Building owners can fund green improvements through council loans
In brief — Environmental upgrade agreements
Building owners can now obtain financing through their local council via an environmental upgrade agreement (EUA) to assist in making green improvements to buildings. The amendments to the Local Government Act (NSW) 1993 to establish the scheme started on 18 February 2011.
How the financing agreements work
References to sections in this update are references to sections of the Local Government Act (NSW) 1993. The Council enters into an EUA with a building owner and a finance provider.
The EUA provides for the following (sections 54D and 54G):
- The building owner agrees to carry out environmental upgrade works to a building
- The finance provider agrees to advance funds to the building owner to finance the environmental upgrade works
- The council agrees to levy a charge on the land for the purpose of repaying the advance to the finance provider
- How the advance will be repaid, including the amount of the environmental upgrade charge to be levied by the Council to be used to make the repayment
- Any other provisions agreed by the parties
- The types of green improvements that can be financed under the scheme are works to improve the energy, water or environmental efficiency or sustainability of the building to which the agreement relates. The regulations under the Act can specify works that are not able to be financed under the scheme (section 54E).
Tenants’ contribution to environmental upgrade charges
Section 54N provides that a lease may require a tenant to pay a contribution towards an environmental upgrade charge, but that the contribution must not exceed a reasonable estimate of the cost savings to be made by the tenant as a consequence of the environmental upgrade works that will be undertaken. However, the section goes on to say that the parties to a lease can agree that the provision limiting the cost payable by a tenant does not apply.
A landlord must provide a copy of the EUA to a tenant, if the tenant asks for it, before the landlord can require a tenant to contribute to the environmental upgrade charge (section 54N).
As the Council is levying the repayment amounts as a ‘charge’, building owners may be able to include the charge as part of the building outgoings, even if there is not a clause in the lease specifically referring to EUAs. If so, all or part of the charge may be able to be paid by the tenants of the building (depending on the outgoings recovery provisions under the lease).
The Council is not liable for any failure of a person to pay an environmental upgrade charge (section 54M).
Types of buildings covered by the EUA scheme
The building must be:
- An existing building, one that is complete and ready for lawful occupation when the agreement is entered into
- A non-residential building or a strata building that is the subject of a strata scheme with more than 20 lots (apart from utility lots and lots used for parking)
- Located in the area of the council that enters into the agreement, at the time the agreement is entered into (section 54F)
- An agreement relating to a strata building is entered into by the owners corporation. The owners corporation can then chose to pay the charges from either its administrative fund or its sinking fund.
If you have any questions about EUAs or green leasing, please contact: