13 Oct 2011

Building energy efficiency disclosure laws about to ramp up

by Nick Thomas

If you're selling or letting large office spaces, you soon must comply with the Commonwealth Government's building energy efficiency disclosure laws.

The Commonwealth Government's building energy efficiency disclosure laws commence in full on 1 November. This means that many corporations proposing to sell or let large office spaces must provide not only a NABERS Energy rating but also an assessment of tenancy lighting in the space being sold or leased and prescribed energy efficiency guidance.

The basic disclosure obligation

The Building Energy Efficiency Disclosure Act 2010 (Cth) has been in force since 1 November 2010, but only in transitional mode. It's the centrepiece of the Government's Commercial Building Disclosure (CBD) scheme. Broadly speaking, the Act requires an owner or a lessee who proposes to sell or let/sublet for more than 12 months (including options) either a whole building which is used or capable of being used as an office and has a net lettable area (NLA) of 2000m2 or more, or an area of a building which satisfies these criteria, to:

  • obtain and register specific energy efficiency information for the building or area;
  • in some cases, give a bona fide prospective purchaser or lessee (or sublessee) a copy of the documents containing that information; and
  • include the relevant energy efficiency rating for the building or area in any advertisement for the sale, lease or sublease of the building or area.

The regulatory package for the CBD scheme comprises the Act, a Regulation, and Determinations made by the Minister for Climate Change and Energy Efficiency and the Secretary of the Department of Climate Change and Energy Efficiency (DCCEE). The use of Determinations means that it is easier for the Government to change details of the CBD scheme's operation.

Soon more information will have to be disclosed

Until 1 November 2011, the information which must be disclosed is only a current NABERS Energy rating for the relevant building or area. However, from 1 November, the advertising requirement will remain the same, but the other disclosure requirements will include:

  • a current NABERS Energy rating for the relevant building or area;
  • a current assessment of tenancy lighting in the relevant building or area; and
  • guidance on how building energy efficiency might be improved for building owners and tenants, in the form set out in the DCCEE Secretary's Determination.

This information must be provided in the form of a Building Energy Efficiency Certificate (BEEC). A BEEC can be valid for up to 12 months, depending on the currency of the information included in it. Only an assessor who is accredited by the DCCEE can issue a BEEC.

NABERS Energy ratings are provided in the form of stars, and are measured in half star increments. Until August 2011, the rating scale was up to 5 stars. It's now been extended to 6 stars, where a 6 star rating represents "market leading" performance. However, the NABERS Energy rating which is required for the CBD scheme must not take into account the purchase of electricity under national GreenPower program, and this may affect the use of some existing NABERS Energy ratings for the CBD scheme.

Some changes since the Act commenced

The Government has made several changes to the way in which the Act operates since the Act commenced, following industry consultation. Two important examples concern mixed use buildings (such as warehouses, medical centres, hotels and retail outlets) and major refurbishments.

Under the current Ministerial Determination, if the total office space for a building comprises less than 75% of the building by NLA (or gross lettable area if NLA is unavailable), then the building is not subject to the disclosure requirements. The Government has indicated that this exception is only an interim measure and it will be subject to review by a panel of experts. Although the interim period was expressed to be until 1 November 2011, the exception has not yet been removed from the Ministerial Determination.

Previous versions of the Ministerial Determination provided an exception from the disclosure requirements for buildings which had undergone a major refurbishment and a certificate of occupancy (which is required under most State planning laws) had not been issued or had been issued less than two years ago. According to the Ministerial Determination, a "major refurbishment" is a refurbishment which affects the energy efficiency rating of the building. The Government has indicated that it expects this would involve substantial changes to the fabric, plant or equipment of the building which would alter a base building rating by at least half a NABERS star, higher or lower.

The exception clause caused some confusion within the industry about whether the disclosure requirements applied prior to the issue of an occupancy certificate, especially when it was not clear whether a certificate was required by the relevant State law and, if so, when it would be issued.

The Ministerial Determination has now been changed so that:

  • the disclosure requirements will not apply for buildings which have undergone a major refurbishment and a certificate of occupancy has been issued less than two years ago; and
  • the disclosure requirements will apply in other cases where a building has undergone a major refurbishment, unless the person who is subject to the requirements has applied for and obtained a specific exemption from the DCCEE.

Will the mandatory energy efficiency disclosure scheme be expanded?

The Government has said it focused the CBD scheme on office buildings initially (Phase 1) because the NABERS rating tool was readily available for office buildings, carbon emissions associated with office buildings are projected to have almost doubled between 1990 and 2010, and office buildings have relatively frequent sale and lease transactions.

The Government has noted that, in the 2010/2011 financial year (most of which was governed by the Act's transitional disclosure requirements), 962 buildings received a NABERS Energy base building or whole building rating, which is a 130% increase on he previous year.

Under the National Strategy on Energy Efficiency, governments are considering expanding disclosure to other types of commercial buildings including hotels, retail centres, schools and hospitals (Phase 2). However, the Standing Committee on Energy (under the Ministerial Council on Energy) has agreed to defer consultation until 2012 which would result in Phase 2 being deferred until 2014, subject to the outcomes of the consultation process.

The Ministerial Council on energy has also sought comments on a proposal for the mandatory disclosure of residential building energy, greenhouse and water performance in residential buildings in the context fo a proposal sale or lease, and issued a Consultation Regulation Impact Statement which provided some regulatory options for the proposal. The submissions period closed on 12 September, and we are now awaiting the Council's response.


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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.