Does the Acantus ruling also affect ESCo structures?

So what was going on in the case that led to the Acantus judgment? Heat, cold and hot tap water were supplied by BAM Techniek Energy Systems B.V. ("BAM") in the apartments of two residential towers. BAM had constructed a heat and cold storage system ("the CHP system") for this purpose and had a building lease established for its own benefit. For the supply of the heat, cold and hot tap water, the landlord had concluded a contract with BAM. The intention was that as of January 2012 BAM would supply directly to the tenants and a supply agreement would therefore be signed between BAM and tenants. It is also important to note that the residents of the apartment complex could not obtain their heat supply in any other way, other than through BAM's WKO installation.

However, tenants (or some of them) did not sign the supply agreement with BAM. As a result, the landlord was still the contractual counterparty of BAM. In addition to the rent, the lessor then decided to charge an advance for the delivery of the heat (the consumption), as well as for the standing charge for heat, the rental of the heat meter, the standing charge for cooling and the standing charge for the delivery set. This standing charge consists of the capital and maintenance costs of the WKO installation. Tenants subsequently indicated that, based on current laws and regulations, the landlord was not entitled to charge fixed fees for heat, cold and the delivery set/tap, and therefore they only owed a fee with respect to consumption.

The Court of Appeal considered in this case (which was later confirmed by the Supreme Court) that a WKO installation as in the Acantus case must be regarded as an immovable appurtenance belonging to the residential premises (Section 7:233 of the Civil Code). A facility may be ancillary if it is part of the leased property and the tenant has exclusive use thereof, but also if the facility is physically connected to the leased property by its nature (immovable) or belongs to the customary equipment level of the leased property according to the common understanding. In this case, the Court ruled that the building - of which the leased property is a part - and the WKO installation are specifically matched to each other from a constructive point of view. After all, since another way of heating the apartments in the building is not possible, the building would have to be considered incomplete in the absence of the WKO installation. From that perspective, the WKO installation was an (immovable) component of the building. According to the Court, the WKO installation was immovable, physically connected to the leased property and by its nature was part of the usual equipment level of each apartment in the building. All in all, the Court of Appeal concluded that the WKO installation and the delivery set were immovable appurtenances as referred to in Section 7:233 of the Dutch Civil Code. The fact that the ownership of the WKO installation (by granting a building lease right to BAM) has been separated from the ownership of the Stoker building does not change this for the assessment of Section 7:233 of the BW.

The Court then ruled that because the heat and cold storage installation is considered an immovable appurtenance of the living space, the landlord must discount the costs in the (bare) rent. The systematics of the law prevent those costs (also or instead of) being included in the service costs. A different arrangement in a Service Charge Decree is contrary to (the higher) statutory rule of Section 7:237(2) of the Civil Code.

The consequences of the Acantus judgment in which landlords supply heat to their tenants are clear: the landlord must factor the capital and maintenance costs of the CHP plant into the bare rent. It was unclear whether, and what consequences the Acantus judgment would have for so-called "energy service companies" (also known as ESCo's), in which not the landlord but a third party (an ESCo/energy supplier) supplies the heat and cold to the tenants. Recently, two judgments were published in which a subdistrict court had to apply the Acantus judgment to an ESCo construction.

The first judgment is by the Subdistrict Court of the District Court of Midden-Nederland and dates from May 10 this year, but was not published until July 17. In this case, the Subdistrict Court found that the case did not actually differ from the one in the Acantus judgment and that the heat and cold storage installation should therefore also be regarded as an immovable property within the meaning of Section 7:233. Subsequently, the Subdistrict Court considered that the costs associated with the investment in the heat and cold storage installation and the maintenance thereof must be deemed to be included in the (bare) rent of the dwelling. According to the Subdistrict Court, it followed from the lease agreement that the investment and maintenance costs of the heat and cold storage installation as part of the rent are for the landlord's account. Therefore, the landlord cannot pass on those costs as service costs in addition to the rent (because that follows from the Acantus judgment). The landlord can, however, adjust the amount of the (bare) rent to its obligation to bear the investment and maintenance costs. Next, the Subdistrict Court found that if the landlord obliges the tenant to enter into an agreement with a third party in which those costs are charged to the tenant, the situation arises that, on the one hand, the landlord is obligated to bear those costs pursuant to the lease and, on the other hand, the tenant is obligated to pay those costs pursuant to the agreement with the third party. If it is the intention of the landlord that the tenant should bear those costs by exclusion, according to the subdistrict court, this effectively amounts to a disguised rent increase. This is not very transparent and, according to the Subdistrict Court, the tenant need not be aware of this: after all, a different rent has been agreed upon. This brings the Subdistrict Court to the conclusion that although the lessee is obliged to pay the investment and maintenance costs of the heat and cold storage installation to the third party on the basis of the agreement concluded between them, the lease agreement implies that the lessor is liable to pay this. Therefore, the lease implies that the landlord will reimburse the tenant for the investment and maintenance costs of the heat and cold storage installation advanced by the tenant, in fulfillment of its obligation to pay. The Subdistrict Court ruled that the lessor would therefore have to reimburse the lessee for those costs or pay them to the operator on the lessee's behalf.

The second ruling was made by the subdistrict court judge of the Gelderland District Court and dates from July 12. In this case, heat and cold was supplied by a subsidiary of the landlord, the "Energie B.V.". The tenants therefore entered into a contract with the Energie B.V. for the supply of the heat and cold. The tenants felt that they had to pay too much rent to the landlord, because they already paid the Energie B.V. the fixed charge for the capital and maintenance costs of the WKO installation. However, the court ruled that the tenants could not raise the amount of the final bill for the energy supply in proceedings with their landlord. So here the subdistrict court seems to give a different interpretation of the Acantus ruling than the subdistrict court judge of the District Court of Central Netherlands.

The judgments discussed show that subdistrict courts interpret the Acantus judgment in different ways with respect to ESCo constructions. We are of the opinion that both explanations of the subdistrict courts are legally defensible, but we do see that the interpretation of the subdistrict court of the District Court of Midden-Nederland will create problems in practice. This explanation means that if an ATES installation is considered an immovable appurtenant property, the lessor must also include the capital and maintenance costs of the ATES installation in the basic rent in the case of ESCO constructions. For non-liberalized rentals, the rent is maximized based on the Residential Tenancies Decree. Therefore, the landlord of a non-liberalized rental cannot simply increase the bare rent to cover the capital and maintenance costs of the WKO installation. This will have the consequence that landlords of non-liberalized housing (such as housing corporations) will look for heat facilities for their housing stock that are not considered immovable appurtenances, because then there will be no obligation to include their capital and maintenance costs in the bare rent.

What does this mean?

Connecting to an existing heat network such as a district heating system would be more attractive than developing and realizing a collective CHP system. There is actually a difference between a collective system that is specific to one or more buildings and a collective system that is not specific to one or more buildings. In practice, that difference does not seem very conducive to legal certainty, let alone to making the heat supply in the Netherlands more sustainable.

The unsuccessful parties may be able to appeal; we suspect that the last word on this has not yet been said and written.

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