this respect and there is now much concern over the costs associated with certification.

The determination of complaints has however prompted two different Portuguese public authorities to convey two different interpretations of the applicable regulations, notably concerning the need for an energy certificate for all property purchase and sale or lease transactions.

The recently created ADENE – Agency for Energy – defends that for any legal act to be executed before a Notary (as a change of property ownership transaction must be) an energy certificate must be shown, while the Portuguese Justice Department defends otherwise: that the absence of a valid certificate should not hinder any real estate transaction.

Questions are inevitably raised by the practical application of such interpretations and the new certification requirements. Namely, who will control the monitoring and enforcement of energy certification? Should it be the licensing entities, such as the municipalities, during the construction phases of the new buildings? Or should it be the lawyers, solicitors, chambers of commerce, notaries and/or the Real Estate Registry Offices upon the execution of any transaction?

However, in spite of these difficulties, there are no doubts about the importance of the steps taken in favour of more sustainable building construction and of property use, which are intended to bring health benefits for building occupants as well as to reduce any overall negative impact on the environment.

Costs associated with property transactions may inevitably though now increase with the requirement for energy certification; nevertheless the hope is that these costs will be balanced by lower energy consumption, which will more broadly contribute to the reduction of Portugal’s national energy dependency and of greenhouse gas emissions.