Obligations for Owners to Climate-Proof Buildings in Iceland

2.1 The Current State of Legislation

The main legal instruments concerning the structure and use of buildings are the Construction Act No. 160/2010 and the Building Regulation No. 112/2012 (secondary legislation). The focus of the Construction Act is primarily on certain fundamental principles, but the details, such as technical specifications, are set out in the Building Regulation. One of the objectives of the Construction Act is to promote the pro108tection of the environment by using sustainable development as a guiding principle when designing and building structures and ensure efficient energy consumption when using buildings, cf. Articles 1(1)(c) and 1(1)(f). There are also numerous provisions in the Building Regulation that aim for energy efficiency and avoidance of energy loss of new buildings. A non-exhaustive list is provided below:

1. Article 6.1.1: When designing and constructing buildings, owners should choose material and methods that minimize the negative impact on the environment.

2. Article 7.1.1: When designing and constructing outdoor areas, owners should always pay attention to the environmental impact and energy use.

3. Article 8: Building materials, specifically concrete (see Article 8.3), should meet certain specifications, including the Icelandic standards ÍST EN 206, ÍST EN 13670 and ÍST 76.

4. Article 13.1.1: When it comes to deciding which insulation to use, designers should ensure that energy consumption is efficient.

5. Article 13.5.1: Designers should ensure that buildings are sufficiently air permeable to avoid energy losses.

6. Article 14.1.1: When designing and making pipes and other technical equipment, special attention should be paid to energy efficiency through the building’s life cycle.

7. Article 14.2.1: Heating and cooling systems should be designed and installed with energy efficiency in mind. Its function should be satisfactory, and its capacity should conform with specifications in the Building Regulation and the Icelandic standard ÍST 66.

8. Article 14.3.1: When a building uses geothermal power, the control equipment and adjusting equipment should be designed in a way that ensures the best use of the heat.

9. Article 15.2.1: It is recommended that an owner complete a life cycle analysis when it comes to the construction of new buildings, renovations, and major maintenance. Life cycle analysis refers to the method to determine the total environmental effect of the building during its whole life cycle (i.e., from the production of material until the destruction of the building).

The requirements of the Building Regulation apply, of course, to the construction of new buildings. They are also applicable in the case of significant renovations, extensions and improvements to old buildings, requiring a building permit, cf. Article 9(1) of the Construction Act, as further discussed in section 3.4 below. As can be seen from the above, the provisions are worded in a general manner, but in some cases, details are provided by standardized technical requirements. For example, in the case of heat loss, the design must meet requirements regarding so-called U-values, cf. Articles 13.2 and 13.3 of the Building Regulation, and technical specifications also 109apply regarding air permeability to avoid energy losses, cf. the abovementioned Article 13.5.1.

Although the Building Regulation and the Construction Act provide the straightforward route to regulate the specifications of buildings, other routes may also be available. The obvious example is through zoning and planning decisions. The Planning Act No. 123/2010 and the Planning Regulation No. 90/2013 give municipalities extensive and openly worded powers to lay down requirements and obligations (collectively referred to as “terms”) that landowners and/or contractors must obey and follow when constructing buildings.^[55] In Articles 5.1.2 and 5.3.2.1 of the Planning Regulation, municipalities are given powers to lay down terms for buildings, including their height and width, colours, material, methods, “and other factors as appropriate”. Thus, municipalities have the power to lay down terms, and enforce them, that have the aim of proofing buildings with respect to sustainability. However, such terms would only apply to new buildings because zoning ordinances only cover the future development of a municipality (or certain zones within the municipality). It is also not optimal from a policy perspective to implement sustainability requirements through zoning and planning, as municipalities would have significant discretion, inviting inconsistencies between municipalities and even between neighbourhoods. To ensure consistency with respect to both new buildings and existing buildings, the legislature would, thus, most likely impose certain minimum standards on sustainability requirements in the Construction Act or Building Regulation, because it would then apply generally to all buildings in the same situation. Municipalities could then go further and prescribe stricter requirements in their zoning ordinances.

Geothermal district heating, the key to Icelandic real estate’s limited greenhouse gas emissions, is primarily governed by the Power Act No. 58/1967, according to which municipalities can obtain an exclusive right to distribute and sell hot water to the public in a particularly defined area. The Power Act provides, in Article 34, authority for expropriation of private land and buildings if necessary to build the municipal district heating systems (including land for pipes).

Finally, there are subsidy schemes and other measures to encourage more efficient energy use in buildings. The most relevant subsidy scheme is Subsidies for Central Heating Costs, as prescribed in Act No. 78/2002. According to Articles 11(1) and (5), homeowners can get grants to buy equipment that leads to more ecofriendly or more efficient energy use. The main purpose is to subsidize the purchase of heat pumps but applicants can also use other equipment if they can demonstrate that it will be more efficient or ecofriendly than the current energy use, for instance if they want to in110stall solar panels.^[56] The grant amount is 50 % of the cost of equipment, but it is capped at 1.3 million ISK (excluding VAT), cf. Article 12(1). A homeowner that buys a heat pump, or other equipment that leads to more efficient or ecofriendly energy use, can also get the pump’s VAT refunded, see Article 42(11) of the VAT Act No. 50/1988.

2.2 Potential Developments of The Building Regulation

Changing laws and regulations requires time and deliberations and may be impeded by inertia or de-prioritization on behalf of national governments. The Building Regulation is from 2012 and even though amendments have been made since, these mainly concern nuanced technical details, not major revisions, despite the growing emphasis on sustainability and climate change action in the public discourse in the last twelve years. The aforementioned Build a Greener Future project, which constitutes the most relevant reform effort in the present context, is mostly focused on reducing the carbon footprint when it comes to the construction of buildings, such as using renewable energy on the work site and using eco-friendlier building materials. However, there is one aspect of the project that focuses on energy use. In the Roadmap, there is a chapter on energy consumption with suggestions, including amendments to the Building Regulation to include more precise benchmarks and methods of calculating energy use and efficiency.^[57] In July of 2023, the Minister of Infrastructure formed a steering committee that has the purpose of (completely) revising the Building Regulation, including the provisions on energy use and efficiency. The optimistic plan is for the steering committee to submit proposals to the minister in the Autumn of 2024.^[58]

The question arises of what happens if this work is delayed, the steering committee does not suggest the necessary changes, and/or the minister does not change the Building Regulation. Indeed, there is cause for concern. To name just one example, the Roadmap estimates that changes to the Building Regulations on calculating energy efficiency could be implemented in 2028.^[59] If the necessary changes are not 111made until then, can a designer in the meantime design a building in accordance with the specifications in the Building Regulations, even though norms have changed, and some requirements might be outdated (or even harmful)? The short answer is no. The Building Regulation only covers the minimum requirements, but the obligations of designers are not limited to the bare minimum. According to Article 22(1) of the Construction Act, buildings should be designed in a “professionally satisfactory manner”, which does not only include the building conforming to laws and regulations but also to standards and “accepted practices”.

In the Building Regulation there are numerous references to standards, both Icelandic and international, that include more detailed technical specifications (see, for instance, Articles 8 and 14.2.1 mentioned above). But the designer must also consider standards that are not referenced in the Building Regulation, if they contain requirements that are necessary to include for the building to be designed in a “professionally satisfactory manner”. Moreover, the designer is under an obligation to look beyond both the Building Regulation and standards to see if there are any “accepted practices” that would require them to increase (or decrease) any technical requirements. It is beyond the scope of this paper to determine what constitutes “accepted practices”, but the point is that the Building Regulation is not an “alibi” for designers. They might be under an obligation to consider sustainability and power efficiency more closely than the Building Regulation requires. If not now, then maybe in the foreseeable future.

It should be reiterated that there is no serious discussion in Iceland about making old buildings more sustainable. The suggestions from Build a Greener Future almost exclusively concerned requirements for new buildings. Only one suggestion included energy efficiency in older buildings, which was to conduct research into whether and to what extent energy efficiency in older buildings could be enhanced so that it leads to environmental and even financial gain in the long run. However, the report expresses doubts as to whether such actions in older buildings would be environmentally advantageous.^[60] The doubts are not supported by any further arguments or citations, but one can assume that the authors believed that the potential environmental costs and carbon footprint of proofing an older building (tearing down some parts of the building, installing new equipment, purchasing building materials that must be shipped between countries, etc.) might outweigh the benefits.

2.3 112The underrated paths – permit schemes and commercial leasing

A less obvious way to introduce obligations to sustainability-proof older buildings is through the scheme of permits. Many commercial operations are subject to permit requirements in accordance with Act No. 7/1998 on Hygiene and Environmental Control, ranging from heavy industry to mundane operations, such as hair salons, massage parlors, and day cares.^[61] Some operations that require special surveillance and monitoring also must acquire an additional licence (often called business or operating licenses). Examples include fish farms^[62] and restaurants.^[63] Regulators could use these procedures to introduce obligations to make commercial operations more eco-friendly, potentially even in older buildings.

Another option would be to require that real estate fulfils certain sustainability measures before it is leased. There are already in place security and fire-safety requirements that owners must fulfil before leasing their house that apply both to professional and non-professional owners, cf. Article 14(2) of the Lease Act No. 36/1994. It might be too burdensome to require all owners to make their real estate more sustainable, because in many cases they lease the real estate for a short period. But it could make sense to require sustainability actions for commercial operators and/or where there is a long-term lease.

The proportionality of introducing obligations through these schemes will be discussed in more detail in Section 3.

2.4 Enforcement

The public body that enforces obligations under the Building Regulation is a Construction Supervisor (byggingarfulltrúi). According to Article 8 of the Construction Act, there is usually one Construction Supervisor in every municipality, but municipalities have the option of cooperating and appointing a joint Construction Supervisor. In the case of buildings of certain rare types (such as constructions on sea and those that are used for national defence), the Housing and Construction Authority is the relevant authority.^[64] The Construction Supervisor does both safety evaluations (before a building is used) and final evaluations (in the first three years after the 113building has been put to use) to ensure that all buildings fulfil the requirements in the Construction Act and Building Regulation.^[65]

Articles 55 and 56 of the Construction Act provide the Construction Supervisor (and the Housing and Construction Authority) with extensive powers to ensure that buildings are in accordance with both zoning ordinances and the Building Regulation. They can request improvements to existing buildings and shut down ongoing construction work. In the case of improvements, the Construction Supervisors can apply daily fines, which the owner must pay until the building is up to code. If the owner still does not do anything, the Construction Supervisor can make the required amendments on their own and claim costs from the owner. The Construction Supervisor can also close any operation in a building that is unsafe or harmful to human health (for instance, if a lot of asbestos was discovered).

As the most relevant sources of potential future obligations of owners of existing buildings are the Construction Act and the Building Regulation, the power to enforce this obligation would most likely lie with the Construction Supervisors and/or the Housing and Construction Authority.

As previously mentioned, municipalities have extensive powers to impose obligations concerning the specifications of new buildings through their zoning ordinances. The municipality oversees the enforcement of the relevant terms, primarily through a planning committee and a Planning Supervisor, cf. Articles 7 and 16 of the Planning Act. The terms of zoning ordinances are also enforced through the scheme of building permits issued by the relevant Construction Supervisor.^[66]

Finally, were sustainability requirements concerning buildings to be imposed through permits schemes, for example the permits issued to various businesses based on Act No. 7/1998 on Hygiene and Environmental Control, the enforcement mechanism may depend on the nature of the business and the applicable laws and regulations. As a general matter, permits under the mentioned Act are issued either by the Environmental Agency of Iceland or by the public health authority of the relevant municipality.^[67]

3.1 115Property Protection under Icelandic Law

Private property is protected in Article 72 of the Constitution,^[70] which provides that no one shall be obligated to surrender their property, except when (1) provided by law, (2) in the public interest, understood to require a legitimate aim and proportionality,^[71] and (3) accompanied by “full compensation”. This applies to instances of expropriation, but the Supreme Court has interpreted the provision to cover also certain instances where regulation amounts to an infringement of the protection afforded in the provision (similar to the doctrine of regulatory takings in the US context).^[72] In 13 decisions the Supreme Court has held that regulation, which did not involve the physical taking of property, still amounted to an infringement of Article 72(1).^[73] This includes cases where legislation retroactively interfered with a party’s property rights,^[74] or where a ban on certain commercial activities (mink farming) resulted in an economic loss for a person, because their equipment and factory became useless.^[75]

Various regulations and interferences of property rights that do not amount to expropriation are accepted in Icelandic Constitutional law as not requiring the payment of compensation. These are collectively referred to as property restrictions (eignarskerðingar) and are usually divided into two categories. First, so-called customary property restrictions, having been applied for a long time without any payment of compensation. This would include the payment of taxes, confiscation of property due to criminal activity, and private law rules that result in loss of property (and sometimes title), such as statutes of limitations and adverse possession.^[76] These will not constitute a violation of Article 72, unless the legislature manifestly violates the principle of proportionality or the regulation is obviously unreasonable.^[77]

Second, so-called general property restrictions, which are a category of various regulatory measures of general applicability that affect property rights. Identifying the dividing line between permissible general property restrictions and the type of regulatory interferences that the Supreme Court has found to violate Article 72 is 116complicated. When distinguishing between the two categories, the Supreme Court will examine the purpose behind the restrictions, their consequences, and whether they are general or impose burdens on only a few people.^[78] If the regulation affects many people, such as the requirement to acquire a building license for the building of (almost) all structures, or applies generally to a certain sector, for instance rules on health, safety and sanitary in a particular commercial sector, it will presumably always fall under the concept of general property restriction. Even if regulation only affects a small number of parties, it can still constitute a justifiable property restriction, if the public interest is very important.^[79] As noted above, retroactive restrictions on property rights have been found to violate the Constitution, even when imposed through regulation of general applicability, although the precise contours of this rule is unclear due to inconsistent wording in the relevant decisions, all of which concern measures impacting the recoverability of monetary claims.^[80]

The Constitutional analysis is thus fundamentally categorical: Either a disputed government measure places such a burden on the owner that full compensation must be awarded (or other remedy provided), or the measure is classified as a justified property restriction, meaning that no compensation or remedy is due. However, this categorical approach is supplemented by the principle of proportionality^[81] and the principle of equality and non-discrimination in Article 65 of the Constitution. Thus, even if a measure is regarded as a property restriction, and would usually be upheld without compensation, the courts will inquire, although not always following a structured approach, whether the measure (1) is lawful, (2) pursues a legitimate aim and (3) is proportionate to that aim, including whether less restrictive means were available.^[82] The focus on the proportionality of regulation affecting property rights has heightened significantly in recent years through the influence of the European Court of Human Rights (“ECtHR”) on the reasoning of the Supreme Court.^[83] However, the Supreme Court has rarely engaged directly with the fair balance (proportionality stricto sensu) of government measures and rather addressed potential, less restrictive, measures.^[84]

117In addition to Article 72 of the Icelandic Constitution, property is also protected by A1P1 as incorporated in Icelandic law through Act No. 62/1994. As Article 72, A1P1 distinguishes between types of restrictions of property (the three-rule approach), however, the ECtHR’s approach to assessing these restrictions is in all cases nearly uniform,^[85] and thus does not have the strong categorial character of the Icelandic constitutional analysis. An interference must, in all cases, (1) be lawful, (2) serve the public interest and (3) strike a fair balance between the public interest pursued and the individual right of the owner.^[86] Because of the wide margin of appreciation awarded to States, property interferences rarely fail the requirements of legality and public interest. The outcome of cases before the ECtHR usually depends on whether the State struck a fair balance, and the question of compensation is often one of the most relevant issues. When awarding compensation in the case of deprivation of property, the ECtHR has stated that in principle, it means the payment of “full compensation at the current market value”.^[87] But there are exceptions to this principle, where the Court has allowed States to pay less than full compensation,^[88] and even no compensation in one case.^[89] States have very often passed the fair balance test under the other rules without paying compensation.^[90] There is not a presumption of compensation for the other two rules; as stated in Depalle, the lack of compensation “is a factor to be taken into consideration in determining whether a fair balance has been achieved but is not of itself sufficient to constitute a violation” of A1P1.^[91]

Despite the doctrinal differences, it is generally assumed that the protection granted by Article 72 is substantively very similar to A1P1, with the exception that Article 72 mandates the payment of “full compensation” in the case of property takings.^[92] Article 72 may be seen as more protective of property in this respect. The 118Supreme Court has increasingly referred to A1P1 when interpreting Article 72 and to the case law of the ECtHR.^[93] It should also be noted that the requirement of lawfulness, in the context of Icelandic law, entails that the restriction of property must be clearly set out in the statutory law; it is not sufficient, for example, that these are set out in secondary legislation.^[94] Both Article 72^[95] and A1P1 protect a broad concept of property or possessions, encompassing, in certain contexts, a legitimate expectation that a possession will be realized.^[96]

Constitutional review of legislation is an active and accepted practice.^[97] A longstanding emphasis has been placed on the requirement of lawfulness, i.e., whether a government measure restricting rights has a sufficient basis in statutory law.^[98] The courts tend to apply a lighter touch to the other requirements for restrictions of property rights. The courts will generally accept the legislature’s view of what constitutes public interest, but will review proportionality, including whether less restrictive means have been sought, while granting the legislature a certain margin of discretion.^[99] This discretion is wide with respect to important public interest such as the administration of the economy and situations where urgent action is required,^[100] including protection of the environment and management of resources,^[101] but narrower where the aim of the measure is of less general importance.^[102] In a 2022 decision the Supreme Court indicated that the quality of the legislative process, namely whether the legislature had diligently considered the impact of a legislative bill on constitutional rights, may impact the width of the margin of discretion.^[103] In cases of expropriation, the courts will scrutinize whether full compensation has been paid.^[104]

In cases involving administrative decisions, the principles of administrative law and the Administrative Procedures Act No. 37/1993 are also relevant. These in119clude substantive principles, such as proportionality and non-discrimination,^[105] and procedural principles, such as a duty to investigate.^[106] The substantive principles can be assumed to be largely identical to the constitutional analysis. Where an administrative body has made a decision that involves discretion, including whether expropriation is necessary, the courts will generally grant the administrative body some leeway when reviewing the decision.^[107]

In the following sub-sections we explore how positive obligations that may potentially be placed on owners to ensure real estate’s sustainability would be assessed under the constitutional protection of property. Necessarily, due to the lack of actual obligations in current law, this exploration is somewhat hypothetical and speculative.

3.2 Lawfulness of Obligations to Climate-Proof Buildings

Positive obligations placed on owners to ensure sustainability of buildings must have a sufficient basis in statutory law. While the technical specifications of new buildings are set out in secondary law (the Building Regulation), the Construction Act contains a detailed provision in Article 60 granting authority to the relevant Minister to enact secondary law on various matters, including construction materials, insulation, air quality, and interior pipes, and the authority to refer, in such secondary law, to technical standards.

The lawfulness of positive obligations placed on owners in secondary law would be assessed by reference to the intensity of the burden placed on owners and the amount of discretion exercised by the executive. Primary law should set out principles and outer limits governing the enactment of secondary law that impacts property rights.^[108]

As a general matter, it appears unlikely that sustainability requirements in the Building Regulation would fail the test of lawfulness. However, such risks may materialize if secondary law is expanded significantly to impose new positive obligations on owners or if building sustainability requirements are added to other unrelated regulations, without due regard to the statutory basis for such regulations.

