Energy performance contract: who bears the commitment to a result on a tertiary asset

An investor who acquires a 12,000 m² office building under an energy performance contract often thinks they are buying security. In reality, they are acquiring a quantified promise, backed by a baseline negotiated by a third party, a measurement protocol they did not draft and a penalty cap that covers neither the administrative sanction under the tertiary decree (décret tertiaire) nor the discount on the asset if a shortfall persists. The question is therefore not whether an energy performance contract has been signed, but who bears the economic cost of the gap between the promised consumption and the consumption actually recorded, and for how long. This guide deals with the contractual allocation of the risk of non-achievement between the owner, the tenant and the operator: characterisation of the undertaking, construction of the baseline, the measurement and verification protocol, the structure of penalties, and procedural levers in the event of non-performance.

What the energy performance contract commits the parties to, and what it does not

An obligation of result, but a limited one

The energy performance contract (contrat de performance énergétique, CPE) is defined at European level as the agreement under which a supplier undertakes to deliver an improvement in energy efficiency that is verified and monitored throughout the term of the contract, its remuneration depending on the level of improvement achieved (Directive 2012/27/EU of 25 October 2012, Article 2, point 27, recast by Directive (EU) 2023/1791 of 13 September 2023 on energy efficiency). Under French law, the CPE has no autonomous statutory regime in the private sphere: it is governed by the general law of contract. Only public procurement gives it a framework, with the global performance contract (marché global de performance) under Article L. 2171-3 of the French Public Procurement Code, which combines operation or maintenance with the construction of the works in order to meet quantified performance targets.

This absence of a statutory regime has a direct consequence: the energy performance guarantee is worth only what its drafting is worth. The operator's undertaking is an obligation of result only to the extent that the contract defines a measurable result, a method of verification and a sanction for any shortfall. Failing that, the court falls back on an enhanced obligation of means and the investor bears the risk.

The scope of the undertaking: kWh, euros or emissions

Three scopes coexist and they do not place the same risk on the parties. A volume undertaking relates to consumption expressed in kWh of final energy, possibly per square metre. A euro undertaking relates to a bill, and therefore includes price risk. A carbon undertaking relates to emissions, and therefore to conversion factors that may change. A volume CPE leaves the whole of the price risk with the owner or the occupier, as was seen during the tensions on wholesale energy markets. A euro CPE exposes the operator to hardship (imprévision) under Article 1195 of the French Civil Code, which it will seek to neutralise by an indexation clause or an express waiver. The choice of scope is the first trade-off, before any discussion of penalties.

CPE, green lease and tertiary decree: three distinct commitments

The most costly confusion is to believe that a CPE performed in accordance with its terms amounts to regulatory compliance. It does not.

The tertiary decree, arising from Article 175 of Law No. 2018-1021 of 23 November 2018 known as the ELAN Law, codified at Article L. 174-1 of the French Construction and Housing Code and clarified by Decree No. 2019-771 of 23 July 2019, requires buildings for tertiary use with a floor area of 1,000 m² or more to reduce their final energy consumption by 40% in 2030, 50% in 2040 and 60% in 2050 against a reference year no earlier than 2010, or to reach a level of consumption in absolute value set by successive orders (the order of 10 April 2020 known as the Method order, then the Absolute Values orders of 24 November 2020, 13 April 2022 and 7 July 2022). Those subject to the decree declare their consumption annually on the OPERAT platform managed by ADEME.

The green lease (bail vert), that is, the environmental annex under Articles L. 174-2 and R. 174-25 et seq. of the French Construction and Housing Code, arising from Article 8 of Law No. 2010-788 of 12 July 2010, is mandatory for leases of office or retail premises of more than 2,000 m². It provides for the exchange of data and an obligation to cooperate, rarely a quantified commitment backed by a sanction.

