The Legal Challenge of PropTech - (III) Digitalization and Ecological Transition in the Real Estate Sector

The term PropTech (a contraction of "Property" and "Technology") refers to the use of technology and digital solutions in the real estate sector, at all stages of the value chain, from construction to asset management and real estate portfolio management, including transactions occurring in the market to sell or lease properties (or even potential funding rounds).

As in other fields (healthcare, law, insurance, etc.), established players in property management and asset management, as well as numerous startups, have recognized the benefits of leveraging constantly evolving technologies to automate existing processes or provide new services to all stakeholders, particularly end-users.

Examples include 3D printing and virtual (or augmented) reality at the construction stage, property valuation through artificial intelligence (AI) tools, online sales or rental listing platforms, and even "smart" management of real estate portfolios based on the Internet of Things (IoT) or collaborative tools aimed at maximizing the utilization of coworking spaces or parking facilities.

Lime provides you with an analysis of the main legal challenges of PropTech, with the third section dedicated to ecological transition[1].

[1] For the previous sections, dedicated (I) to the valuation of data in compliance with the GDPR and (II) to artificial intelligence, see. https://www.lime.law/en/latest-thinking/les-enjeux-juridiques-des-proptech.

Given the environmental impact of the real estate sector, particularly related to the energy consumption of buildings, various measures have been taken, both under European Union law and national law, to attempt to alter the current trajectory and move towards carbon neutrality. New rules have thus been adopted to improve the energy performance of buildings or as part of the reporting required by the CSRD.

In the real estate sector, as in other fields, technology and digital solutions can be deployed in favor of ecological transition. Numerous players in the PropTech ecosystem offer innovative solutions that, for example, allow for the measurement of energy consumption and its automatic reduction based on selected criteria (such as occupancy in the building, outdoor temperature, etc.).

While we should obviously welcome any initiative contributing to ecological transition, stakeholders in the sector must remain vigilant regarding data protection issues and risks associated with illicit greenwashing practices.

In 2019, the European Commission presented its Green Deal for Europe[1], which aimed to achieve climate neutrality by 2050 while reducing greenhouse gas emissions by at least 55% by 2030 (compared to 1990 levels). These ambitions were enshrined in a binding manner in the "European Climate Law" of 2021[2]. Recital No. 2 of this law states that "The European Green Deal also aims to protect, conserve and enhance the Union’s natural capital, and protect the health and well-being of citizens from environment-related risks and impacts. At the same time, this transition must be just and inclusive, leaving no one behind".

The real estate sector is affected, and several strategies presented by the Commission directly concern it[3]. Buildings are indeed responsible for 40% of energy consumption and 36% of greenhouse gas emissions related to energy. The rate of renovation should therefore increase to significantly improve the energy efficiency of both public and private buildings. At the same time, the construction of new buildings must be regulated to reduce the negative environmental impact, particularly related to the extraction of raw materials, their transportation, and any potential transformation. The end-of-life phase of buildings is also important, to ensure, as much as possible, the recycling of materials.

Various measures, either transversal or more sector-specific, have been taken to achieve the goal of carbon neutrality[4].

These proposals align with the United Nations Sustainable Development Goals (SDGs) set in 2015[5], particularly SDG No. 7 (Affordable and Clean Energy) and SDG No. 12 (Responsible Consumption and Production).

In April 2024, a new directive on the energy performance of buildings was adopted[6]. The measures aim to reduce energy consumption in buildings and the use of imported fossil fuels while promoting the use of solar energy and more sustainable mobility (including charging points for electric vehicles). It also establishes a methodology for calculating the energy performance of buildings and imposes minimum requirements for new and existing buildings.

Other texts of broader scope may also apply to the real estate sector. This includes the Corporate Sustainability Reporting Directive (CSRD)[7], adopted as part of the Green Deal, which prescribes transparency obligations related to Environmental, Social, and Governance (ESG) themes and is expected to lead to a transformation of the companies concerned. However, proposals were submitted by the Commission on February 26, 2025, to simplify the regulatory framework, particularly by limiting the scope of the CSRD[8].

[1] Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions, “The European Green Deal”, COM(2019) 640 final.

[2] Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’), O.J. L243 of 9 July 2021.

[3] The Commission thus published its "Renovation Wave Strategy" in October 2020, aiming to double the energy renovation rate of buildings by 2030. Additionally, in May 2022, it adopted the REPowerEU plan, which aims to save energy, replace fossil fuels, and diversify energy supply sources

[4] https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en.

[5] https://www.un.org/sustainabledevelopment/.

[6] Directive (EU) 2024/1275 of the European Parliament and of the Council of 24 April 2024 on the energy performance of buildings, O.J. L of 8 May 2024. Most of the provisions must be transposed into the legislation of the Member States by May 29, 2026, at the latest (Art. 35).

[7] Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting, O.J. L332 of 16 December 2022.

[8] https://finance.ec.europa.eu/publications/commission-simplifies-rules-sustainability-and-eu-investments-delivering-over-eu6-billion_en.

As in other sectors, digital technology can help reduce the negative environmental impact of the real estate sector. This is referred to as "IT for Green."