3.3 120The Categorical Approach and Positive Obligations of Owners

There is no case law in Iceland where an owner has disputed a positive obligation placed on them by a government measure. On the contrary, all the relevant cases are framed as challenges to restrictions on the owner’s activities. There are, of course, numerous obligations on owners in Icelandic law, such as the obligations of owners of certain types of businesses (e.g., restaurants or industrial sites) to install equipment and employ certain methods to ensure safety and sanitary environment or prevent pollution. Such obligations do not appear to have been challenged as unconstitutional positive obligations placed on owners. It is therefore somewhat unclear how the Icelandic Courts would treat such positive obligations with respect to Article 72, in particular under the categorical approach described above.

Under the ECHR, positive obligations on landowners have been held to constitute a legitimate regulation of land use.^[109] The Icelandic Courts are likely to follow a similar approach, i.e., to treat an owner’s positive obligation as a restriction of property rights and assess, using its established methodology, whether the restriction is constitutionally allowed. Thus, while the issue has not been directly tested, it is very unlikely that placing positive obligations on owners to ensure sustainability of real estate would be held unconstitutional per se. Rather, such obligations would be assessed based on the same criteria as other regulations affecting property rights.

The following is an illustrative example in this respect: Under current laws, a landowner bears an obligation to pay for the cost of changes to the interior pipes that are necessary to connect their house to a district heating system, cf. Article 36 of the Power Act.^[110] Were the constitutionality of this obligation to be tested before the Supreme Court, the outcome would of course always depend on the circumstances of each case, but one may hypothesize about the potential arguments. The Court would first, in all likelihood, find that this does not amount to expropriation and that it is therefore appropriate to assess whether the obligation qualifies as a general restriction of property rights, constitutionally permissible without compensation. The framing of the legal obligation is clearly of a general character, as it involves the Minister deciding that all buildings within the reach of a district heating system must be connected to that system. The consequence for the owners is to bear financial costs, at least in the short term, but the long-term benefits for the value of the building and savings from a more affordable heating method may potentially outweigh those costs. Presumably, the consequences are similar for all af121fected owners, but the details of each case may be of importance. The rationale for the obligation is the dual public interest of ensuring the viability of district heating systems and the energy efficiency of buildings. Thus, the criteria of the categorical approach of constitutional property protection appear, on the level of principle, to support the conclusion that the obligation qualifies as a permissible general property restriction, although the conclusion in each case would depend on the proportionality analysis.

The analysis of such a hypothetical case, i.e., where obligations are imposed without compensating owners in any way, would involve various arguments. The arguments against requiring compensation would include: first, the protection of the environment is an important public interest, especially when coupled with the community interest of ensuring the viability of district heating systems. Second, the burden is placed on all owners in a similar situation, as opposed to excessive individualized burdens. Third, it is unclear whether the owner would lose money as the district heating system would probably be more affordable than alternative heating options. Additionally, the policy is likely to be accompanied by subsidies. In this respect the Act on Subsidies for Central Heating Costs No. 78/2002 provides in Article 14 that subsidies to establish new geothermal district heating systems shall be used in part to extend subsidies to the owners of residential buildings where the cost of connecting the building to the system is substantial. If so, the requirement of considering and applying less restrictive alternatives can be argued to have been met. The owners would make, inter alia, the following arguments in response: the general rule is that you should build your house in accordance with the public requirements at the time of construction. If you do that, you should generally be free from any government involvement. Even though environmental and climate change action is important, there is less urgency to climate proof buildings in Iceland compared to other States, due to the use of renewable energy. In this light, the owners would argue that the burden placed on them is excessive.

The example demonstrates that the overall characteristics of positive obligations of owners to ensure sustainability appear to fit the category of permissible general restrictions of property rights under Article 72. However, their constitutionality will depend on proportionality in each specific case.

