Germany’s Building Modernisation Act:  A vast impact ahead on the (green) energy supply

The draft claims to re-introduce technology openness. Property owners replacing a heating system may choose between heat pumps, district heating, biomass, hybrid models, and even gas or oil boilers. However, fossil-fuelled systems installed after the Act comes into force must comply with the so-called “bio-staircase”: from 01 January 2029, at least 10% of heat supplied must come from CO₂-neutral fuels (biomethane, bio-oil, biogenic liquified petroleum gas (LPG), or green/blue/turquoise hydrogen). This share rises to 15% in 2030, 30% in 2035, and 60% in 2040. 

The government intends the transposition of the Energy Performance of Buildings Directive (EU) 2024/1275 on a 1:1 basis. From 01 January 2030, all newly constructed buildings must meet the zero-emission standard, meaning no CO₂ emissions from fossil fuels at the building site. For existing non-residential buildings, mandatory renovation thresholds apply from 2030 and 2033. 

The law also amends German statutory tenancy law. In future, landlords installing a heat pump may only pass the full modernisation cost through to tenants via rent increases if the system achieves a certain minimum annual coefficient of performance; otherwise, only 50% of costs are recoverable. While today landlords benefit from a flat-rate 15% deduction that reduces deemed maintenance costs in the modernisation surcharge calculation, the amendment removes this privilege where the landlord opts to install a fossil-fuel heating system. Furthermore, under the reformed CO₂ Cost Allocation Act, landlords of residential buildings who install fossil-fuel heating systems must bear 50% of the biogenic fuel costs and gas network charges arising from the bio-staircase, whereas the current graduated scale can leave tenants with up to 100% of CO₂ costs.

The draft bill also tightens the Building Electromobility Infrastructure Act. For example, new residential buildings with more than three parking spaces must equip at least 50 % with pre-cabling and install at least one charging point; new non-residential buildings with more than five spaces must provide one charging point per five spaces, rising to one per two spaces for office buildings.

For international investors, the draft bill creates both opportunity and compliance risk. Existing contracts drafted under current law assumptions may contain regulatory gaps, and the phased entry into force (immediate effect upon publication, further amendments on 01 January 2028 and 01 January 2030) requires careful due diligence planning. 

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Dr Jörn Bosse is a Partner at FPS, specialising in real estate law. He advises on project developments and asset management.