Third-party financing is a financial mechanism: a third party funds energy renovation works, repaid through a fee spread over several years. Insulation, heating or energy efficiency: for a home as for offices, the regulatory framework requires an estimate of energy savings, not their measurement. Yet you will repay on that result. Before the contract is put in place, know who sets the baseline, who measures it and who absorbs the gap.
Third-party financing under the French Construction Code and the players behind it
A technical offer and financing repaid through a time-limited fee
Third-party financing is defined by article L381-1 of the French Construction and Housing Code (Code de la construction et de l'habitation, CCH), introduced by the 2014 ALUR law[1][1]RegulationLégifrance, “Construction and Housing Code” (Code de la construction et de l'habitation), articles L381-1 to L381-3; “Monetary and Financial Code”, article L511-6, 8°See in sources ↓. It combines a “technical offer” for energy renovation with “a service including partial or total financing” of that offer[1][1]RegulationLégifrance, “Construction and Housing Code” (Code de la construction et de l'habitation), articles L381-1 to L381-3; “Monetary and Financial Code”, article L511-6, 8°See in sources ↓. In return, the client makes “staggered, regular and time-limited payments”[1][1]RegulationLégifrance, “Construction and Housing Code” (Code de la construction et de l'habitation), articles L381-1 to L381-3; “Monetary and Financial Code”, article L511-6, 8°See in sources ↓.
In practice, the third-party financer designs the project, funds the works and provides the technical support the building owner needs during implementation. In commercial buildings, this model often goes through an energy performance contract or EPC.
Which buildings and projects are eligible?
In France, the framework for third-party financing companies (STFs, sociétés de tiers-financement) is aimed first at housing: co-owned residential buildings and households[2][2]RegulationLégifrance, “Decree No. 2015-306 of 17 March 2015 specifying the scope of third-party financing services for energy renovation works in housing”, articles D.381-9 to D.381-12 of the CCH (formerly R.381-9 to R.381-12, version in force since 1 September 2019)See in sources ↓. Since 2023, the State, its public institutions and local authorities have had a separate, experimental scheme: the deferred-payment global performance contract (marché global de performance à paiement différé)[3][3]RegulationLégifrance, “Law No. 2023-222 of 30 March 2023 opening third-party financing to the State, its public institutions and local authorities to support energy renovation works”See in sources ↓. For businesses, third-party financing of commercial buildings usually goes through a financed EPC or a bank arrangement, outside the STF framework.
The conditions set by the 2015 decree: audit, works program, calculated performance target
Decree No. 2015-306 of 17 March 2015 specifies the content of the offer[2][2]RegulationLégifrance, “Decree No. 2015-306 of 17 March 2015 specifying the scope of third-party financing services for energy renovation works in housing”, articles D.381-9 to D.381-12 of the CCH (formerly R.381-9 to R.381-12, version in force since 1 September 2019)See in sources ↓. Article D.381-10 of the CCH (formerly R.381-10) sets a calculated performance target: the works must achieve a reduction in conventional primary energy consumption, at a level set by ministerial order. Article D.381-11 (formerly R.381-11) requires a works program based on an audit, an estimate of the savings and support for the building owner[2][2]RegulationLégifrance, “Decree No. 2015-306 of 17 March 2015 specifying the scope of third-party financing services for energy renovation works in housing”, articles D.381-9 to D.381-12 of the CCH (formerly R.381-9 to R.381-12, version in force since 1 September 2019)See in sources ↓. Remember the word “estimate”: the text says nothing about measurement.
Regional third-party financing companies and their approval
Article L381-3 allows a third-party financing company to grant loans, as an exception to the banking monopoly provided for in article L511-6, 8° of the French Monetary and Financial Code[1][1]RegulationLégifrance, “Construction and Housing Code” (Code de la construction et de l'habitation), articles L381-1 to L381-3; “Monetary and Financial Code”, article L511-6, 8°See in sources ↓. This exemption covers STFs in which local authorities hold a majority of the capital or which are attached to a supervising local authority. Their lending activity requires authorization from the ACPR (the French banking supervisor)[1][1]RegulationLégifrance, “Construction and Housing Code” (Code de la construction et de l'habitation), articles L381-1 to L381-3; “Monetary and Financial Code”, article L511-6, 8°See in sources ↓. An STF is most often set up by a region. These companies form a national network federated by the Serafin association[4][4]Studies and reportsSerafin, association of third-party financing companies, “Third-party financing” (Le tiers-financement), ACPR approval, combined roles, commitment period in residentialSee in sources ↓. Effinergie, which runs renovation labels, operates in the same ecosystem.