3.4 Proportionality of Obligations to Climate-Proof Buildings

The example discussed in the preceding section highlights how proportionality is likely to be the focus of the constitutional analysis of potential positive obligations concerning building sustainability. It seems clear that such obligations would pur122sue a legitimate aim, i.e., energy efficiency or action to address climate change and in any event the courts are unlikely to review the legitimacy of the aim pursued by the legislature. However, a relevant factor in the proportionality analysis, to an extent setting Iceland apart from the other countries discussed in this special issue, is the use of renewable energy. The benefits of climate-proofing buildings in Iceland simply do not appear to be equivalent to the potential benefits in other countries, at least as science currently tells us. The weight of the public interest behind such measures may therefore be less and this may affect the assessment of which burdens can be placed on individual owners.

Another relevant factor is who should bear the costs of the positive obligation. Will the owner bear the full costs or enjoy subsidies, at least partial? If no subsidies are available, it could be important to analyse whether the positive obligation is cost-effective for the owner in the long run. It is unclear whether this is the case in Iceland, as previously mentioned, which already has affordable energy prices and renewable energy. Cost-effectiveness and the availability of subsidies are though not always controlling factors in the proportionality analysis. Indeed, many positive obligations are imposed on owners without any means of relief.

The proportionality analysis may look somewhat different in the case of companies or commercial buildings, as owners of such facilities are used to incur costs due to legal obligations imposed on their activities and able to recoup such costs, at least to some extent. The analysis may also look significantly different depending on whether these obligations are imposed on owners of new or old buildings, which is the subject of the following section.

3.5 Temporal Distinctions: Of Buildings Old and New

As the property protection analysis includes considerations of retroactivity, legitimate expectations and an assessment of the burdens placed on individual owners, it is helpful to distinguish between (1) new buildings, (2) old buildings, and (3) temporal outlier cases. The case of a new building, constructed in accordance with a building permit based on a (hypothetical) Building Regulation which includes sustainability standards raises no difficult questions for constitutional property protection. Buildings must fulfil all requirements of law at the time of construction and the regulators will always enjoy great discretion to adopt new technical requirements if the purpose is to increase security, energy efficiency or otherwise promote public interests. Owners would only have a chance of success in challenging such regulations if they could show that the requirements were, for instance, clearly disproportionate, harmful or contrary to best practices.

123Stricter requirements for old buildings are more suspect from the Constitution’s point of view. One such requirement was explored in sub-section 3.3 above, i.e., the obligation to connect a house to a district heating system. Introducing new and increased obligations has a sense of retroactivity for the owner. As has been noted, retroactive restrictions of property rights have been found unconstitutional, although the relevant cases arose in a very different context and, for the most part, include case-specific elements.^[111] Therefore, it is unclear whether the imposition of obligations to make existing buildings more sustainable would be viewed as a retroactive interference in the manner that was found to violate the Constitution in these cases. Looking past that issue, an owner that bought a building in a certain condition and for a particular price would in any case argue that they could reasonably rely on things to stay relatively stable. Such expectations can sometimes enjoy property protection as a legitimate expectation, but the extent of the protection depends to a large extent on how strongly the expectation is rooted in existing law. Also, this line of argument would only ever require a certain level of stability, not stagnation. An important element in that respect is whether sustainability-proofing older buildings is such an important public interest that it outweighs the private costs that owners may incur. Once again, the details and context would be highly relevant for the constitutional analysis. And as noted in Section 2, there are no plans currently in motion to impose significant climate-proofing requirements on owners of old buildings.

