Obligations for Owners to Climate-Proof Buildings in Spain

2.1 General Overview

The territorial organization of Spain affects the legal framework of positive obligations to climate-proof buildings. In terms of competences, Spain is a multi-level legal system, so the 17 Autonomous Communities may assume their own legislative competences on certain issues, such as housing and planning (Art. 148.1.3 Spanish Constitution of 1978, CE; see below).^[113]

Nevertheless, the General State Administration is also legally competent in matters of basic legislation related to public administration and to land law^[114] (Constitu131tional Court decisions 61/1997,^[115] and 141/2014).^[116] It may also legislate on civil law, although certain Autonomous Communities are entitled to preserve, modify and develop their own civil law.^[117] Furthermore, Art. 45 CE provides for the protection of the environment, constituting a general principle that shall inspire the policies and running of the whole public administration.

The fragmentation of the legal framework of positive obligations is also caused by the fact that certain energy-efficient appliances have their own specific regulation, such as oil-boilers.^[118]

2.2 The Specific Status of Urban Property

Article 33.1 CE stipulates that “The right to private property and inheritance is recognized.” In this regard, the Constitutional Court decision 37/1987^[119] held that this provision regulates the right of private property as a set of duties and obligations established, in accordance with the laws, in response to the values and interests of the community, that is, to the social purpose of private property, enshrined in Art. 33.2 CE.^[120] This decision also held that different types of property with different legal regimes are included within Art. 33.1 CE (so it does not reproduce, and it is not equal to, the liberal conception of property enshrined in Art. 348 of the Spanish Civil Code).^[121] Accordingly, the Constitutional Court decision 164/2001^[122] entitles the State to 132regulate the “basic conditions” that guarantee the “equality” of all landowners in the exercise of their right of urban property, so that the content and enjoyment of urban property may be defined by each municipality according to its competences.

This is reflected in the Spanish Land Act,^[123] which regulates the specific features of urban property. In this vein, Art. 15.1(b) Land Act establishes that the right of ownership of land (derecho de propiedad del suelo) includes the duty to maintain the property in the legal conditions that ensure safety, health, universal accessibility, a suitable state of repair and other conditions required by law. The legal duty to conserve urban property is based on the social function of the property^[124] (Art. 33.2 CE) and the specific status of land.^[125] Therefore, health and safety measures are deemed to be social values enshrined in the legal duty to conserve urban property. The right to property also entails the duty to carry out additional works ordered by the relevant Administration for the improvement of the quality and sustainability of the urban environment (Art. 15.1(c) Land Act).

The first question is whether energy efficiency works may be included within the scope of the legal duty of conservation provided for in Art. 15.1(b) and (c) Land Act. Scholars argue that a duty to undertake these works is not enforceable under these provisions as the terms “safety, health, universal accessibility” (b) and “quality and sustainability of the urban environment” (c) are too vague for such purposes.^[126] Accordingly, the power granted by law to the administration to guarantee the duty of conservation, in general terms, may not go beyond the standard health and safety requirements.^[127]

The second question is whether the Spanish lawmaker may introduce the legal duty to meet energy efficiency standards in the built environment as another social value within the Land Act. In our view, such a measure would contribute to the common good, but any limitation of the right of private property must respect its essential content (Art. 53.1 CE).^[128] According to the latest cases from the Spanish Con133stitutional Court dealing with the expropriation and taxation of empty dwellings by Autonomous Communities,^[129] it may be concluded that the Constitutional Court has not adopted the absolute conception regarding the essential content of the right of private property, according to which any fundamental right has a ‘core’ or ‘nucleus’ outside the legislator’s scope, but the relative one, which argues that a fundamental right may be limited through the proportionality principle. Proportionality includes the analysis of the suitability or adequacy of the measure, its necessity and that of proportionality in the strict sense.^[130] This means, inter alia, that the essential content of the right of private property will be respected insofar as a sufficient individual or economic utility for the owner of the right is guaranteed once the proportionality principle is applied. In order for this principle to be respected, owners would only be obliged to pay up to half of the value of the construction of a new building equivalent to the original one (Art. 15.3 Land Act);^[131] otherwise, it would be a limitation of the right of private property that should be compensated. Only in extremes cases, i.e., lack of any economic utility for the owner, would this lead to the necessary expropriation by the Administration (Art. 33.3 CE).

2.3 Basic Requirements of Buildings

Regarding the basic requirements for the habitability of buildings, the legal framework of reference used for the development of land is the Spanish Building Act 38/1999,^[132] which establishes that buildings must be projected, constructed, maintained 134and conserved in such a way that satisfies a number of basic requirements. Within the scope of the habitability requirements, Act 38/1999 also takes into consideration energy savings and the thermal insulation necessary to ensure a rational use of energy needed for the building to be inhabited properly (Art. 3.1(c)). This provision is further developed by:

1. the Technical Building Code (CTE), the regulatory framework that establishes the basic quality requirements for buildings and services, such as the Basic Document on Energy Saving (DB-HE).^[133] The CTE was modified in 2019^[134] to introduce the duty to review minimum energy performance requirements at regular intervals established in Art. 4 EPBD. Following what is established in Art. 4.2 EPBD, Spain has exempted industrial, defence and agricultural buildings from meeting minimum energy efficiency standards. Additionally, the CTE does not apply to technically simple or minor constructions, which are not of residential or public nature, and are built on a single floor (Art. 2.2 CTE). According to Royal Decree 173/2010,^[135] all existing residential buildings should comply with the basic universal accessibility standards provided in the CTE without prejudice to other regional and local regulations. Nevertheless, the other standards stipulated in the CTE, including minimum energy efficiency standards, are only binding for 135new and existing buildings that are subject to improvement works (Art. 2.3 CTE).^[136]

2. Regulation of Thermal Facilities in Buildings (RITE).^[137] The RITE is the basic normative instrument regulating the energy efficiency and safety requirements that thermal installations in buildings must meet, i.e., fixed installations for air conditioning (heating, cooling and ventilation) and for the production of domestic hot water required to meet the demand that provides for people’s well-being and hygiene (Art. 2.1).^[138] RITE applies when the building must provide people with an adequate level of thermal comfort and hygiene, so the thermal installations used in industrial, agricultural or other processes, are not within its scope (Art. 2.6).

3. There are other rules worth highlighting, such as the Royal Decree 390/2021,^[139] which requires the energy efficiency certificate to be delivered to the buyer or the new tenant; the Royal Decree 736/2020,^[140] which transposes into Spanish Law Directive 2018/2002, amending Directive 2012/27/EU on energy efficiency;^[141] and the Spanish Housing Act,^[142] which makes energy efficiency one of the goals of public policies (Art. 2.1(g)) and a priority as far as public aid is concerned (Art. 33.1(e)).

2.4 136Distribution of powers among Autonomous Communities and Municipalities

As stated above, the Spanish Autonomous Communities may take on responsibility for town/country planning and housing, so that the State has no direct enforcement powers in this field, but only the legal competence to regulate the basic requirements as pointed out above. Therefore, these Autonomous Communities and municipalities may implement stringent requirements. Furthermore, the municipalities have exclusive legal competence regarding legislation on preservation and renovation of buildings,^[143] with the aim of preventing risks for people and property or eliminating hygiene-related hazards in compliance with state or regional law (Art. 25 of the Local Government Regulatory Act 7/1985).^[144]

To this end, municipalities can issue local ordinances (ordenanzas) on the basis of their legal competence on environmental protection (Art. 25.2(b) Act 7/1985) and urban planning (Art. 25.2(a) Act 7/1985), always in compliance with the rules enacted by the State or the Autonomous Communities.^[145] Enforcement of the CTE is thereby a regional and a local issue. Article 59 of the Land Act stipulates that municipalities will oversee the enforcement of the duties imposed on owners and developers, which may include works to improve the sustainability of the urban environment (Art. 15.1(c) Land Act). In fact, some Autonomous Communities have regulated the possibility of municipalities imposing maintenance works on owners, such as Art. 197 Act on Urban Planning of Catalonia,^[146] Art. 170 Land Act of Madrid,^[147] or Art. 106 Land Act of Castilla y León.^[148] The enforcement of the CTE by municipalities, in particular regarding sustainability standards, is carried out by means of issuing 137an order for the execution of works or through the subsidiary arrangement of the execution of works (Art. 15.4 RDL Land Act).

2.5 Subsidies

The State Housing Plan in force for the period 2022–2025 (Royal Decree 42/2022)^[149] provides for grants intended to foster social housing that requires the achievement of minimum levels of energy efficiency. For instance, the programme for the promotion of housing for the elderly and people with disabilities requires new or renovated buildings to have an energy efficiency class of A (Art. 72 RD 42/2022). The same requirement applies to the programme that aims to foster temporary accommodation, cohousing models and intergenerational housing (Art. 82 RD 42/2022). Also, the programme for the elimination of degraded areas, shantytowns and substandard housing may finance energy efficiency works, provided that they achieve an energy efficiency of class A. As pointed out above, the Spanish Housing Act 12/2023 sets energy efficiency as one of the priorities for the designation of public aid, so it is expected that future State housing plans will continue to increase the aid offered in this area.

The other main source of subsidies to climate-proof buildings is the Recovery, Transformation and Resilience Plan mentioned above, following Regulation (EU) 2021/241.^[150] The so-called Next Generation Funds provide for six funding programs that aim to renovate the existing building stock. By means of example, the plan regulates a funding programme focused on the improvement of the energy efficiency of housing (Programme 4), which gives owners, usufructuaries or tenants the equivalent of 40 % of the renovations’ costs, with a maximum amount of EUR 3,000 (Art. 44 RD 853/2021).

However, the distribution of aid, the lack of transparency and information, the complexity of processing applications and the fact that owners must advance the money are all barriers to the success of this programme.^[151] In addition, as the responsibility for regional planning and housing has been assumed by the Spanish Autonomous Communities on the basis of Art. 148.3 CE, they have their own housing plans and policies that might not include all measures funded at national level.^[152]

3.1 The General Rule: the Inability of Municipalities to Order Renovation Works

One of the key issues in the debate on positive obligations is whether, under Spanish law, a public body may impose the performance of energy efficiency works in existing buildings without providing appropriate compensation. In this regard, the following must be taken into consideration:

1. Article 84.2 Act 7/1985 establishes that any intervention undertaken by a municipality shall, in any event, be adjusted to the principles of equal treatment, consistent with the reasons and purposes that justify the action and be performed with respect for individual freedom.

2. According to the Supreme Court,^[153] the owner can only be compelled to carry out those works necessary for the end pursued.

3. The public body competent to order renovation works is the local authority, provided that (1) the execution order contains the economic quantification of what was ordered and a predictable budget, and (2) the public body complies with local regulations and (3) observes the principle of administrative proportionality with the prior hearing of the interested person.^[154] The proportionality principle involves that the public body shall assess and balance the rights of citizens and the need for better energy efficiency conditions when imposing these orders.

As explained above, neither the Spanish Land Act nor the CTE allows public bodies to order works for the improvement of the urban environment that include renovations for the improvement of energy efficiency. The determination of the duty to incorporate technical innovations into the building may also depend on the sectorial legislation,^[155] which may impose specific duties on homeowners that deviate from the general doctrine explained. This is the case when it comes to old boilers: owners of any building should check if it complies with the current requirements established in the RITE concerning oil-fired boilers; if it does not, they should replace the existing boiler.

139Accordingly, an order for the execution of works requiring the owner^[156] to bear the costs without a previously established legal obligation would generally not comply with the proportionality principle (i.e., these restrictions or sanctions by public authorities do not meet the criteria of necessity and suitability to the end pursued),^[157] as there is currently no obligation to adapt these buildings to comply with existing laws. Such an order would breach Art. 25 and 26 CE, so the validity of this administrative act could be challenged based on Art. 47.2 Act 39/2015,^[158] according to which the acts of public administrations that violate the Constitution, laws or other administrative provisions of a higher rank (in this case, Art. 33 CE and Art. 15 Land Act), are null and void. Once the administrative procedure has been terminated, following the filing of an appeal before the administrative authority (Art. 121 Act 39/2015), the claimant could bring an action before the Administrative Court (Art. 45 of Act 29/1998).^[159]

It would be necessary to amend current legislation (whether primary or secondary), in order to impose a new requirement on the owners of existing buildings, compelling them to comply with minimum energy efficiency standards (for example, through an amendment of the CTE) in order to consider it legally admissible for the public administration to enforce these works. If the Proposal for a Directive on the energy performance of buildings (Proposal EPBD Recast) ever entered into force, Spain would probably require the introduction of positive obligations applicable to the existing building stock. According to Art. 9 of the Proposal, minimum energy performance standards would have to be set.^[160] Furthermore, Art. 9 would also require that these obligations be supported by other measures, such as financial mechanisms, one-stop-shops or removing split incentives.

Nevertheless, there are two exceptions to the general rule that positive obligations to retrofit are impermissible: when renovation works are undertaken and when the works are included in urban planning.

3.2 140First Exception: the Performance of Improvement Works

The first exception to the general rule is when improvement works are undertaken. In this case, the current energy efficiency requirements of the CTE must be met, provided that these requirements are compatible with the nature of the renovation, for example when the owner performs renovations affecting the thermal generation systems and more than 25 % of the total surface area of the final thermal envelope of the building (Basic Document HE, Energy Savings and Art. 2.3 CTE). Under such circumstances, the municipality will be able to oblige the owner to comply with current energy efficiency standards in accordance with Art. 15 CTE. This requirement follows the mandate of Art. 7 EPBD. Another example is when owners renovate the thermal installations of their houses. In this case, current RITE requirements are applicable and owners must adapt the new boiler if they: a) install or modify air conditioning or domestic hot water production subsystems; b) replace or increase the amount of heat generating or cooling equipment; c) change the type of energy used or incorporate renewable energy sources; or d) change the intended use of the building. The agents responsible for ensuring that existing installations are correctly adapted to meet RITE standards are the professionals involved in the design, execution, maintenance, and inspection of these installations, as well as the entities and institutions involved in the approval and supervision of the projects or who draw up technical reports, in addition to the owners and users of the installations.

In theses cases, owners could be ordered to implement the energy efficiency measures, provided that the principle of proportionality is observed. Also, owners would only be obliged to pay up to half of the value of the construction of a new building equivalent to the original one (Art. 15.3 Land Act).

As a result, old buildings have an obligation to adapt to existing requirements in terms of energy efficiency if major renovations are undertaken. However, it must be taken into account that owners may choose the most appropriate way to comply with the requirements set out in the CTE. Taking as an example district heating systems,^[161] these are not required by the CTE, so that owners are not obliged to con141nect to them and do not need to implement a specific measure, provided that the equipment they decide to install is efficient, according to Art. 15 CTE. Another example is solar panels.^[162] For each climate zone and for different levels of demand for domestic hot water (at a reference temperature of 60 °C), the CTE establishes a minimum annual solar contribution depending on whether the support energy source is diesel, propane, natural gas, or others. The CTE does not specify the term ‘renewable energy sources’, so that the owner could install renewable sources other than solar panels (for instance, micro wind power plants or biomass boilers). As a result, although the Land Act allows public bodies to order works for the improvement of the quality and sustainability of the urban environment, the order for the execution of works would probably not fulfil the principle of proportionality, as the owner is not obliged to install a specific source for renewable energy.

3.3 Second Exception: Imposing Renovation Works at Local Level through Urban Planning

Compulsory energy efficiency requirements may be introduced in new urban developments on the basis of the special status of the urban property. As a matter of fact, the establishment of a specific purpose for land or the imposition of other types of administrative limits or limitations (urban planning standards) does not, in princi142ple, generate a right to compensation for individuals (Art. 4.1 Land Act).^[163] Additional requirements may be introduced through special urban plans, which must be issued in compliance with the general urban development plan of each municipality, a basic instrument used for the comprehensive planning of the territory of one or more municipalities. As a result, the current and any future owner of a property would be bound to carry out energy efficiency works. The proprietary or “in rem” nature of such obligations is provided by the publication of the urban plan according to the Land Act. As pointed out above, Art. 15.1 establishes that the right of ownership of land comprises several duties, and Art. 27.1 establishes that the transfer of land does not modify the obligations of the owner with respect to the fulfilment of duties established by the legislation related to territorial and urban planning, which in turn are applicable or enforceable through the issuing of orders for the execution of works. As the urban planning commitments derive from the law, not from publication in the Land Registry,^[164] the transfer of the land to a third party in good faith (Art. 34 Spanish Mortgage law, LH)^[165] does not affect the duties or limits imposed by authorities.^[166]

