Compliance with compulsory building energy efficiency disclosure

Introduction

Further to our eAlert on 19 July 2010 regarding the introduction of the Building Energy Efficiency Disclosure Act 2010 (Cth) (the Act), an implementation date has now been set. Owners, landlords and sub-landlords of buildings captured by the Act and wanting to sell, lease or sub-lease, must urgently prepare for compulsory energy efficiency disclosure by 1 November 2010.

As an expansion on our eAlert, below are a few more important points to consider:

  • the Act applies in relation to commercial office space covered by the Act (i.e. a building, or part of a building, with a net lettable area of 2,000sqm or more and not subject to any of the listed exemptions) where:
    • the owner, landlord or sub-landlord is a corporation; or
    • the owner, landlord or sub-landlord is an individual, but a prospective purchaser, tenant or sub-tenant is a corporation which serves a notice requiring compliance with the Act.
  • strata titled buildings and buildings where the occupancy permit is less than two years old are exempt from operation of the Act
  • it is likely that the operation of the Act will be expanded in the future to include other types of commercial buildings, retail buildings, hotels, car parks and health care facilities.

Transition period

There will be a 12 month transition period commencing on 1 November 2010. During the transition period, a valid National Australian Built Environment Rating System (NABERS) rating can be registered in place of a Building Energy Efficiency Certificate (BEEC), and included in the relevant advertisement.

Owners, landlords and sub-landlords who do not hold a current NABERS rating (one that is less than 12 months old), must apply for one or obtain a BEEC. Given that considerable information is needed to obtain a NABERS Energy rating, owners, landlords and sub-landlords must urgently ensure that they have access to all the required data and arrange for an accredited energy efficiency assessment without delay.

Sale and leasing considerations

For a sale of a qualifying commercial office building, the Act has only two requirements for compliance; registration of a valid current BEEC and compliance with the advertising requirements under the Act.

For leases and sub-leases of qualifying commercial office buildings, the Act raises a number of issues that landlords, sub-landlords and tenants need to consider. Examples include an obligation on the tenant to provide the necessary information to enable disclosure and who bears liability for compliance costs and ongoing costs of renewing the NABERS rating and BEEC. It is, therefore, important that landlords and sub-landlords consider including provisions in new leases and sub-leases to deal with the consequences of compliance with the Act, and recovery or apportionment of the costs of disclosure and compliance.

For existing leases, the Act gives accredited assessors the authority to compel tenants to provide data and access in order to prepare a BEEC.

Given that the Act is likely to be expanded to apply to other types of buildings, it is prudent to consider including similar provisions in leases and sub-leases for other types of buildings, in readiness for the expansion.

Implications

Owners, landlords and sub-landlords must act quickly in preparing for compliance with the Act. Demand for accredited assessments is likely to be high and owners and landlords may find themselves on a waiting list. Failure to comply with the Act by 1 November 2010 will inevitably result in delays in selling or leasing the building and may also result in heavy penalties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.