Finally, the CPE commits an operator to a consumption that is adjusted according to agreed factors. The objective of the tertiary decree, however, is measured on actual consumption, corrected for climate and modulated according to intensity of use under the Absolute Values orders. In other words, an operator may have performed its CPE perfectly and collect its performance bonus, while the party subject to the decree is nevertheless off its OPERAT trajectory because the actual intensity of use did not follow the adjustment assumptions. This disconnect must be addressed by an explicit alignment clause, failing which the regulatory risk remains entirely with the owner.

The chain of parties subject to the decree: owner, tenant, operator

Article L. 174-1 of the French Construction and Housing Code refers to owners and, where applicable, tenants. The scheme thus creates a joint liability under the decree without designating a single responsible party: the allocation is a matter for the contract. In practice, the owner controls the building envelope, the heavy equipment and the energy capex; the tenant controls use, occupancy hours, density, IT and often process consumption. Neither can achieve a 40% reduction trajectory alone.

The allocation of works is governed by Article L. 145-40-2 of the French Commercial Code and Decree No. 2014-1317 of 3 November 2014. Article R. 145-35 of the French Commercial Code excludes from the charges that may be passed on to the tenant expenditure relating to major repairs under Article 606 of the French Civil Code, as well as expenditure intended to remedy obsolescence or to bring the leased property into compliance with regulations, where it falls within those major repairs. An institutional landlord that hoped to re-invoice tertiary compliance works through service charges runs up against this mandatory provision for leases concluded or renewed since 5 November 2014. The remaining levers are the negotiation of a savings-sharing clause, a rent adjustment on renewal in respect of the improvement of the premises, or structuring the financing within the CPE itself. The allocation of energy capex between landlord and tenant is dealt with separately in our article on the environmental annex to the green lease.

The result is a three-tier structure that must be made consistent: a lease that allocates works and use, an environmental annex that organises the transmission of consumption data, and a CPE that commits a third party to a result. If the three instruments share neither the same metering scope, nor the same reference year, nor the same timetable, litigation is structurally built in.

The families of CPE and the transfer of risk they entail

Three configurations dominate the tertiary market, according to the classification adopted in market-led work, notably the Ortega report on energy performance contracts delivered in 2011 and the subsequent guides of the Plan Bâtiment Durable.

• The services CPE, also called the operating CPE, covers the running, adjustment and maintenance of existing installations. The potential for savings is limited, the operator's commitment is limited too, and the risk of drift due to obsolescence remains with the owner.
• The works and services CPE combines an investment programme with a multi-year operating commitment. It is the configuration most exposed to litigation, because performance depends on the quality of the design, of the implementation and of the operation all at once.
• The global CPE, covering design, construction, operation and sometimes financing, concentrates the risk on a single operator. It removes discussions about attribution, but at the price of a risk premium built into the price and a strong dependence on one provider for a term that frequently exceeds ten years.

The choice of configuration is a trade-off in the allocation of risk, not a technical question. An investor holding an asset with a view to a short-term disposal does not have the same interest as a long-term property company: the former seeks a liquid and transferable guarantee, the latter a lasting performance and a secure regulatory trajectory.

The baseline and the adjustment clauses: the real battleground of the dispute

Building an enforceable baseline

The baseline is the consumption against which the recorded consumption will be compared. It mechanically determines the amount of the guaranteed savings. A baseline established on an atypical year, for example a year of under-occupancy, artificially inflates the performance subsequently reported. The investor must therefore check three elements: the period chosen and its representativeness, the source data, which must be meter readings or auditable invoices rather than estimates, and any corrections applied.

The baseline must be accompanied by explicit boundary conditions: opening hours, occupancy rate, set-point temperatures, number of workstations, presence of a data centre or a kitchen, and the scope of uses included and excluded. Each of these variables becomes, in the event of a shortfall, an argument for the operator's exoneration. The broader and vaguer the boundary conditions, the more illusory the guarantee.

The adjustment factors, the heart of the negotiation

The adjustment factors make it possible to recalculate the reference consumption according to actual conditions. Climatic severity, measured in unified degree-days, is the classic factor. Next come intensity of use, changes to the asset and changes in the tenant's activity. The rule of method is simple: any factor over which the operator has no control must be adjusted; any factor it controls must not be. An operator that obtains an adjustment for control-setting drift or maintenance failures has, in effect, emptied its guarantee of its substance.

