CIRCUSOL: Solar power business models towards a circular economy in…
Disclaimer: This article is based on the Flemish/Belgian legislation. Nevertheless, similar legal principles can often be found in other civil law countries.
In a Solar as a Service (SaaS) agreement, the service provider remains the owner of the PV installation, both legally and economically. For the provider, it is essential that the ownership of the PV installation remains with the provider and that third parties are aware of this. Nevertheless, in most civil law countries, solar panels become immovable goods as a result of incorporation into a building. Consequently, the doctrine of accession applies. Accession is a way of acquiring ownership under civil law, based on the idea that the owner is entitled to everything that the property produces and to what is either naturally or incidentally united with the property. This means that in case of accession, the landowner becomes the owner of all buildings and immovable goods that are incorporated into or onto the building. In short, the user will become the owner of the incorporated PV installation. The retention of the right of ownership by the provider can, therefore, become problematic. When entering into a SaaS agreement, due consideration must be given on how the provider can retain his right of ownership and how this right can be invoked against third parties.
Nonetheless, it is possible for the landowner to abstain from this principle of accession. This is considered equivalent to a right of superficies. Under Belgian property law, a right of superficies is a right in rem to have buildings, constructions or plants in whole or in part, on, above or below other people's land for a duration of up to 50 years. A right of superficies could provide a solution to the issue of accession. However, it is doubtful whether the granting of a right of superficies is the solution for SaaS agreements in practice. A number of remarks need to be taken into account:
- Remark 1: financial implications – Under Belgian law, a notarial deed is required to write the deed of superficies in the mortgage registers. However, this registration is associated with registration fees and honorary fees. The establishment of a superficies thus leads to a higher cost of the SaaS agreement. Especially if the project is to be rolled out on a larger scale, the establishment of a superficies right with each individual user will be very time-consuming and expensive.
- Remark 2: sufficient independence – A superficies can only be established on constructions with an independent existence and not on improvements or repairs that are being made. Such works are immediately incorporated into the building. The requirement is therefore that construction can exist independently, without having to make use of other constructions that are not part of the right of superficies. For a PV installation, this is not a problem; the solar panels can be used without using the building. But suppose that in the future a SaaS agreement is drawn up whereby sunroof tiles are made available instead of solar panels: disconnecting the roof tiles from the building is already a lot more difficult. The same problem arises for PSS BMs that provide batteries for people who already have solar panels: the incorporated battery system can hardly exist independently without the energy it receives from the solar panels. Obtaining the right of superficies for these goods will be very difficult.
- Remark 3: reimbursement at termination – At the end of the right of superficies, accession takes place: the landowner thus automatically becomes the owner of the PV installation. In theory, the landowner is therefore obliged to pay the provider a compensation equal to the current value of the installation. However, this is not in line with the idea of a PSS, i.e. that the service provider is still the owner of the goods at the end of the contract and takes them back with the aim of reusing them. Nonetheless, this provision is a supplementary right: the parties can stipulate that the provider is entitled to remove the PV system.
What is the solution to avoid accession? Research has shown that the traditional legislative exceptions on the rule of accession – the accessory right of superficies and the retention of title – do not bring salvation. Nor is it possible to regulate this between parties on a contractual basis. Changes at the level of the legislation should be considered. In the Belgian doctrine, the call for a cheaper circular right of superficies is growing stronger.
This circular right of superficies would allow the provider to establish a right of superficies on all components of the immovable property. It will therefore no longer be relevant whether these components are susceptible to an independent existence or not. Moreover, the requirement of independence loses its effect. The reason for this is that in a circular economy, it is precisely the purpose to safeguard (and even increase) the value of raw materials and objects by keeping the ownership of these different materials or objects separate, whereas in traditional Belgian law the requirement of independency (as part of the principle of unity) is intended to protect the value of the entire object, based on the idea that the unit is more than the sum of the individual components.
Now that certain components of the building, such as sunroof tiles, belong to someone other than the building owner based on this circular right of superficies, it is important that third parties are aware of this. The publication can, of course, take place in the traditional mortgage register.
However, there is no harm in thinking of other, alternative registers, in which it can be made clearer that certain components of real estate form a separate property law entity. For example, the classic mortgage register could be linked to Thomas Rau's Madaster.
Essentially, the Madaster is a cadastral register for building materials based on the online collection of the Materials Passports. It is perfectly possible to mention in these material passports the owner of the materials or goods incorporated in the immovable property. The combination of the Madaster and the classical register would be ideal. In order to roll out such a Madaster, it is of course important that the material passports are drawn up by the providers. By doing so, they will make such undertakings possible in the future.
ABOUT THE AUTHOR: Emilie Verbeure obtained her law degree at the KU Leuven with the specialization in International & European law. She then proceeded with the master’s studies in Environmental Sciences at the University of Antwerp where she conducted research on the legal considerations, possibilities and barriers for PSS in the photovoltaic sector made in the context of the European project CIRCUSOL, in collaboration with VITO. She currently works as a lawyer at Flemish Energy Agency.
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