Technologies can, for example, be utilized to inform users about their electricity consumption (using smart meters) and assist them in modifying certain practices to reduce it. They can also enable more efficient analysis and management of buildings by combining the installation of connected devices and sensors with artificial intelligence solutions (which, for instance, can reduce heating when the last employee has left the offices). Virtual tours of an apartment, made possible through video conferencing tools, will have a lower carbon footprint than in-person visits, which require several people to travel by car and cover numerous kilometers.

Digital building twins can also be created. This refers to "interactive and dynamic simulation that reflects the real-time status and behaviour of a physical building"[1]. Various factors can be taken into account (temperature, occupancy, humidity, weather, etc.). Their analysis allows for a comprehensive and real-time understanding of the energy performance of buildings and provides managers with an effective tool for optimizing energy consumption.

At the same time, it is important to recognize that the use of digital technology also has a negative environmental impact (estimated at 4% of the global carbon footprint and increasing significantly). This impact originates from IT products (smartphones, computers, data centers, network cables, etc.) and applications (data, AI, social media, streaming, eCommerce, etc.).

[1] See Recital No 57 of directive 2024/1275.

Digital technology utilized for ecological transition will generally involve processing the data of individuals who live or work in the buildings. This is the case, for example, when a smart meter records electricity consumption in real-time. Such processing of personal data will be subject to the provisions of the General Data Protection Regulation (GDPR). There are indeed obvious privacy risks: in this illustration, the data collected by the smart meter allows us to know when the house is occupied and the consumption habits of the people living there (meal times, sleep patterns, etc.).

Each party involved must be clearly classified: data controller, processor, data subject, etc. The legal basis for the processing must be established precisely (legitimate interest or performance of a contract, for example), while taking into account the constraints that may arise from it (such as the right to withdraw consent if that is the lawfulness basis of the processing).

Technical and organizational measures must be implemented to ensure the security of the processing activities. Finally, it is essential to ensure that the rights of the data subjects are scrupulously respected, particularly regarding transparency.

For further details, we refer to the note on the valuation of data in compliance with the GDPR.

Given the increasing attention paid by the public - consumers or otherwise - to environmental protection issues, professionals rightly wish to highlight the environmental performance of their products or their own eco-responsible behavior in marketing campaigns or on the product itself (with specific labeling).

In the real estate sector, companies might therefore emphasize the use of more "green" materials or the adoption of technologies that help mitigate climate impact, achieve carbon neutrality, or respect the environment.

If the claim is accurate and the potential use of the logo or label complies with applicable regulations, there is no particular difficulty. On the contrary, it is encouraging that environmental concerns are being acknowledged by industry professionals and appropriately valued by clients, at the final stage of the distribution process, influencing their decision to purchase one product over another.

However, misleading practices that involve displaying incorrect information about the environmental impact of a product will be penalized. In this regard, it is generally very difficult, if not impossible, for the consumer to verify the accuracy of the environmental claim.

Such behaviors—generally referred to as greenwashing—are prohibited.

Soft law rules have been established by the advertising and marketing sector (at both the international and Belgian levels) to regulate environmental claims in commercial communications. The 2024 edition of the International Chamber of Commerce (ICC) Code on Advertising and Marketing ("ICC Code")[1] includes a specific section dedicated to environmental claims in commercial communications (Chapter D)[2].

Such practices could also be sanctioned under unfair commercial practices concerning consumers[3].

Considering that these rules are insufficient, the European Commission has submitted proposals in this regard[4].

Directive 2005/29/EC on unfair commercial practices was amended in 2024[5]. The concept of "environmental claim" is now introduced. Two scenarios in which a practice is deemed misleading by action according to the semi-general standard have been added to Article 6, § 2. They relate to "an environmental claim related to future environmental performance without clear, objective, publicly available and verifiable commitments set out in a detailed and realistic implementation plan that includes measurable and time-bound targets and other relevant elements necessary to support its implementation, such as allocation of resources, and that is regularly verified by an independent third party expert, whose findings are made available to consumers" (point d), and "advertising benefits to consumers that are irrelevant and do not result from any feature of the product or business" (point e).

Several unfair commercial practices that are prohibited in all circumstances have also been added. The following practices are prohibited:

• "Making a generic environmental claim for which the trader is not able to demonstrate recognised excellent environmental performance relevant to the claim";
• "Making an environmental claim about the entire product or the trader’s entire business when it concerns only a certain aspect of the product or a specific activity of the trader’s business"; or
• "Claiming, based on the offsetting of greenhouse gas emissions, that a product has a neutral, reduced or positive impact on the environment in terms of greenhouse gas emissions."

This upcoming tightening of the rules regarding greenwashing should prompt professionals to exercise caution when promoting the merits of the services they implement in favor of ecological transition and to avoid broad and vague formulations.

[1] This version of the ICC Code is available on ICC_2024_MarketingCode_2024.pdf.

[2] In Belgium, the Intersectoral Code of Ecological Advertising can also be mentioned.

[3] Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’), O.J. L149 of 11 June 2005.

[4] See also the Proposal for a Directive of the European Parliament and of the Council on substantiation and communication of explicit environmental claims (Green Claims Directive), COM(2023) 166 final.

[5] Directive (EU) 2024/825 of the European Parliament and of the Council of 28 February 2024 amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and through better information, O.J. L of 6 March 2024. This directive must be transposed by March 27, 2026, with the new rules coming into effect from September 27, 2026.

For more information, please feel free to contact Hervé Jacquemin, Julie-Anne Delcorde, Thierry Tilquin

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