4.1 Introduction

Retrofitting condominiums and rented dwellings constitutes a more complex process due to the conflicting interests of several actors, including co-owners, neighbours, tenants, and their family members. The EU is aware that there are multiple barriers to overcome when retrofitting multi-unit buildings or rented dwellings, as 143shown by EU Parliament resolution of 17 September 2020.^[167] This resolution recognizes that split incentives, regulatory and administrative barriers in rented dwellings and buildings with multiple owners act as significant limits to investments (recital 17). The EU Green Deal 2019^[168] also refers to this issue when confirming that ‘the Commission will also work to lift national regulatory barriers that inhibit energy efficiency investments in rented and multi-ownership buildings’.

In 2012, the Energy Efficiency Directive referred to ‘split incentives’ in Art. 19. Nevertheless, this phenomenon was not legally defined until the Recast Energy Efficiency Directive 2023 (Art. 2(54)) as a lack of distribution of fairly and reasonable rewards among the involved parties (that is, landlords and tenants, and owners of apartments or building units) that ballast energy efficiency investments. Indeed, there are non-regulatory and legal barriers to retrofitting the existing building stock, when dwellings are rented or in a multi-unit building:

1. Non-regulatory barriers are mainly information asymmetries that would make homeowners and tenants unaware of the energy efficiency level of their homes and the benefits of having more efficient homes.^[169]

2. Regulatory and legal barriers are specific pieces of legislation that contribute to the energy efficiency market failure. In particular, the stability of tenancy relationships, rent regulation, distribution of costs, the obligation of the tenant to tolerate energy refurbishment works and the possibility of increasing the rent after retrofitting a rented home, are key issues when promoting energy efficiency works.^[170] Also, owners and occupants of multi-family dwellings were underrepresented in energy conservation programs.^[171] Owners in multi-unit buildings must decide on the convenience of undertaking energy efficiency works in 144common areas, which will be paid by all of them jointly. Depending on the decision-making process or the quorum required by legislation to execute the works, they may encounter barriers to improve the energy efficiency of the whole building.^[172]

The Spanish lawmakers have approached these issues as follows.

4.2 Condominiums

Condominiums are relevant in Spain. As already pointed out above, it has the highest proportions of citizens living in flats in the European Union, with the vast majority of these flats being organized as condominiums. In regard to energy efficiency, since the entry into force of Royal Decree Law 19/2021^[173] and Law 10/2022,^[174] which amend the Spanish LPH, the quorum required to implement energy efficiency measures has been changed. In particular, the works or actions that contribute to the improvement of energy efficiency (leading to an upgrade in the building’s energy efficiency class through, for example, low-power boilers and thermal insulation in roofing or false ceilings), the implementation of renewable energy sources for common use (for instance, solar, geothermal and aerothermal), as well as the request for subsidies, loans or any type of funding to public or private entities to carry out such works or actions, will require a simple majority vote, that is, 50 % plus one vote, of owners attending the meeting of the community of owners, who must also make up a simple majority of the participation quotas. Without such a specific rule, a simple majority vote in relation to the total number of owners of the condominium would be required. It is, however, necessary to ensure that when the cost of implementing those measures is passed on in the form of annual payments, with subsidies or public aid discounted and financing arrangements applied, where appropriate, the cost does not exceed the amount of twelve ordinary monthly payments of common expenses (Art. 17.2 LPH).^[175] It is not clear from the law what hap145pens if the cost exceeds the amount of twelve ordinary monthly payments of common expenses, in particular whether the agreement could be challenged by the dissident owners (Art. 18.1 LPH) or they could only be obliged to pay the maximum amount established by law.^[176] In this regard, RDL 19/2021 amended Art. 9.5 of the Land Act in order to provide the community of owners with legal personality when applying for such loans or public aid. This is necessary because, as a general rule, the community of owners has no legal personality in Spain, only for specific legal acts. However, the civil liability regime of the community of owners enshrined in Art. 22 LPH is not clear enough to provide legal certainty to lenders, as they are not entitled to seize the common parts of the building and the owners are only liable towards the community of owners because they are not a contractual party to the loan concluded between the lender and the community. This poses difficulties for lenders in seizing owners’ apartments. For this reason, lenders require in practice all owners to be part of the contract, who will be jointly liable with the community of owners.^[177]