EPC operators that pre-finance the works
In a financed EPC, the operator becomes the third-party financer: it carries the investment and recovers it through the fee. These are often energy service companies (ESCOs). Serafin states that STFs themselves can act as owner's advisor (AMO), design engineer, delegated client or general contractor[4][4]Studies and reportsSerafin, association of third-party financing companies, “Third-party financing” (Le tiers-financement), ACPR approval, combined roles, commitment period in residentialSee in sources ↓. An EPC operator often wears the same hats. The one who designs the works then becomes the one being repaid.
Banks, leasing and energy leasing
A bank loan without an integrated works offer is not third-party financing within the meaning of the Code.
Energy leasing, a form of lease financing, covers equipment such as a boiler or a heat pump. A third-party investor provides capital without designing the program. These solutions ease the upfront outlay, in exchange for a rate built into the lease payments. Repayment remains due, savings or not.
Third-party financing and EPCs: how the structure fits together
From audit to fee: the chain of a financing structure as seen by the building owner
A financing structure reads as a chain of five steps, from the audit to the last payment. The diagram below shows who holds each one, in an STF setup as in a third-party financed EPC. Select a step to follow the chain of responsibility.
Five steps, two structures: who holds what
Each card shows who holds the step in an STF setup, then in a third-party financed EPC.On the third-party financed EPC line, the operator can hold four steps out of five, including the estimate that sets its own repayment. The Serafin association lists these same tasks for STFs[4][4]Studies and reportsSerafin, association of third-party financing companies, “Third-party financing” (Le tiers-financement), ACPR approval, combined roles, commitment period in residentialSee in sources ↓. Nothing illegal about it. It is nonetheless a structural conflict of interest, which the building owner often discovers too late.
How does the EPC guarantee the performance that repays the financing?
In an EPC, the operator commits to a quantified reduction in energy consumption. In practice, the performance guarantee comes with penalties if the target is missed. These penalties are contractual practice: no text requires them. They protect the financing as long as the measurement holds up. The contract must also state who bears the P5 and P4 items (the French contract cost categories for capital renewal and financing) during the commitment.
The deferred-payment global performance contract, open to local authorities since 2023
Stemming from a bill aimed at “supporting energy renovation works”, Law No. 2023-222 of 30 March 2023 opens third-party financing to the State and local authorities[3][3]RegulationLégifrance, “Law No. 2023-222 of 30 March 2023 opening third-party financing to the State, its public institutions and local authorities to support energy renovation works”See in sources ↓. It derogates from the French Public Procurement Code[3][3]RegulationLégifrance, “Law No. 2023-222 of 30 March 2023 opening third-party financing to the State, its public institutions and local authorities to support energy renovation works”See in sources ↓. It authorizes a deferred-payment global performance contract (marché global de performance à paiement différé), an EPC awarded in the form of the global performance contract of article L. 2171-3, experimental for five years from its enactment, i.e. until spring 2028[3][3]RegulationLégifrance, “Law No. 2023-222 of 30 March 2023 opening third-party financing to the State, its public institutions and local authorities to support energy renovation works”See in sources ↓. For a public service, the question is the same as in the private sector: who measures?
Who bears which risk: performance, building use, measurement, default?
Over a period of 15 to 25 years, the duration reported by Serafin in the residential sector[4][4]Studies and reportsSerafin, association of third-party financing companies, “Third-party financing” (Le tiers-financement), ACPR approval, combined roles, commitment period in residentialSee in sources ↓, four risks are allocated:
- Performance: the operator or the third-party financer, through the contract penalties.
- Use: the building owner, as soon as the use of the premises or their operating hours change.
- Default: the building owner, who keeps the equipment and sometimes the debt.
- Measurement: nobody claims it, for lack of a written protocol.
Measurement risk conditions all the others, because it sets the amount repaid.
Questions to ask before signing
Six questions before signing
These risks are allocated at signing, rarely afterwards. Of these six questions, tick the ones that already have a written answer in the draft contract.
If one is still without a written answer, the contract is not ready. The baseline is negotiated now, while you still have leverage.
A fee backed by savings requires a measurable baseline
Estimating or measuring savings: what the texts leave open
The offer must include an estimate of the energy savings[2][2]RegulationLégifrance, “Decree No. 2015-306 of 17 March 2015 specifying the scope of third-party financing services for energy renovation works in housing”, articles D.381-9 to D.381-12 of the CCH (formerly R.381-9 to R.381-12, version in force since 1 September 2019)See in sources ↓. Estimating is not measuring. Serafin describes savings built into the financing plan[4][4]Studies and reportsSerafin, association of third-party financing companies, “Third-party financing” (Le tiers-financement), ACPR approval, combined roles, commitment period in residentialSee in sources ↓. Yet no regulatory method verifies, years later, each unit of consumption avoided.
