Building energy efficiency update — Commercial Buildings Mandatory Disclosure Regime and Environment
In Brief — Mixed use buildings, refurbishments and Environmental Upgrade Agreements
The Commercial Buildings Mandatory Disclosure Regime has undergone amendments, effective 29 November 2010, related to mixed use buildings and refurbishments. The Local Government Amendment (Environmental Upgrade Agreements) Bill 2010 facilitates a financing mechanism for building owners to implement major long term energy efficiency upgrades to buildings.
Mixed use buildings
Mixed use buildings which comprise office space with other uses such as retail, industrial, hotel or hospital are now not required to disclose a NABERS energy rating if the building has less than 75% office space (calculated on net lettable area). However, this is an interim measure during the 12 month transition period which expires on 31 October 2011.
This development has the effect of excluding most industrial and retail premises from complying with the new mandatory disclosure regime, even if the office component is greater than 2,000 sq metres.
In cases where buildings undergo major refurbishments, there is now no requirement to disclose a NABERS energy rating for two years from the date of the certificate of occupancy relating to the refurbishment, on the condition that the refurbishments meet three criteria:
- They involve substantial change to the fabric, plan or equipment
- They require the issue of a certificate of occupancy under State or Territory legislation
- They will have a substantial effect on the energy performance of the base building
Local Government Amendment (Environmental Upgrade Agreements) Bill 2010
This bill facilitates a financing mechanism for building owners to implement major long term energy efficiency upgrades to buildings. The concept of an “environmental upgrade agreement” will be introduced to assist building owners to gain access to commercial finance in the timeframe and on terms needed to progress cost effective environmental upgrade works.
The proposed environmental upgrade agreements will operate according to the following framework:
- The lender provides finance to the building owner
- The lender takes a charge over the building
- The building owner upgrades the building
- The building owner then makes regular payments to the local council in the form of a special rate or charge
- When repayment is received, the council forwards it to the lender to repay the debt
Participation on the part of building owners, lenders and local councils is voluntary.
Passing on costs to the tenant
In principle, as the special rate or charge will be rendered by council, it is likely to fall under the definition of “outgoings” in a lease and therefore be capable of being on-charged to the tenant under the outgoings provisions of the lease. However, tenants must not be required to pay more than they would have been required to pay had the environmental upgrade agreement not been in place.
In practical terms, the benefit in the reduced power bill as a result of the environmental upgrade must outweigh the contribution that the tenant will be required to make under the outgoings provisions of the lease.
For further information please contact: