In Brief - Mixed use buildings, refurbishments and
Environmental Upgrade Agreements
The Commercial Buildings Mandatory Disclosure Regime has
undergone amendments, effective 29 November 2010, related to mixed
use buildings and refurbishments. The Local Government Amendment
(Environmental Upgrade Agreements) Bill 2010 facilitates a
financing mechanism for building owners to implement major long
term energy efficiency upgrades to buildings.
Mixed use buildings
Mixed use buildings which comprise office space with other uses
such as retail, industrial, hotel or hospital are now not required
to disclose a NABERS energy rating if the building has less than
75% office space (calculated on net lettable area). However, this
is an interim measure during the 12 month transition period which
expires on 31 October 2011.
This development has the effect of excluding most industrial and
retail premises from complying with the new mandatory disclosure
regime, even if the office component is greater than 2,000 sq
In cases where buildings undergo major refurbishments, there is
now no requirement to disclose a NABERS energy rating for two years
from the date of the certificate of occupancy relating to the
refurbishment, on the condition that the refurbishments meet three
They involve substantial change to the fabric, plan or
They require the issue of a certificate of occupancy under
State or Territory legislation
They will have a substantial effect on the energy performance
of the base building
Local Government Amendment (Environmental Upgrade Agreements)
This bill facilitates a financing mechanism for building owners
to implement major long term energy efficiency upgrades to
buildings. The concept of an "environmental upgrade
agreement" will be introduced to assist building owners to
gain access to commercial finance in the timeframe and on terms
needed to progress cost effective environmental upgrade works.
The proposed environmental upgrade agreements will operate
according to the following framework:
The lender provides finance to the building owner
The lender takes a charge over the building
The building owner upgrades the building
The building owner then makes regular payments to the local
council in the form of a special rate or charge
When repayment is received, the council forwards it to the
lender to repay the debt
Participation on the part of building owners, lenders and local
councils is voluntary.
Passing on costs to the tenant
In principle, as the special rate or charge will be rendered by
council, it is likely to fall under the definition of
"outgoings" in a lease and therefore be capable of being
on-charged to the tenant under the outgoings provisions of the
lease. However, tenants must not be required to pay more than they
would have been required to pay had the environmental upgrade
agreement not been in place.
In practical terms, the benefit in the reduced power bill as a
result of the environmental upgrade must outweigh the contribution
that the tenant will be required to make under the outgoings
provisions of the lease.
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