Build­ing own­ers can fund green improve­ments through coun­cil loans

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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.

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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: