A proposed scheme by the Federal Government places mandatory reporting obligations on landlords (and in some instances tenants) to disclose the energy efficiency of their commercial buildings.

The new scheme is intended to begin operation in 2010 under the National Framework for Energy Efficiency. As such, now is the time to consider and address the proposed reporting obligations in any new leases.

The new scheme

In December 2008, the Federal Government issued two Consultation Documents on the mandatory disclosure of commercial office building energy efficiency for public consultation. The Consultation Documents followed on from a Concept Paper in March 2008 and a number of energy efficiency policy initiatives.

What are the reporting obligations?

Under the scheme, companies that own or lease certain commercial buildings will be required to disclose the energy efficiency of those buildings using the NABERS rating tool (National Australian Built Environment Rating System). NABERS rates a building on the basis of its 'measured operational impacts on the environment' on a scale of one to five, with five being the lowest impact on the environment. While NABERS has various ratings including 'Water' and 'Indoor Environment', only NABERS Energy is proposed to be used at this stage.

It is proposed, that when commercial office buildings (or any part) with a net lettable area of 2000 square metres or more are leased or sold, an energy efficiency rating and assessment report must be disclosed:

  • In any advertising for the lease or sale of the building (or the relevant part thereof).
  • To prospective tenants or buyers.
  • In a central registry.

The type of buildings captured by the scheme are Class 5 buildings under the Building Code of Australia, ie buildings used for a commercial or professional purpose, but this may be extended to other buildings down the track. Exemptions to the reporting obligations may also apply but these are yet to be outlined.

The proposed penalties for failure to comply with the reporting obligations are civil and criminal penalties. In the case of a sale, failure to comply may enable the purchaser to hold back part of the settlement monies until the owner or vendor complies.

What are the potential issues for landlords and tenants?

Under the proposed scheme, building owners may need to collect information on energy efficiency/usage not only from their own records but also from tenants. This will require landlords to have access to tenant records on an annual basis.

Many commercial leases do not contain any clauses that provide a landlord with the rights of access needed for this kind of information gathering. So it may be necessary to review existing leases for this purpose and to consider including access clauses within any future leases.

While the Consultation Documents make it clear there will be mandatory obligations on tenants to provide this information, they identify that information will be provided to the 'assessor' and specifically state not to the landlord. Accordingly, a clause in the lease may be necessary to ensure landlords have access to the necessary information so they can prepare relevant reports and obtain ratings as and when needed.

What's next for the scheme?

The Government is currently in the process of considering submissions it received to the two Consultation Documents and to comments made during a series of information forums held throughout January and February this year. The submissions can be viewed on the Department of Environment, Water, Heritage and the Arts website.

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