Did you know? Article D.381-11 of the CCH (formerly R.381-11) requires a quantified estimate of the savings without designating any verification protocol or verifier[2][2]RegulationLégifrance, “Decree No. 2015-306 of 17 March 2015 specifying the scope of third-party financing services for energy renovation works in housing”, articles D.381-9 to D.381-12 of the CCH (formerly R.381-9 to R.381-12, version in force since 1 September 2019)See in sources ↓. The contract organizes measurement, when it does.
Meters, data gaps, manual overrides: the flaws that skew repayment
An inflated baseline repays the operator for savings that do not exist, over the entire term. Here are five flaws we find in historical data, with their effect on the calculation.
| Flaw | Effect on the savings calculation | Method that neutralizes it |
|---|---|---|
| Unreliable meters | Baseline skewed from the start | Prior meter validation |
| Gaps in historical data | Baseline filled in by extrapolation | Reconstruction of a full year, IPMVP protocol[5][5]Studies and reportsEVO, “International Performance Measurement and Verification Protocol (IPMVP)”, baseline period and adjustmentsSee in sources ↓ |
| Manual overrides | Artificially high baseline | Overrides lifted before measurement |
| Uncorrected energy drift | Operational savings credited to the renovation | Baseline reset to nominal operation |
| No weather correction | A mild winter passes for a success | Adjustment using heating degree days (HDD) |
In our experience, these flaws are not a matter of bad faith: nobody looked at how the building was operated before signing.
Which structure to finance works across a commercial portfolio?
Equity, STF, financed EPC, CEE, data reliability: five routes compared
On the CEE side (CEE energy-savings certificates), the BAT-TH-116 sheet requires a class A or B BMS under the NF EN ISO 52120-1 standard[6][6]RegulationCEE standardized operation sheet BAT-TH-116, “Building management system for heating, domestic hot water, cooling/air conditioning, lighting and auxiliaries”, class A or B under NF EN ISO 52120-1:2022See in sources ↓, a logic distinct from compliance with the BACS decree. The comparison below cross-checks five routes against four criteria, including how savings are measured.
| Structure | Access | Bearer of the performance risk | Commitment horizon | How savings are measured |
|---|---|---|---|---|
| Equity Measurement at your expense |
Private and public | Building owner | No financing commitment | Paid for by the building owner, no protocol required. |
| Third-party financing through an STF Estimate only |
Housing, co-owned buildings, households | Building owner for the actual consumption gap; the STF answers for proper delivery of the technical offer | Time-limited fee | Estimate required by article D.381-11, no measurement protocol required. |
| Third-party financed EPC or deferred-payment global performance contract Measurement in the contract |
Private (EPC); public by derogation from public procurement rules | Operator, within the limit of the contract penalties | Contract term | Defined in the contract; insist that it be auditable by both parties. |
| CEE bonus (BAT-TH-116, class A or B BMS) No ex post measurement |
Private and public | Building owner | One-off, bonus paid on completion | No ex post measurement required. |
| Making existing systems reliable, no CAPEX Auditable baseline |
Private and public | Building owner | Short | Reconstructed baseline, IPMVP protocol and HDD correction. |
The column to read first is the last one. Equity and the CEE bonus leave measurement to the building owner. Third-party investment and third-party financing of commercial buildings hand it, in practice, to whoever will be repaid.
When is third-party financing a good idea?
The structure makes sense when the avoided CAPEX frees up cash for other assets. It also makes sense when a single lead contractor coordinates a deep renovation to BBC Effinergie level (the French low-energy renovation label), envelope and heating included. Pre-financing the CEE bonus avoids a cash advance. The Décret tertiaire (France's tertiary decree on energy savings in commercial buildings) target of -40% consumption by 2030[7][7]RegulationLégifrance, “Decree No. 2019-771 of 23 July 2019”, known as the Décret tertiaireSee in sources ↓ pushes in this direction. The only limit: the longer the commitment, the more measurement matters.
What Foobot brings the building owner, without financing or selling works
A second BMS advisory opinion on the technical offer before commitment
Foobot is neither a third-party financer, nor an STF, nor an EPC operator. Our BMS advisory reviews the works program and the savings estimate before you commit. Independent of both the works and the financing, our opinion does not depend on who will be repaid.
