Australia: Building Energy Efficiency Disclosure Requirements for Owners and Tenants – Important: Disclosure Commences 1 November 2010

Property Law Update
Last Updated: 4 November 2010
Article by Bill Hazlett and Matt Vicars

The energy efficiency disclosure provisions under the Building Energy Efficiency Disclosure Act 2010 ("Act") came into force on 1 July 2010. However the disclosure obligations do not begin until 1 November 2010 which is the Implementation Day.

Who does the Act apply to?

The Act establishes a compulsory disclosure scheme on corporations that are owners or tenants of buildings, and parts of buildings, that are used or capable of being used as offices and which exceed the net lettable area threshold of 2,000 square metres or more. Corporations that are owners or tenants must disclose the energy efficiency of their buildings, or parts of buildings, that exceed the net lettable area threshold when either selling or leasing.

What are the energy efficiency disclosure requirements?

The disclosure requirements will apply from the Implementation Day. The Act imposes three central obligations on owners and head tenants:

  1. an owner or tenant cannot offer to sell, lease a building or a part of the building, or invite offers to purchase or lease the building (or part), unless a valid and current building energy efficiency certificate ("BEEC") is registered in the Building Energy Efficiency Register
  2. in any advertisement for the sale, lease or sublease of the building or part of the building, the owner or head tenant must disclose the appropriate energy efficiency rating as set out in the BEEC
  3. an owner or tenant must provide a copy of the registered BEEC to a prospective purchaser or lessee (if it is requested in writing).

Under the Act the disclosure requirements do not apply to offers to let or sublet a building or part of a building with an area of 2,000 square metres or more if the term of the proposed lease or sublease is 12 months or less including any options to extend.

What must be included in the BEEC?

The Building Energy Efficiency Disclosure Regulations 2010 ("Regulations") set out the information that must be included in a BEEC. The Regulations prescribe that a BEEC must include (amongst other things):

  • the net lettable area of the building or area of the building
  • the hours of occupancy for the building, as determined by the NABERS Energy rating rules
  • whether the energy efficiency rating is a base building rating or a whole building rating
  • the energy consumption of the building per year
  • the greenhouse gas emissions generated by the building
  • an assessment of the energy efficiency of the lighting in the building
  • guidance on how energy efficiency might be improved.

The energy efficiency rating to be disclosed on the BEEC can be either a base building rating or a whole building rating, as measured under the National Australian Built Environment Rating System ("NABERS"). A base building rating only applies to the energy consumed in central services and common areas, so it will be important that separate metering of the base building and tenancy areas is conducted in order for a rating of this type to be carried out and disclosed.

A BEEC will only be current for 12 months from the date of issue.

What are the penalties?

The Act imposes substantial penalties upon owners or head tenants who fail to comply with the disclosure requirements.

The Act provides a maximum civil penalty of $110,000 for the failure to register a BEEC or for not providing an energy efficiency rating in any advertisement.

A separate contravention will occur for each day that the building is offered for sale or lease without disclosure and for any advertisement that doesn't disclose the appropriate energy efficiency rating. However the Act limits the penalty payable for certain contraventions which continue for more than one day and the maximum penalty for these contraventions is $11,000.00 per day.

Transition period

The Act allows for a 12 month transition period beginning on the Implementation Day and finishing on 31 October 2011. The transition period will allow owners or head tenants to disclose an efficiency rating from a recognised issuing authority (such as NABERS) instead of a full building BEEC to satisfy the disclosure obligations under the Act.

In order to meet the requirements for the transition period under the Act, the energy efficiency rating must be:

  • obtained prior to the Implementation Day or during the transition period
  • a base building or whole building rating
  • a current rating
  • issued from a recognised issuing authority such as NABERS
  • publicly accessible on the Department of Climate Change and Energy Efficiency's 'Commercial Building Disclosure' website.

How to prepare

Any corporation which owns or leases a building or part of a building that is used or is capable of being used as an office and which exceeds the net lettable area threshold should ensure it has a current NABERS energy efficiency rating or immediately begin obtaining a NABERS energy efficiency rating for its building to avoid any delays in either selling or leasing.

Owners and tenants need policies and processes when contemplating selling or leasing their building or part of their building to ensure that disclosure of the energy efficiency rating is made at the first instance of negotiations or discussions with prospective purchasers or tenants and in any advertisements. They also need to receive written confirmation from prospective purchasers or tenants when they have received the building's energy efficiency rating.

Purchasers and tenants need to review and update their due diligence checklists to ensure they receive the current energy efficiency rating of any building or part of a building they intend to purchase, lease or sublease.

Hunt & Hunt can advise you how to prepare for the disclosure obligations and their impacts upon you.

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.

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Bill Hazlett
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