In a similar vein, Catalan Decree-Law 28/2021^[178] and, later, Law 3/2023^[179] have amended the Civil Code of Catalonia (CCC)^[180] to facilitate the execution of works to improve energy or water efficiency and the installation of renewable energy systems.^[181] Accordingly, the same majority vote mentioned above will be enough to approve the execution of works so as to install common infrastructure or equipment with the purpose of improving the mobility of users, energy or water efficiency (in this case, even for particular use in common elements), renewable energy systems or to connect broadband telecommunications services or to individualize the measurement of water, gas or electricity consumption or for the installation general provision of charging points for electric vehicles (Art. 553–25.1(c) and (d) CCC).

146From the right of property perspective, the community of owners necessarily implies the need to reconcile the concurrent rights and interests of a plurality of owners and occupants of the flats,^[182] so that legal or statutory restrictions to the rights of use and enjoyment of the apartment may be put in place.^[183] As a result, the community of owners’ association may agree on the improvement of the energy efficiency of the buildings, which is binding on all homeowners (Art. 17.9 LPH).

These rules follow the same logic as the Land Act. Whereas the conservation works that are performed to comply with the basic safety and habitability requirements will be mandatory and will not require prior agreement from the community of owners’ board, in accordance with the LPH (Art. 10.1(a) LPH), the improvement works that increase energy efficiency do require such prior agreement, thereby hindering the chances of improving the energy efficiency of the building if the homeowners association declines to do so.

4.3 Rented Dwellings

When a dwelling is rented, according to Art. 22 of the Urban Leases Act 29/1994 (LAU),^[184] the tenant must tolerate the performance of improvement works by the landlord, provided that they cannot reasonably be deferred until the end of the contract. The improvement works that cannot be deferred until the end of the contract, are those that are imposed by a judicial authority, public administration or even by the community of owners’ board.^[185] It is doubtful whether landlords may also enforce these works when receiving public funds to undertake them, even if they allege that these public funds shall be used in a timeframe.^[186] Therefore, the 147Spanish system creates challenges for landlords when it comes to carrying out energy efficiency improvements.

Following Art. 19 LAU, once the first five years of the tenancy contract have elapsed (or seven if the landlord is a legal entity), the landlord may increase the annual rent by the amount resulting from investments in the improvement of the property, the legal monetary interest rate at the time of the completion of the works plus three points,^[187] as long as it does not exceed an increase of 20 % of the current rent. To calculate the invested capital, public subsidies obtained for undertaking the works must be deducted.

In view of this system, the application of positive obligations on owners is necessary to allow landlords to impose these works on tenants, and to increase the rent due to these renovations after five or, respectively, seven years. Paradoxically, when reaching this duration, and provided that the contractual term did not exceed five or, respectively, seven years (which is not a common practice in Spain), the landlord may set a new rent to conclude a new contract.^[188] Therefore, the possibility to increase the rent due to energy efficiency works may be considered superfluous in view of the fact that, in general terms, the contract terminates once it reaches five or, respectively, seven years. Nevertheless, incentives could be provided to landlords and tenants, encouraging them to retrofit rented housing, for instance, ensuring long-term leases for tenants that decide to invest in energy efficiency or allowing landlords to increase the rent by a fair amount if they bear the costs of these works.^[189]

In any case, if energy efficiency works are carried out and these works last more than 20 days, tenants have the right to reduce the rent (Art. 21.2 LAU).