Be prepared! Mandatory disclosure for the energy efficiency of commercial office building

To enable potential purchasers or lessees to consider energy efficiency as part of their decision making processes, the Building Energy Efficiency Bill 2010 (Cth) (Bill), places obligations on vendors and landlords to disclose the energy efficiency of large commercial office buildings (with a net lettable area of 2000m? or more) on sale, lease or sublease.

The Bill, once passed, will have retrospective application from 1 July 2010 but the disclosure obligations will start from 1 October 2010 to allow parties affected by the disclosure obligations time to prepare.

Details of the Bill are outlined below.

Who has to disclose and when?

The Bill only applies to Corporations and to the Crown. Non-corporate entities (for example partnerships) may participate voluntarily.

If a Corporation or the Crown is intending to sell or lease (including subleasing) a net lettable office area greater than 2000m? and enters into a Transaction*, then it is required to:

• register a Building Energy Efficiency Certificate (BEEC) on the Building Energy Efficiency Register (publicly available over the internet)
• provide a copy of the BEEC to a prospective purchaser/tenant, if requested
• include the building's energy efficiency rating in any advertising material for the Transaction.

*Transaction includes the sale (or lease or sublease), making an offer to sell (or lease or sublease), and inviting offers to purchase (or take a lease or sublease) of net lettable office area greater than 2000m?. It also includes options and agreements for lease.

A BEEC can only be issued by an accredited assessor and will be current for 12 months from the date of issue.

What is a BEEC?

BEEC is a certificate that contains:

• an energy efficiency rating for the building based on the NABERS (National Australian Built Environment System) Energy base building rating
• an assessment of the energy efficiency of the lighting that is expected to remain in the space being sold, leased or subleased
• guidance on how to improve building energy efficiency

NABERS is a performance based rating system derived from actual occupation and operations in a commercial building over a 12 month period.

A base building rating only applies to the energy consumed in the central services (for example lifts and air conditioning) and common areas (for example carparks and foyers) of the building - not services used exclusively within a tenancy space. This means that a separate metering of the base building (as opposed to the tenancy space) would be required to measure energy consumption in the base building. If base building data is not available due to inadequate metering, a whole building rating must be disclosed.

Information gathering powers

Accredited assessors engaged by a party for the purpose of obtaining a BEEC have power to compel an owner, lessee or sublessee to provide access and information that is necessary for the assessment.

Direct exemptions

There are exemptions for:

• New office buildings that are less than 12 months old
• Strata buildings
• Transfer of titles through sale of shares or units of interest
• Short term leases for a period less than 12 months
• Lease options that were part of the original lease.

Claimable exemption

On receipt of an application, the Secretary of the Commonwealth Department of Climate Change and Energy Efficiency may grant an exemption where:

• an office is used for security or police operations, or
• it is not possible, due to the characteristics of the building or the area of the building, to assign a rating or assess the lighting under the methods and standards for assessment.

Enforcement provisions

These include:

• civil penalty orders (for example for up to $110,000) for each day a non-complying advertisement appears or a property is offered for sale or lease without proper disclosure
• infringement notices
• criminal offences and publicity.

As the Bill includes significant enforcement and penalty provisions, it is imperative that parties affected by the Bill are prepared by:

• implementing a compliance plan
• installing a separate meter for the base building
• collecting data on all the energy (for example electricity, gas, diesel) consumed by the base building.

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.

Celina Lee