Making meters and historical data reliable to set a solid baseline
Meter data reliability work tracks down disconnections, data gaps, duplicates and invisible drift. Every meter used in the baseline must have proven that it counts correctly. Without this, each annual repayment is calculated on unqualified data.
Before signing a third-party financing deal, set the baseline you can defend
A third-party financing deal is signed on an estimate and repaid on a measurement. In between, the baseline decides who pays what. Before signing, lock in a baseline measured with an auditable method, then a written allocation of risks, measurement included. Then follow the sequence: make existing systems reliable, then finance the works. Have this baseline checked before someone else sets it for you.
secure measurement before financing
FAQ - third-party financing
What is third-party financing?
Third-party financing combines an offer of energy renovation works with their partial or total financing. The beneficiary repays it through regular, time-limited payments. It is defined by article L381-1 of the French Construction Code[1][1]RegulationLégifrance, “Construction and Housing Code” (Code de la construction et de l'habitation), articles L381-1 to L381-3; “Monetary and Financial Code”, article L511-6, 8°See in sources ↓.
How do you set up a third-party financing company?
A third-party financing company is most often set up by a region, rooted in its territory. To grant loans, it must obtain authorization from the ACPR, as an exception to the banking monopoly provided for in article L381-3 of the CCH and article L511-6, 8° of the Monetary and Financial Code[1][1]RegulationLégifrance, “Construction and Housing Code” (Code de la construction et de l'habitation), articles L381-1 to L381-3; “Monetary and Financial Code”, article L511-6, 8°See in sources ↓.
What are the advantages of third-party financing?
It avoids a cash advance and brings audit, works and financing together under a single point of contact who supports the project. It can also pre-finance the CEE bonus. For a deep renovation, it is a real lever, provided measurement is locked in.
How does third-party financing work?
The third-party financer proposes a works program based on an audit, then advances all or part of the cost. Repayment is made through a fee based on the estimated energy savings. A measurable baseline is needed before signing.
Which projects can benefit from third-party financing?
In France, housing, co-owned buildings and households have access to it through the STF network[2][2]RegulationLégifrance, “Decree No. 2015-306 of 17 March 2015 specifying the scope of third-party financing services for energy renovation works in housing”, articles D.381-9 to D.381-12 of the CCH (formerly R.381-9 to R.381-12, version in force since 1 September 2019)See in sources ↓. The State, its public institutions and local authorities have had access since 2023[3][3]RegulationLégifrance, “Law No. 2023-222 of 30 March 2023 opening third-party financing to the State, its public institutions and local authorities to support energy renovation works”See in sources ↓. Private commercial buildings usually go through a financed EPC or a bank arrangement.
What are the conditions for third-party financing?
The 2015 decree requires a quantified target for reducing conventional primary energy consumption and a works program drawn up on the basis of an audit[2][2]RegulationLégifrance, “Decree No. 2015-306 of 17 March 2015 specifying the scope of third-party financing services for energy renovation works in housing”, articles D.381-9 to D.381-12 of the CCH (formerly R.381-9 to R.381-12, version in force since 1 September 2019)See in sources ↓. It also requires an estimate of the savings and support for the building owner throughout the operation.
How does third-party financing help local authorities?
The 2023 law opens a deferred-payment global performance contract to local authorities, for example to renovate a school's heating. As an exception to public procurement rules, this scheme remains experimental until spring 2028[3][3]RegulationLégifrance, “Law No. 2023-222 of 30 March 2023 opening third-party financing to the State, its public institutions and local authorities to support energy renovation works”See in sources ↓.
Sources and references
7 sources.- [1]Légifrance, “Construction and Housing Code” (Code de la construction et de l'habitation), articles L381-1 to L381-3; “Monetary and Financial Code”, article L511-6, 8°↑ 1 2 3 4 5 6 7
- [2]Légifrance, “Decree No. 2015-306 of 17 March 2015 specifying the scope of third-party financing services for energy renovation works in housing”, articles D.381-9 to D.381-12 of the CCH (formerly R.381-9 to R.381-12, version in force since 1 September 2019)17/03/2015↑ 1 2 3 4 5 6 7
- [3]Légifrance, “Law No. 2023-222 of 30 March 2023 opening third-party financing to the State, its public institutions and local authorities to support energy renovation works”30/03/2023↑ 1 2 3 4 5 6
- [6]CEE standardized operation sheet BAT-TH-116, “Building management system for heating, domestic hot water, cooling/air conditioning, lighting and auxiliaries”, class A or B under NF EN ISO 52120-1:2022↑
- [7]Légifrance, “Decree No. 2019-771 of 23 July 2019”, known as the Décret tertiaire23/07/2019↑