How Will a Low Energy Rating Affect Your Property Purchase?
Volume XXI, Issue 3
The new DPE energy ratings are giving us a lot of concern, not because they exist, but because of the lack of understanding by potential buyers of how this affects the properties they are considering purchasing.
The DPE is an Energy Performance Diagnosis, as first decreed in May of 2022. This document serves mainly to estimate the energy consumption and greenhouse gas emission rates of a dwelling (or building). It must be included in the technical diagnosis file (DDT) and given to the future buyer or tenant of the property. Penalties can be assessed if the DPE does not comply with the regulations.
SPECIAL NOTE: The obligations of the DPE differ depending on whether the property is for rent or for sale. Since January 1, 2023, a dwelling, located in Metropolitan France, can be RENTED (more than four months) only if its energy consumption does not exceed the threshold of 449 kilowatt hours of final energy per square meter of living space per year. (If you intend to live in the property without official rental, then the rating does not affect you.)
The DPE is mainly used to evaluate the amount of energy and greenhouse gases in a dwelling (or building). The DPE must be carried out at the initiative of the owner of the dwelling who rents his dwelling (the lessor). The lessor must have this diagnosis performed by a certified professional. The lessor must include the DPE in the technical diagnosis file (DDT) and give it to the future tenant. The lessor may be held liable if they do not voluntarily provide the DPE to the future tenant. The latter can appeal to the court to ask for damages: A sum of money intended to repair the damage suffered.
The DPE must be carried out in all dwellings, except those intended to be occupied less than four months per year.
The DPE must be performed by a certified diagnostician. To find a certified diagnostician, it is possible to consult a directory. To carry out the DPE, the diagnostician must respect a specific method. The landlord who uses a non-certified diagnostician may be fined €1,500 (€3,000 in case of recidivism). Similarly, the diagnostician may be fined €1,500 if they work without certification (€3,000 in the event of a repeat offense). The diagnostician must transmit the results of the DPE to the Agency for Ecological Transition (Ademe). The diagnostician can be fined 1,500 € if they do not transmit these results to Ademe. Ademe then issues an identification number to the diagnostician which will be written on the DPE. Without this number, the DPE is not valid. The diagnostician must transmit this number to the lessor.
The price of the DPE is not regulated, so the rate may vary from one professional to another.
The DPE must contain at least the following information:
• Relevant characteristics of the dwelling (or part of it) and a description of its equipment for heating, domestic hot water production, cooling, ventilation, and in certain types of buildings, integrated lighting of the premises. Each category of equipment must indicate the conditions of use and management that affect energy consumption.
•Indication of the annual amount of energy consumed or estimated for each category of equipment according to a conventional calculation method and evaluation of this annual consumption expenditure.
• Evaluation of the amount of greenhouse gas (GHG) emissions related to the annual amount of energy consumed or estimated.
• Information on the renewable energy produced by the equipment permanently installed and used in the dwelling (or part of it).
• Classification of the dwelling (or part of it) in application of a reference scale (energy label) taking into account the climatic zone and the altitude, carried out according to the annual quantity of energy consumed or estimated in relation to the surface of the dwelling (or part of it) for heating, cooling, the production of domestic hot water, lighting and the auxiliaries of heating, cooling, domestic hot water and ventilation.
• Classification of the dwelling (or part of it) according to a reference scale (climate label) taking into account the climatic zone and altitude, based on the quantity of greenhouse gas emissions related to the surface area of the dwelling (or part of it) for heating, cooling, domestic hot water production, lighting and auxiliary heating, cooling, domestic hot water and ventilation
• Recommendations to improve the energy performance (e.g. window insulation) of the dwelling with an evaluation of their cost and effectiveness. These recommendations must not increase the amount of greenhouse gas emissions associated with the annual amount of energy consumed or estimated for the dwelling.
• Last report of the periodic inspection of the boiler or certificate of annual maintenance.
• Elements of appreciation on the capacity of the dwelling (or a part of it) to ensure thermal comfort in the summer period.
The DPE must mention that the diagnostician has the required skills to perform the diagnosis. The diagnostician is liable for any errors in the DPE, unless the error is due to the fact that the landlord has voluntarily provided false information about the property or its equipment. The tenant can make an appeal to the court to ask for damages: A sum of money intended to repair the damage suffered or even the cancellation of the lease.
The DPE is valid for 10 years. However, the DPE carried out between January 1, 2013 and December 31, 2017 were valid until December 31, 2022. Those made between January 1, 2018 and June 30, 2021 are valid until December 31, 2024.
The required information for your real estate ads differs depending on the source of the ad.
The diagnostic must be performed in the case of a sale of a dwelling, as part of the required diagnostics. This measure will come into force on April 1st, 2023. However, since January 1, 2023, a dwelling located in Metropolitan France may be RENTED only if its energy consumption does not exceed the threshold of 449 kilowatt-hours of final energy per square meter of living space per year.
These new laws are sure to change the housing market. First off, the measure concerns about 40 percent of the housing inventory, as 58 percent of the French own their own homes. These diagnostics have been mandatory since 2006, but until now, the DPE was for information purposes only. Now, they can greatly affect the value of the property.
Since July 1st, 2021, the “energy” and “climate” labels have been merged, but there are five items now that are assessed:
• Domestic hot water production
• Air conditioning
• Lighting consumption
• Consumption of auxiliary equipment (ventilation, pumps, etc.)
Of the two scores that are created, the worst one will be chosen. The point: to reduce the CO2 emissions, of which housing account for 20 percent.
The impact on the housing market is real. About seven million properties are affected, or one in five. The documents will become more complete, more legible and therefore more enforceable over time. The valid term of this document is at 10 years.
Here are some important deadlines to remember:
• January 1, 2022: the appearance of the home’s energy consumption estimated in euros in all property advertisements
• January 1, 2023: dwellings with an energy consumption of more than 450 kWhep/m²/year will be considered indecent and will no longer be available for rent
• January 1, 2025: G-rated properties will no longer be allowed to be rented
• January 1, 2028: F-rated properties will no longer be allowed to be rented
• January 1, 2034: E-rated properties will no longer be allowed to be rented
Properties with low ratings can be sold, but those that need work to bring them up to standards may see their prices drop. There is also a theory that landlords renting older properties would rather sell than upgrade, further driving prices down. This is good news for buyers willing to renovate and who will have an opportunity to bring their properties up to standard.
This new legal requirement opens up a can of worms. Should there be errors in the diagnosis, a tenant or buyer can challenge the owner. If the rating is too low, then the owner can be sanctioned to carry out the necessary renovation. And rents can’t be raised if the property has low ratings. But rentals lasting less than four months are NOT subject to the ratings requirement.
One major aspect of this that is difficult to determine is what improvements one must make in order to improve the energy ratings.
The diagnostics report will provide indications of where the energy loss is most acute. That’s a good place to start.
Doing insulation work is the first way to improve the result of a DPE, starting with the roof, which is the main source of heat loss in a house. So check the state of the insulation of the lost or habitable attic. Other areas to insulate as a priority are the walls and openings (windows, doors, etc.). Insulation is particularly important in older houses. According to Ademe (Agence de la transition écologique), and not insulated let a significant amount of heat escape. The biggest losses are through:
• The roof, between 25 and 30 percent
• The walls, between 20 and 25 percent
• Windows, between 10 and 15 percent
The fact of carrying out thermal insulation work before other types of work will allow you to better choose the sizing of heating equipment (boilers, stoves, heat pumps). In the context of insulation work, you should not neglect the proper ventilation of your home. Think about installing an efficient Ventilation Mécanique Contrôlée (VMC, or Controlled Mechanical Ventilation) to homogenize the temperature and stir the air inside. In older homes with little or no insulation, the roof, walls and windows should be prioritized for insulation. There is a wide variety of insulation on the market.
Another major point for a better energy balance is to do work on the heating system. In some cases, it may be wise to change the energy source for heating and domestic hot water production. In other cases, it is sufficient to install thermostatic valves or to insulate the heating pipes. Ask a heating engineer for advice on the various options.
There are many grants existing to help you finance your energy renovation work. Before embarking on an energy renovation project, take the time to find out about the assistance available to you. There are indeed several and you can potentially reduce the cost of your project:
• The “Coup de pouce économie d’énergie” scheme: It allows individuals to benefit, under resource conditions, from bonuses when they carry out thermal insulation or heating renovation work. The work must be done with companies that have signed a charter with the Ministry of Ecological Transition and Solidarity.
• MaPrimeRénov: It replaces the energy transition tax credit and the aid of the National Housing Agency (Anah) “Habiter mieux agilité”. To benefit from it, the housing in which the work is carried out must be your main residence.
• The “Habiter mieux sérénité” help: It aims to support low-income households in carrying out their work. For households with very modest incomes, the amount of assistance represents up to 50% of the amount of work (excluding taxes) and can reach up to 15,000€. For households with modest incomes, the aid covers only 35 percent of the amount of work (excluding taxes) with a maximum ceiling of 10,500€. A “Habiter mieux” bonus, equivalent to 10% of the total price of your work (excluding taxes), can be added to this aid.
• The zero-interest eco-loan: This is a zero-interest loan that allows you to finance your energy-saving work. It is repayable over a maximum period of 15 years.
• 5.5% VAT: You can benefit from a VAT reduction to help finance your energy renovation work.
The bottom line:
If you don’t intend to rent your home, then the energy efficiency is for you and the environment, and not just to satisfy the government.
A poor rating, however, can affect the resale value in the future unless you make the improvements. If you intend on renovating the home, then that’s the perfect opportunity to get it up to standards, so it will not have been at additional costs, or certainly not much more for which you would have planned anyway. Making the improvements will increase the value of the property!
If you don’t intend on selling any time soon, then do nothing, if you choose. Thirty years down the road, the new buyers will renovate and not care about the low ratings.
If you do intend on renting your home, for four months or more annually, then expect to do the work to get the ratings up to an acceptable level.
Should this be a deal breaker when considering a property?
My answer is, no. The reason is that just about every property you encounter will have some less-than-perfect ratings which you will want to improve. This is your opportunity to do something good for yourself and the environment…plus, increase it’s value due to its new and improved rating!
Be sure to work closely with our Property Search Consultant to fully understand the diagnostics and how they will affect your ownership of the property!
The Adrian Leeds Group®
P.S. Considering a property purchase in France? Don’t do it lightly. Let us help you make the smartest decisions to ensure you make the best investment you can. We can also expertly advise you how best to create a profitable rental. Contact us to learn more.