Germany's Building Modernization Act (GModG): What Housing Companies Must Do Now

Since 29 July 2026, the Building Energy Act (Gebäudeenergiegesetz, GEG) officially carries a new name: the Building Modernization Act (Gebäudemodernisierungsgesetz, GModG). The former requirement that new heating systems run on at least 65 percent renewable energy has been dropped entirely, with nothing put in its place. For housing companies, what matters now are the unchanged inspection, optimization and documentation duties under Section 60b, plus new deadlines for non-residential buildings in the portfolio. A portfolio-wide fleet approach is still off the table.

For portfolio owners, the practical question is which obligations apply immediately, which ones follow in 2027, and which have disappeared completely under the reform. Let's go through them in order.

These three deadlines show you where action is actually required right now:

What did the GModG change about the 2026 Building Energy Act?

Since 29 July 2026, the Building Energy Act has officially been renamed the Building Modernization Act. The Bundestag and Bundesrat had already passed the law on 10 July 2026, and it was published on 28 July 2026 in the Federal Law Gazette under number 2026 I No. 226. The Bundestag vote came in at 323 to 271.

Legally, this is a renaming combined with an amendment. The core heating rules in Article 1 have applied since 29 July 2026, while the EPBD-related provisions in Article 2 follow on 1 January 2027, including renovation duties for non-residential buildings and the new rules on building automation.

For context: The Building Energy Act has not legally disappeared, it simply operates under a new name now. Anyone searching for the Building Energy Act ends up at the GModG in substance, because both terms have referred to the same legal framework since July 2026.

Two instruments have been dropped entirely under the reform: the 65 percent rule for new heating systems and the operating ban on constant-temperature boilers older than 30 years. Both had previously done a great deal to determine when a heating system in the existing stock had to go.

Which heating options can you install now, and what does choosing gas or oil cost you?

Since the reform, you can once again choose freely from a catalog of ten heating options, including gas and oil heating systems as well as newly added high-efficiency CHP units. The catalog of options in the GModG replaces the former requirement to generate heat predominantly from renewable sources.

If you decide on gas, heating oil or LPG, a phased blending quota kicks in alongside it, informally known as the "bio-ladder":

Eligible fuels include biomethane and bio heating oil (other options are bio-LPG and green hydrogen). Details on a supplementary green gas and green heating oil quota from 2028 are still pending: according to IWPro, they are due to be set out in a separate law by 1 December 2026, so the exact framework remains open for now.

For gas, oil or LPG heating systems installed after 29 July 2026, an additional rule takes effect from 2028: the CO₂ Cost Allocation Act will then mandate a flat 50/50 split of CO₂ costs and gas network charges between landlord and tenant, plus a proportional share of the extra biofuel costs, regardless of the building's energy condition. Systems installed before that date remain subject to the existing 10-tier model. For heat pumps, the cost allocation is additionally tied to a seasonal performance factor of at least 2.5.

What deadline applies to the Section 60b heating inspection in your portfolio?

The heating inspection and optimization duty under Section 60b of the GEG still applies unchanged to water-based heating systems in buildings with six or more residential or usage units. Systems installed before 1 October 2009 must be inspected and optimized by 30 September 2027. Newer systems follow within one year after 15 years of operation.

Any optimization measures identified also have to be implemented and documented within one year of the inspection. You must provide the results to tenants without delay whenever they ask for them. Violations of these operator duties count as regulatory offenses under Section 108 of the GEG/GModG.

Fines for non-compliance: Depending on severity, the range starts at 5,000 euros, for example for a missing heat pump operating check, climbs to 10,000 euros for a late heating inspection, and can reach 50,000 euros for serious breaches of duty.

What role does municipal heat planning still play for your portfolio?

The direct link between heat planning and a heating obligation disappeared along with the 65 percent rule. The heat plans themselves remain strategically important though: they show which areas are set up for district heating and where decentralized solutions such as heat pumps stay the more economical option.

Planning progress shows a clear gap by municipality size. Of Germany's 83 large cities with more than 100,000 residents, 72 had already completed their heat plan on time by the 30 June 2026 cut-off date, according to the BBSR half-year report. Nationwide, 56 percent of the population lived in municipalities with a completed heat plan at that point. Municipalities with fewer than 100,000 residents have until 30 June 2028 under the Heat Planning Act.

Investment decisions on heating replacements are therefore worth weighing location by location, since planning progress differs substantially from one municipality to the next. A portfolio with locations spread across several federal states runs into very different starting conditions as a result.

Why does the fleet approach remain off-limits for housing companies?

The federal government explicitly rejected the fleet approach called for by the Bundesrat and the GdW, the German housing industry association, on 26 June 2026. The GModG makes no provision for meeting requirements across buildings at portfolio level.

The one cross-building relief that survives is the existing district solution, extended on a temporary basis until 31 December 2030. It lets you meet efficiency requirements jointly for several spatially connected existing buildings owned by the same party, as set out in Section 103(3) of the GModG. In its opinion, the Bundesrat explicitly criticized the absence of a genuine fleet solution.

