Tips & tricks on product-as-a-service services in a smart building

Leasing a car, listening to music through Spotify and watching movies through Netflix are examples of the product-as-a-service (Paas) revenue model. The goal is not to sell a product, but to provide a product performance. Not only cars and entertainment lend themselves to a Paas construction. Components of a (smart) building are also increasingly offered as Paas. Examples are the circular facade, solar panels and smart sensors that collect data on the current status of the building. The difference with cars and music is that in this case they are not separate products, but parts of a building that are "attached" to the building. That fusion with the building can cause the supplier to lose unwanted ownership of the product. In this blog, Noreen Sturris and Eline Holtland - van der Zwaag provide practical tips and tricks to prevent unwanted loss of ownership and properly set up Easter service for building components.

Easter service as a sustainable service

In the case of Paschal, the supplier retains ownership of the product and ensures its maintenance and quality. This gives the supplier an additional incentive to make high-quality products that last and are easy to repair. After all, (planned) product obsolescence costs the supplier money. In addition, in case of service termination, the product is reused with a new customer. Paschal thus encourages sustainable construction. For the use of the product, the user pays an agreed fee to the supplier.

Difficulties with building components as a service

Once the user stops paying for the service, the provider will deny him access to the product. This is easy to implement in the case of leasing a car, movie or music. In the case of building components - such as a facade or solar panels - this is obviously more difficult to organize. On the one hand, because in order to dismantle solar panels, smart sensors or a facade, the supplier must gain physical access to a property that does not belong to him and thus obtain permission to do so. On the other hand, because ownership may have unintentionally passed to the property owner/user and thus there is no right to dismantle.

Property loss due to constituent formation

Unintentional loss of ownership can thus occur through constituent formation. With constituent formation, one thing becomes a constituent of another thing: the main thing. Subsequently, the owner of the main object also becomes the owner of the components. The thing is then seen as a whole.

Constituent formation occurs when a case:

1. is part of another item that is considered by the common law to be the principal item; or
2. cannot be removed from the main case without damage.

Classic examples of constituent formation are a chip in a computer or an engine in a vehicle. The owner of the computer and the vehicle, respectively, also own the chip and the engine.

Component formation at Paschal

Component formation can pose risks at Paas. The owner of a circular façade, for example, naturally wishes to retain ownership of it. Legally, however, the user also becomes the owner of the facade as soon as it is built. After all, a facade forms a whole with a building. This problem also applies to solar panels.

Although the case law and literature are not yet clear on whether solar panels are a constituent of a building, it is quite conceivable that the owner of solar panels may lose ownership after installation. You can read more about constituent formation in solar panels in this blog.

In the form of Paas where, for example, a kitchen is provided as a service, the kitchen will also be part of the dwelling in which it is placed, according to common sense. This is because a kitchen will be built-in and cannot be removed without damage. For this reason, the owner of a home also owns a kitchen once it is installed.

Points of interest in Easter service of building components

Finally, what about Paschal and building components? These are subject to a right of superficies. A building superficies right is a right in rem that can be established on another person's real estate. This right of superficies can in some cases prevent the unwanted loss of ownership of the circular business owner . An owner of solar panels can secure his ownership right through a building lease. Because of the building lease, he remains the owner even if the solar panels are mounted on someone else's building.

There is much debate in the legal community as to whether a building lien can also be established for the benefit of a kitchen or bathroom. In addition, the mortgage holder - usually the bank - plays a role if the building in question is mortgaged. In most cases, the owner of the building may not establish a building lease on the building without the bank's consent. For these reasons, it is a good idea to check, before you engage in any product performance, whether you may be faced with unwanted loss of ownership.

Do you want to know if a building lease is the solution for your Paschal? Or are you unsure whether your product is a component of the smart building in which it is placed? Feel free to contact us using the form below. We are happy to think with you about the possibilities!