Vigilance is also needed on the formula itself. A linear adjustment applied to uses that are not proportional to occupancy, or a climatic adjustment applied to electricity consumption that is mostly not temperature-sensitive, produces results unrelated to physical reality. Having the adjustment formula audited by an independent third party before signing costs less than a court-ordered expert report five years later.

The measurement and verification protocol as the law between the parties

The measurement and verification protocol, commonly built on the IPMVP framework published by the Efficiency Valuation Organization, sets the method for establishing performance. The options are well known: retrofit isolation of key parameters, retrofit isolation of all parameters, whole-facility metering, or calibrated simulation. The choice is not neutral. Whole-facility metering is robust but does not allow a shortfall to be attributed to a specific technical item. Calibrated simulation opens up considerable scope for debate about modelling assumptions.

Two provisions deserve particular attention. The first is the origin of the data: where the measurement comes from the building's technical management system operated by the operator itself, the debtor of the guarantee holds the evidence. This evidentiary asymmetry must be corrected by direct and permanent access for the owner to the raw, time-stamped and unprocessed data, and by an obligation to retain it for a period longer than the limitation period. Decree No. 2020-887 of 20 July 2020 on building automation and control systems, as amended by Decree No. 2023-259 of 7 April 2023, which requires tertiary buildings whose technical systems exceed 290 kW and then, from 1 January 2027, 70 kW to be equipped, facilitates this instrumentation: ownership of and access to the data must still be set out in the contract.

The second is how disputes are handled: appointment of a third-party expert, time limit for referral, whether or not the opinion is final, and how it fits with referral to the court. A poorly drafted contractual expert clause may delay access to the court by several months without producing a usable conclusion.

Structure of the performance guarantee: who pays for the shortfall

Penalty, fixed compensation or penalty clause

The sanction for a shortfall generally takes the form of a payment by the operator calculated by applying a unit price of energy to the difference in consumption. This drafting, which compensates for an additional cost actually incurred, is distinct from a fixed penalty detached from the loss. The distinction has practical consequences: if the provision is characterised as a penalty clause (clause pénale), Article 1231-5 of the French Civil Code allows the court to reduce it if it is manifestly excessive, or to increase it if it is derisory. An investor who has negotiated a deterrent penalty must factor in this risk of judicial revision and, where possible, prefer a purely compensatory mechanism tied to the additional cost recorded.

Conversely, a bonus for outperformance is not merely a commercial concession: it aligns the operator with a logic of continuous optimisation rather than with mere compliance with the guaranteed threshold. Its absence encourages performance pitched just above the target.

Caps, deductibles and the essential obligation

Liability caps are the point at which the guarantee is emptied or preserved. An annual cap equal to a small fraction of the operating fee, combined with a deductible on the first points of shortfall and the exclusion of indirect loss, results in a nominal guarantee. Article 1170 of the French Civil Code deems unwritten any clause that deprives the debtor's essential obligation of its substance, and Article 1231-3 limits compensation to foreseeable loss in the absence of gross negligence or wilful misconduct. A cap that is manifestly out of line with the guaranteed energy stakes can be challenged on that basis, but it is better to negotiate the cap than to bet on having it set aside by a court. On the distinction between a cap on compensation and a contractual penalty, see our analysis of the limitation of liability clause and the penalty clause.

Three heads of loss must be dealt with expressly, failing which they will remain with the owner: the additional cost of the energy bill, the cost of corrective works and remedial measures, and the separate loss resulting from a shortfall against the regulatory trajectory. On the latter point, the burden of a punitive sanction, such as the administrative fine under Article L. 174-4 of the French Construction and Housing Code, is difficult to transfer by contract; by contrast, nothing prevents the parties from providing for compensation of the separate financial loss, including the loss of value of the asset or the cost of accelerated compliance works.