In practice, that means if you own several buildings within one district, you can demonstrate optimization measures on a combined basis. Scattered individual properties in different locations remain subject to the duty on their own. The article Starting decarbonization in existing buildings without renovation describes how efficiency requirements can be met in the existing stock even without a full-scale renovation.

How do you meet the optimization duty without inspecting every building individually?

The recurring individual inspection under Section 60b no longer applies once a heating system already runs on standardized building automation under Section 71a, or is subject to comparable external operations management or energy contracting with efficiency monitoring.

For that, the system needs continuous monitoring and logging of operations, along with automatic detection of efficiency losses. Digital monitoring then delivers an ongoing record in place of the recurring individual inspection.

Digital monitoring shows its strength here especially in larger portfolios. The KUGU Energieplattform, with KUGU VIS (Visuelles-Informationssystem), makes supply temperatures and heating curves visible for every system and logs efficiency losses on an ongoing basis, forming the documentation basis for the Section 60b exemption. Building on that, KUGU EOS (Energie-Optimierungssystem) takes over the automated recalibration, so that efficiency losses that are detected also get corrected continuously. The article Heating optimization in existing buildings: levers, costs, savings potential describes which optimization levers work technically and what they cost. Heating system diagnostics: which faults cost portfolios money shows which operating faults can be reliably uncovered through system diagnostics.

Housing companies that take this route secure the required documentation as a result. And they save energy at the same time: digital heating optimization saves more than 20 percent on average, with KUGU guaranteeing at least 12 percent.

What additionally applies to non-residential buildings and mixed-use portfolios?

Commercially used parts of buildings and purely non-residential buildings in the portfolio are subject to additional, separate duties. Since 31 December 2024, heating or air conditioning systems above 290 kilowatts of rated output have had to be fitted with digital building automation. Under the GModG amendment, that threshold drops to above 70 kilowatts as part of the EPBD implementation, with a deadline of 31 December 2029.

On top of that comes a building-specific minimum-efficiency renovation duty. Under Section 40 of the GModG, primary energy demand may not exceed 3.5 times the reference building value from 1 January 2030, and no more than 2.95 times from 1 January 2033. That affects roughly the least energy-efficient 16 percent of the existing stock from 2030, rising to around 26 percent from 2033.

The renovation duty counts as met, among other things, for buildings constructed from 1996 onward, buildings renovated to the 1995 Thermal Insulation Ordinance (WSchVO 1995) standard, or buildings heated predominantly by heat pump, biomass or district heating. Listed heritage buildings and buildings scheduled for demolition are exempt.

The GModG also introduces, for the first time, a nationwide, staggered solar obligation that takes effect in several steps, according to Haufe:

Existing residential buildings are exempt from the solar obligation. Exemptions also apply in cases of technical impossibility, economic unreasonableness or heritage protection constraints.

Staying on top of GModG obligations across your portfolio

Dropping the 65 percent rule takes some pressure off your choice of heating technology. The real work now sits in proving compliance during ongoing operation: inspection, optimization and documentation under Section 60b, plus the new deadlines for non-residential buildings in your portfolio.

The best starting point is a system audit across the whole portfolio. Check which heating systems were installed before 2009 and which are approaching the 15-year mark. Then work out where the inspection duty can already be met through continuous monitoring today, without scheduling an on-site visit for every single building.

Getting this overview in place now buys you breathing room ahead of the 30 September 2027 deadline. It also puts the figures in your hands to demonstrate savings to regulators, tenants and investors alike.

Do I have to replace old gas or oil heating systems now?

No, there is no longer a replacement duty based purely on a system's age. The former operating ban on constant-temperature boilers older than 30 years was dropped entirely under the GModG, with nothing put in its place. Existing heating systems may keep running as long as the inspection and optimization duty under Section 60b is met.

From when do new gas heating systems need climate-friendly fuels?

From 2029, newly installed gas, heating oil or LPG heating systems are subject to a minimum quota of 10 percent climate-friendly fuels such as biomethane or bio heating oil. The quota rises in steps to 15 percent from 2030, 30 percent from 2035 and 60 percent from 2040. Details on a supplementary green gas quota from 2028 are due to be set out in a separate law by the end of 2026.

Does the Section 60b inspection duty also apply to smaller apartment buildings?

The duty only kicks in for buildings with six or more residential or usage units and applies to water-based heating systems. Smaller properties with fewer units fall outside this specific deadline rule. For larger properties in a portfolio, the six-unit threshold counts per building, not across the entire portfolio.

What happens if the 30 September 2027 deadline is missed?

A fine under Section 108 follows, scaled to the severity of the violation. A heating inspection that isn't carried out on time can bring a fine of up to 10,000 euros, while more serious breaches of duty can reach up to 50,000 euros. The deadline applies to water-based systems installed before 1 October 2009.

Can several buildings at one site meet the requirements jointly?

Yes, but only within the existing district solution, which has been extended on a temporary basis until the end of 2030. It applies exclusively to spatially connected existing buildings owned by the same party, not to an entire, geographically spread portfolio. The federal government rejected a general fleet approach for housing companies in June 2026.