Consequences of Acantus ruling contained? A ruling that suits the practice of heat/cold - supply by Escos.
On February 21, 2024, the Subdistrict Court of the District Court of Midden-Nederland rendered a judgment in the context of the payment obligation of a tenant for the fixed costs of a heat and cold network ("WKN"), consisting of heat pumps with underground storage locations, a combined heat and power plant, the pipe network in the neighborhood ánd the delivery system in the rented house (ECLI:NL:RBMNE:2024:899). As we discussed in our earlier blog, (subdistrict) courts appear to interpret the Acantus judgment in different ways with respect to ESCo constructions. In this blog, we discuss the relevance of the ruling of the Subdistrict Court Midden-Nederland of February 21, 2024. Two specific questions have been addressed: (i) Is there a defect under rental law, if not the landlord leases the heat/cold installation; and (ii) Should the landlord bear the fixed costs associated with the ESCO, or not.
Lack
There is no defect according to this ruling. Demotion sounds like a bell: "The fact that the house is heated by and on the basis of an agreement with a third party ( [company] ) instead of with [Veenvesters ] [note: that is the landlord], is not relevant to the question whether there is a defect. The leased property can be heated. It is therefore not clear why [plaintiff's] rental enjoyment would have been affected by the way the leased property is provided with heat."
Fixed costs
In this case, the tenant (of a social rental property) invoked the Acantus judgment and argued that the landlord must bear the fixed costs of the WKN, whether or not by factoring these costs into the bare rent. The subdistrict court did not go along with this and came to the opinion that the landlord does not have an obligation to bear the fixed costs for the WKN, which the tenant owes to a third party (ESCo/energy supplier).
Quote from the ruling: "It does not follow from the Acantus judgment - contrary to [plaintiff]'s contention - that there is a general obligation for the landlord to bear the fixed costs for a WKN installation in all cases, whether or not by factoring them into the rent on the basis of Section 7:237(2) of the Civil Code."
And then: "It follows at most from the Acantus judgment that Section 7:237(2) of the Dutch Civil Code prevails over the regulation under the 2014 Heat Act, in the event that the factual situation leads to a contradiction between those two regulations. Such a factual situation may exist if:
- a CHP plant must be considered an immovable appurtenance of the leased property and
- the tenant pays the consumption costs and the fixed costs for that CHP plant to the landlord, because they have entered into an agreement to that effect, and
- the landlord qualifies as a supplier within the meaning of the Heat Act."
How does this compare to previous rulings and the Acantus ruling?
We wrote in an earlier blog that subdistrict courts interpret the Acantus judgment in different ways in the situation where not the landlord, but a third party supplies the heat and cold to the tenant. Briefly, on May 10, 2023, the Subdistrict Court of the District Court of Midden-Nederland ruled that a landlord who obliges the tenant to enter into a heat supply agreement with a third party is also obligated to pay the investment and maintenance costs for the CHP installation. The subdistrict court judge of the Gelderland District Court on July 12, 2023, seemed to give a different interpretation to the Acantus ruling and indicated that the tenants could not raise the amount of the final bill for the energy supply in proceedings with their landlord. Despite the fact that the heat and cold was supplied by a subsidiary of the landlord.
At first glance, the ruling at issue here appears to be a change of course in case law. Unlike in the May 10, 2023 district court ruling, the district court ruled that the landlord does not have to bear the fixed costs of a heat/cold system for the simple reason that the landlord is outside the heat supply agreement. However, this requires some nuance.
This ruling involves a connection to a heat/cold network that provides heat to almost all (2,000) homes in the neighborhood. The heat pumps with underground storage locations and the cogeneration plant are located in one location in the district (outside the leased property) and the heat is brought through a pipeline network to the delivery sets in the rental homes. The costs paid to the operator of the system are only those related to the WKN (and not on the leased property). Moreover, the tenant itself entered into a supply agreement with the third party, leaving the landlord completely out of the heat supply. The Subdistrict Court then drew the conclusion that this was not a situation covered by the Acantus judgment, so the tenant's appeal did not succeed.
The subdistrict court does not seem to have had in mind that under an ESCo construction a landlord would normally not be required to bear the fixed costs. There, then, appears to be a departure from Acantus. The subdistrict court seems to have considered not only the circumstance of delivery by a third party, but also the actual situation of the WKN installation itself. It is highly questionable whether the WKN installation would qualify as immovable appurtenances. Unfortunately, the Subdistrict Court does not explicitly comment on that.
Existing case law shows that subdistrict courts interpret the Acantus judgment in different ways when it comes to ESCo constructions. Although this ruling will greatly help (legal) practice, we suspect that the last word has not yet been said and written on this matter.
Closing
Do you have questions about the Acantus ruling and how it affects you? The Renewable Energy and Rental Law practice groups of Straatman Koster attorneys are ready to assist you.