The grounds for exoneration to be delimited

The operator will seek to be exonerated in the event of a change in conditions of use, works carried out by the tenant, failure to supply data, unavailability of equipment or force majeure within the meaning of Article 1218 of the French Civil Code. Each of these grounds is legitimate in principle and dangerous when drafted in open terms. Three safeguards are needed: an obligation on the operator to give immediate warning as soon as it notes a drift attributable to the client, on pain of forfeiting the right to rely on it; an adversarial quantification of the effect of the cause relied on, rather than a total exoneration; and an obligation to propose corrective measures, reflecting its duty of advice as an energy professional.

Litigation over non-performance: timeline and levers

Litigation over the energy performance guarantee presents a difficulty of its own: it is, before it is legal, evidentiary. The shortfall is measured on data series held by the party who owes the guarantee, and it is established period by period, often with a lag of several months linked to the billing cycle and the annual verification report.

The useful sequence is as follows. From the first financial year with a shortfall, formalise the challenge to the verification report within the contractual time limit, failing which the report becomes binding on the owner. At the same time, require disclosure of the raw data and of the adjustment parameters applied. If the operator stalls or if access to the technical management data is restricted, Article 145 of the French Code of Civil Procedure makes it possible to obtain, before any proceedings, an investigative measure intended to preserve or establish evidence of facts on which the outcome of the dispute may depend: appointment of an expert, sequestration of the recordings, installation of adversarial metering. In a CPE, this measure has an additional advantage: it freezes the state of the installations before maintenance work makes it impossible to reconstruct the causes of the drift.

The general-law levers then remain available: price reduction under Article 1223 of the French Civil Code, the defence of non-performance (exception d'inexécution) under Articles 1219 and 1220, termination by notice under Article 1226 after formal notice, and contractual liability under Article 1231-1. Where the shortfall stems from a design or workmanship defect, the question of the ten-year warranty (garantie décennale) arises, with a notable limit: the intrinsic energy performance guarantee introduced by Law No. 2015-992 of 17 August 2015 on energy transition and codified in the French Construction and Housing Code makes recognition of unfitness for purpose conditional on excess consumption of more than 10% of the annual conventional consumption, which excludes most ordinary drift from the scope of the ten-year warranty.

Finally, the five-year limitation period under Article 2224 of the French Civil Code and Article L. 110-4 of the French Commercial Code imposes discipline: since the guarantee account is closed period by period, each deficit year in principle gives rise to its own claim, and letting several years go by without any act interrupting the limitation period amounts to abandoning the oldest ones.

Taking over an asset under a CPE: the due diligence that is often missing

The CPE does not follow the building. Unlike the lease, which Article 1743 of the French Civil Code makes enforceable against the purchaser, the operating and performance contract is transferred by an assignment of contract subject to Article 1216 of the French Civil Code, which requires the consent of the other contracting party. The operator therefore has bargaining power at the very moment when the purchaser is most constrained by its timetable.

The acquisition review must cover specific points and must not be limited to the existence of the contract: the baseline and its documentation, the verification reports for past financial years and any challenges, the history of adjustments applied, the status of penalties due and paid, the OPERAT declarations made and the trajectory selected, the existence of any formal notice from the administrative authority, the remaining term of the contract and its exit clauses, and finally the consistency between the CPE commitments, the works clauses of the leases in force and the environmental annex.

These findings are then reflected in the acquisition documentation: specific representations under the asset and liability warranty (garantie d'actif et de passif) on regulatory compliance and the absence of proceedings, a condition precedent of effective transfer of the CPE with the baseline and history maintained, and, where a shortfall has already been identified, a price adjustment or a deferred compensation mechanism rather than a mere representation. For a lender, the exposure is a mirror image: a tertiary asset that is off its regulatory trajectory is an asset whose exit value and liquidity deteriorate, which justifies energy reporting covenants and, where appropriate, indexing the margin to verifiable indicators. The content of an asset and liability warranty on the sale of a let asset is examined in our article on the sale of an occupied building.

