Australia: Can you take advantage of the new rules for building energy efficiency disclosures?

Changes to the building energy efficiency regime commence on 1 July 2015. Building owners may find they can take advantage of new exemptions where energy efficiency disclosures will no longer be required.

Currently, building owners must disclose energy efficiency information to prospective buyers or tenants who are offered 2,000m2 or more of commercial office space for sale or lease.1 Building owners must also obtain a Building Energy Efficiency Certificate2 prior to advertising the space on the market.

However, from 1 July 2015, building owners will no longer have to disclose this information in certain circumstances.3

WHAT ARE THE CHANGES TO THE BUILDING ENERGY EFFICIENCY REGIME?

The following new exemptions for building owners will apply:

  1. Wholly-owned subsidiary transactions: The Building Energy Efficiency Disclosure Act will no longer apply to transactions between entities and their wholly-owned subsidiaries. This means that businesses will not have to disclose energy efficiency information in dealings with their wholly-owned subsidiaries.
  2. Unsolicited offers: The Act has been amended to include an exemption for building owners that receive "unsolicited offers" to sell or lease office space.

An "unsolicited offer" is where the building owner has not, during the preceding six months, advertised the building for sale or lease or made an offer to (or invited an offer from) the relevant person.

A number of conditions must be satisfied to obtain the exemption, including that:

  • the exemption would "facilitate negotiations" between the parties;
  • the relevant person has consented to waive the right to be given a current Certificate for the building or area;
  • during the three months before the application for the exemption is made, no exemption has been granted for another unsolicited offer in relation to the building or area; and
  • during the three months before the decision on the application is made, the person to whom the offer was made has not been in negotiations in relation to the building or area with any other person.

Going forward, we recommend building owners implement processes to record which buildings or areas in their portfolio have been subject to the exemption within the past three months, as well as those that have been the subject of advertising or negotiations.

Building owners may also need to consider how they will obtain the consent of persons who make an unsolicited offer and subsequently waive their right to receive a Certificate.

Any exemption which is granted will apply for a maximum period of 12 months and end on the earlier of the date:

  • specified by the Secretary;
  • that the parties end negotiations or otherwise enter into a contract;
  • that the building owner begins negotiating with another party; or
  • that the building owner advertises the building or area for sale or lease.

However, the substance of this exemption may change in the final Amending Regulations.

WHAT OTHER CHANGES HAVE BEEN MADE?

Other notable changes include:

  1. Flexibility regarding Certificate commencement dates: Building owners will be able to nominate "start dates" for Certificates that are later than their dates of issue. This provides greater flexibility for businesses that proactively maintain current Certificates for their property portfolios, as building owners will be able to have a Certificate issued in advance of, and starting on, the expiry of an existing Certificate.
  2. No need to pay application fee for re-applications or existing exemptions: New building owners and landlords will no longer need to reapply for fresh exemptions, nor will they need to pay any corresponding new application fee where a valid exemption already exists.
  3. Live and interactive online information about energy efficiency: The Secretary will be able to make determinations about the information to be included in Certificates. The Commonwealth Government has already indicated that it will no longer require the six pages of standard energy efficiency guidance text which is currently included on Certificates to be included. Instead, it intends to provide live and interactive information online about improving energy efficiency.

There are also other minor changes, including in relation to assessment, accreditation and auditing under the Commercial Building Disclosure Program (CBD Program).

WHAT DO YOU NEED TO DO TO PREPARE FOR THE CHANGES?

If you are already complying with the CBD Program, you do not need to do anything to prepare for the upcoming changes. However, we recommend:

  • If you are a building owner, consider the practical implications of your business structure, particularly the wholly owned subsidiary exemption and whether any future transactions will attract an exemption.
  • Once the changes are finalised and in place, consider how you will categorise which offers are "unsolicited" within the meaning of the new provisions. You will also need a system for obtaining and documenting the necessary consents from buyers or tenants to waive the right to receive a Certificate.
  • Pinpoint the Certificates that you proactively maintain, so you can plan to apply for new Certificates in advance of relevant expiry dates. For any properties that will be added to your portfolio in the new financial year, identify which properties are or will be subject to a valid exemption, so that you can avoid unnecessarily reapplying for and paying for a new exemption application.
  • Monitor any further changes to the regulatory material (particularly to the Amending Regulations exposure draft) as well as any determinations of the Secretary that may impact the available exemptions and amended provisions.

Footnotes

1 Building Energy Efficiency Disclosure Act 2010 No. 67 (Cth) (Act) and the Building Energy Efficiency Disclosure Regulations 2010 (Cth) (Regulations).

2 Including a National Australian Built Environment Rating System (NABERS) Energy star rating, tenancy lighting assessment and general energy efficiency guidance. The Certificates are valid for up to 12 months from their issue date.

3 The Commonwealth Government also released an exposure draft of the Building Energy Efficiency Disclosure Amendment (Unsolicited Offers and Other Measures) Regulation 2015 (Cth) (Amending Regulations), which proposes to amend the Regulations.

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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