The last category, temporal outlier cases, involves instances somewhere between purely new and purely old buildings. Imagine an owner that has received a building permit but has not initiated construction. Or another owner that received a building permit five years ago, has only finished around 10 % of the project and has not built anything for three years. Will the two owners have to abide by new requirements, if introduced in the interim? If the requirements are not intended to apply retroactively, it is likely that the regulation would include an entry-into-force provision, addressing these issues, for instance by introducing a transitional period or grandfathering clauses. A similar complication arises when an owner wants to make changes to their building, for instance by building an extension or renovating, improving, or maintaining the old building. Regular maintenance generally does not require a building permit,^[112] but a permit is required for renovations, extensions and improvements, cf. Article 9(1) of the Construction Act. Unless specifically addressed in the regulation, the new requirements would apply to all construction projects that require a permit, including renovations, extensions, and improve124ments. Indeed, according to Article 11(1) of the Construction Act, a building permit cannot be issued unless the design of the construction conforms to laws and regulations, including the Building Regulation. Such cases can raise similar concerns as regulations of old buildings, although the owner here would often have a choice not to embark on the relevant project, if she is unwilling to meet the new requirements.

3.6 Constitutional Analysis of Alternative Routes of Regulation

As discussed in Section 2 above, in addition to the Construction Act and Building Regulation, one can imagine sustainability standards being imposed by other routes, including through planning and zoning, various permit systems and through lease law. As regards planning and zoning decisions by municipalities, Article 51 of the Planning Act No. 123/2010, as amended in 2014, provides that an owner of real estate can claim compensation if the value of the property is reduced significantly, as compared to the value of similar properties in the vicinity.^[113] The clause was intended to match the rules of the Planning Act to the constitutional analysis of when general restrictions of property rights are permissible without compensation, as planning is traditionally seen as one such general restriction.^[114] Therefore, the use of planning law to impose the relevant regulations, instead of the Building Regulation, should not in itself significantly alter the analysis.

As regards the possibility of attaching new sustainability standards to work permits or operating permits, for example under Act No. 7/1998 on Hygiene and Environmental Control, it should be noted that Icelandic constitutional law would frequently classify occupational rights under an existing permit as a property right protected by Article 72.^[115] However, an expectation to receive a specific permit, without fulfilling all legal requirements, would generally not constitute a property right, and while a right to pursue an occupation of one’s choosing is protected in Art. 75(1) of the Constitution, that right may be subject to limitations, if based on law and in the public interest. In case law the legislature has been granted a wide margin of discretion to regulate various industries, including through permits.^[116]

125In general, owners of businesses must ensure that their operations conform with the applicable laws when the permits are issued, and they cannot reasonably rely on things to stay the same. Similar considerations regarding temporality as discussed in sub-section 3.5 above, would therefore arise. However, these types of owners may have stronger arguments than owners of unbuilt buildings that are frustrated with new requirements in the Building Regulation, due to the more targeted nature of the permit scheme, and their less direct connection to the qualities of buildings. Frustrated owners may argue that the permit scheme is being used as a “backdoor” to achieve aims that should be achieved through the Building Regulation. There might also be a weaker connection of proportionality between the legitimate aim sought (sustainability-proofing buildings) and the measures taken. Arguments relating to non-discrimination may also be raised when sustainability requirements are imposed only on certain activities.

Nonetheless, the government may be able to sustain the use of permit schemes to introduce positive obligations to sustainability-proof buildings. The government could argue that it would be too burdensome to impose positive obligations on all owners through the Building Regulation and placing targeted burdens on commercial activities may in fact be reasonable, as the businesses will be able to recoup the costs. The temporal considerations and concerns of retroactivity may also be less important because operating permits are reviewed and renewed on a regular basis. However, due to the requirements of a legitimate aim and proportionality, there must be at least some nexus between the purpose behind the obligation and the relevant operations. For instance, it would be more reasonable to put stricter requirements for energy efficiency on the operators of swimming pools and power plants (because they use a lot of energy) than, for instance, on operators of daycares and hair salons.

A very similar analysis would apply if obligations were introduced through lease laws. If the obligations would only apply to new leases, it would not be retroactive or frustrate legitimate expectations, but they might fail the proportionality analysis in certain cases, such as if the obligation would apply to all owners, including those that want to lease their own home for a short period while they are not using it. It is less likely to raise constitutional concerns if the obligations apply to commercial actors.