Conclusion

The market view that the CPE transfers energy risk to an operator is inaccurate. The CPE transfers a fraction of that risk, determined by the baseline, the adjustment factors, the measurement protocol and the liability caps. The rest, that is, price risk if the undertaking is in volume, usage risk if the boundary conditions are broad, and the whole of the regulatory risk under Article L. 174-1 of the French Construction and Housing Code, remains with the owner and, in part, with the tenant. The lasting viability of a tertiary asset is therefore not secured at the time of acquisition, but through the permanent articulation of three instruments: the lease and its allocation of energy capex, the environmental annex and its data flows, and the CPE and its guarantee account.

Before any signature or any takeover of an asset under a CPE, have the baseline, the adjustment formula and the measurement and verification protocol audited by an independent third party, a lawyer and an engineer working together. It is on these three documents, and not on the title of the contract, that the outcome of any non-performance dispute will turn.

Frequently asked questions

Is an energy performance contract enough to comply with the tertiary decree? No. The CPE commits an operator to a consumption adjusted according to contractual factors, whereas Article L. 174-1 of the French Construction and Housing Code requires a reduction in actual final energy consumption of 40% in 2030, 50% in 2040 and 60% in 2050 against a reference year after 2010, or the achievement of absolute values set by orders. The two frameworks may diverge, in particular if the actual intensity of use departs from the adjustment assumptions. An explicit clause aligning the contract with the OPERAT trajectory is necessary to place that risk on the operator.

Who is subject to the tertiary decree, the landlord or the tenant? Both. Article L. 174-1 of the French Construction and Housing Code refers to owners and, where applicable, tenants, for buildings for tertiary use with a floor area of 1,000 m² or more. The allocation of reporting obligations and of the actions to be taken is a matter for the contract, generally the lease and its environmental annex. In the absence of any provision, each remains exposed in respect of its own area of control.

Can the landlord re-invoice the tenant for energy compliance works? For leases concluded or renewed since 5 November 2014, Article R. 145-35 of the French Commercial Code excludes from the charges that may be passed on to the tenant works falling within the major repairs of Article 606 of the French Civil Code, as well as works to bring the property into compliance with regulations where they fall within those same major repairs. Heavy works on the building envelope or on structural equipment therefore remain the landlord's responsibility. The alternative levers are contractual sharing of savings, a rent increase on renewal, or including the financing in the CPE.

What are the sanctions for failing to comply with the tertiary decree? Article L. 174-4 of the French Construction and Housing Code provides for a formal notice from the administrative authority, publication of formal notices that remain without effect, and then an administrative fine capped at €1,500 for individuals and €7,500 for legal entities. The direct financial risk is limited; the real risk is reputational and financial, through the deterioration of the value and liquidity of the asset with investors and lenders who are subject to their own reporting obligations.

What is the usual term of an energy performance contract? It depends on the payback period of the guaranteed investments and on the financing mechanism chosen. A CPE limited to operation is concluded for a short term, whereas a CPE combining heavy works and operation runs for a long term, often more than ten years. The term must be weighed against the holding horizon of the asset: a long contract that is difficult to transfer weighs on the negotiation in the event of a disposal.

How can an unfavourable performance verification report be challenged? First, by complying with the contractual time limit for challenge, since a report that is not challenged generally becomes binding. The raw metering data, the adjustment parameters applied and the detail of the calculations must then be demanded. If access to the data is obstructed, Article 145 of the French Code of Civil Procedure makes it possible to obtain, before any proceedings, an investigative measure, an expert report or sequestration of the recordings, in order to freeze the evidence before maintenance work makes analysis impossible.

Does energy non-performance fall under the ten-year warranty? Only marginally. The intrinsic energy performance guarantee, introduced by Law No. 2015-992 of 17 August 2015 and codified in the French Construction and Housing Code, recognises unfitness for purpose only in the case of excess consumption of more than 10% of the annual conventional consumption, and provided that the damage results from a defect in design, in products or in workmanship. Ordinary operating drift therefore falls solely within the contractual sphere, hence the importance of the drafting of the CPE.