Energy renovation of co-ownerships: “What are the banks waiting for to finance it!”

600,000 condominium buildings that need to undergo an environmental makeover: this is undoubtedly the biggest challenge in the country's ecological transition, due to its size and the number of buildings concerned, as well as the decision-making method that governs condominiums. Moreover, it is in condominiums that the majority of private rental housing is located, some of which is threatened withban on renting, and this is where urgent action is needed to avoid attrition of rental supply. Not to mention that the energy transition, by the admission of all condominium trustees, creates the opportunity to undertake maintenance and restoration work in all directions: the co-owners had deferred them and the obligations to diagnose and schedule improvements to the building for energy reasons leads them to undertake other renovation and modernization actions at the same time. In short, this is truly the project of the century.

It can be estimated that the most difficult obstacle to overcome is the fragmentation of decision-making power. This observation is undeniable. In this year when we celebrate the 60th anniversary of the law that established the co-ownership system in France, promulgated on July 10, 1965, the actors of co-ownership do not question the principle of this kind of census democracy, the only valid logic for organizing life in buildings where ownership of the common areas is shared. We will simply observe that in most cases, the cause must be sought in what prevents a majority from emerging, the question of the contributory capacity of the co-owners, both individual and collective.

Facing works of a considerable amount, which amounts to several hundred thousand euros, the savings of each and every one – the works fund created by the ALUR law of March 24, 2014 – are far from sufficient and genuine financial engineering must be deployed. Property managers must acquire a culture of financing and most often know how to mobilize the right external specialized skills, by using a financial project management assistant (AMO). Of course, it is a question of gathering the public aid to which the co-ownership is entitled, but also of finding complementary solutions in terms of credit. The famous collective loans were born 20 years ago and have never been so much talked about. If their market was confidential, its depth has increased with the constraints of the fight against climate change. The legislator even got involved by inventing, alongside the pre-existing formula of the collective loan with individual membership, a loan with systematic membership, unless otherwise expressed within two months following notification of the minutes of the general meeting which voted on the loan.

"How can banks and guarantors not rush into this market as one?"

One would be justified in thinking that the arsenal is complete and that all is well. In fact, banks are not rushing as one to finance co-ownerships. The two major brands, historically familiar with individual membership loans, are the most enthusiastic. The others, encouraged by the government and Parliament, are reluctant to consider the co-ownership community as a single, indivisible borrower and to understand the risk it truly carries. They consider themselves to have neither visibility nor control. Moreover, it is the surety companies that lack enthusiasm. These players even approved the stipulation in the law that they would intervene as soon as a co-owner defaults, whereas strictly speaking, it is the failure of the co-owners' association that will be recorded, itself obviously caused by one of its members. It was also necessary to fight to ensure that the implementing decree of the law specifying the terms of the collective loan did not require the trustee to provide the banker with a long list of documents relating to each borrowing co-owner...

French banks and their guarantors, who actually have the final say on whether a loan is approved, must change their view of the real risk associated with co-ownerships: it is minimal. First, there is no reason to believe that the monthly loan payments, added to the general expenses, calculated to be bearable by the co-borrower, will generate non-payments. Nor is there any reason to imagine a kind of negligence on the grounds that the loan has been granted, enforced, and that there will be no consequences for the completion of the work... The lender will be less accommodating than the trustee when he notices non-payment... The fear of the police will be greater than it is today. In addition, the neighbors' view of bad payers is not friendly, and there is constant pressure to avoid culpable negligence... We are talking here about a lack of rigor, and not about objective accidents of life, respectable in themselves. Finally, what is the ultimate guarantee in the event ofunpaid debts not resolved The sale of the lot belonging to the defaulting co-owner. Its value is such that the debt will obviously be absorbed. In this context, how can banks and guarantors not rush into this market as one?

“Less than 10% of the work essential to upgrading the energy performance of co-ownerships has been carried out”

Certainly, the administrative management of a collective loan is more complex, but in the age of software and artificial intelligence, who would believe that lenders could be dissuaded by this embarrassment? What's more, in return for this complexity of each file, it is on average of an uncommon amount: an average co-ownership of around twenty apartments needs one million, one and a half million or even two million euros... Enough to justify some IT developments and specific training of specialized teams. To date, it is estimated that less than 10% of the essential work to upgrade the energy performance of co-ownerships has been carried out, out of an amount estimated between 200 and 400 billion euros!

Banks cannot fail to provide assurances of greening their balance sheets. In this regard, co-ownership offers them the most promising market. History would not forgive them for having delayed or prevented the successful environmental transformation of French co-ownerships. Moreover, it is the collective wealth of their clients that they will promote: it is much more than a guarantee in the event of default; it constitutes the foundation of wealth that encourages households to consume and borrow for their daily lives and investments.