In December 2008, the Commonwealth Department of the Environment, Water, Heritage and the Arts (DEWHA) issued a Consultation Regulation Document and a Consultation Regulation Impact Statement in support of the proposed Mandatory Disclosure of Commercial Building Energy Efficiency.
In short, these papers propose that a mandatory disclosure scheme will apply to commercial office buildings with a Net Lettable Area (NLA) of 2,000 m2 or more, or any part of a building that is greater than NLA of 2,000 m2, that is to be sold, leased or sub-leased. The scheme will require the energy efficiency rating and assessment report of the building to be disclosed.
Public information forums held in January and February 2009 indicate that the anticipated commencement date of the new mandatory disclosure requirements will be July 2010.
This article provides insight on this proposal, and what might be regarded as a good National Australian Built Environment Rating System (NABERS) Energy rating for a commercial building, being a likely metric for the new mandatory disclosure scheme.
The need for a national arrangement for Commercial Building Energy Efficiency was previously identified in Stage One of the National Framework for Energy Efficiency in December 2004. More recently, Professor Ross Garnaut in his Garnaut Climate Change Review issued late last year, concluded that there were market failures for information-based energy efficiency measures for commercial buildings.
In Australia, commercial buildings account for at least 10 per cent of Australia's greenhouse gas emissions (excluding emissions associated with building and construction), and these emissions grew by around 87 per cent between 1990 and 2006. Studies commissioned by DEWHA have highlighted that tapping into cost-effective abatement opportunities for commercial buildings will ease the abatement costs of addressing greenhouse gas emissions for other economic sectors.
To address the need for, and market failures of addressing, energy efficiency for commercial buildings, three options were identified:
- Option 1 — Mandatory disclosure of NABERS energy efficiency ratings at the point of sale and lease. Under this option, certain property owners would have to report a NABERS Energy rating to buyers or tenants, where the property meets the NLA criteria of over 2,000 m2
- Option 2 — Industry code of practice, which participants can voluntarily sign up to. By signing up to the code, building owners are making a commitment to provide energy efficiency information in sales or lease transactions
- Option 3 — Mandatory minimum energy efficiency standards. This option mandates certain building owners to meet minimum energy efficiency standards within a stated timeframe.
Option 1 has been identified as the preferred option in the papers issued by DEWHA.
Key features of the proposed mandatory disclosure of Commercial Building Energy Efficiency
As noted above, the proposed disclosure scheme will initially apply to commercial buildings with a NLA greater than 2,000 m2. Where this threshold is reached, the proposed mandatory disclosure requirements are:
- for any advertisement about sale or lease of the building, disclosure on an appropriate building energy efficiency star rating
- to prospective buyers and tenants, disclosure of a valid Building Energy Efficiency Certificate (BEEC) and an Energy Efficiency Assessment Report (EEAR), and
- to a central registry, disclosure of a valid BEEC and EEAR.
A BEEC is a certificate that allows prospective building owners and tenants to compare the energy efficiency of buildings/tenancies on a like-for-like basis. An EEAR is a report that allows prospective building owners and tenants to obtain targeted advice with respect to the options to improve the energy efficiency of the building/tenancy.
The proposed mandatory disclosure scheme will be designed to ensure that it does not override any existing energy efficiency disclosure obligations relating to building sales or leases which are imposed by state or territory law. For example, Section 11 of the Retail Tenancies Act 1994 (NSW) requires particular disclosures, including some energy information, to certain retail tenancies which will remain unchanged on the implementation of the Commonwealth mandatory disclosure scheme.
Other key features of the proposed mandatory disclosure scheme are:
- Application to all constitutional corporations so as to have the widest possible coverage
- Captures all commercial buildings defined as Class 3 and 5 to 9 buildings under Part A3 of Volume One of the Building Code of Australia (exceptions may be made for places of worship, temporary buildings, buildings to be demolished, non-serious purchasers or lessees, and where a person made reasonable attempts to obtain a BECC but could not obtain one)
- Administered by the DEWWA with input from the Commonwealth Department of Climate Change. The NSW Department of Environment and Climate Change is proposed to continue administration of NABERS
- Establishment of a regulatory framework that recognises suitably qualified persons to provide BEECs and EEARs
- A BEEC will be valid for 12 months, while advisory material under the EEAR, will remain valid for seven years
- Compliance for mandatory disclosure will be enforced through civil penalties through a complaints-based approach, whereby a secretariat within DEWHA would be responsible for responding to complaints from buyers or tenants. Penalties are expected to be in the order of $8,000 so as to deter non-compliances.
In circumstances where a lessor wishes to sub-lease their premises (above the threshold), he or she will be required to provide a tenancy rating for the space being offered for lease. In these circumstances, it will be a requirement that the base building assessment be provided to the potential lessee if it is available at the time of the sub-lease.
NABERS Energy ratings
The NABERS Energy scheme benchmarks the actual operational energy use of existing commercial office buildings, measuring the energy use per m2 of the NLA. Under the NABERS Energy rating, a rating of about 2 to 2.5 stars indicates 'average' performance. A 4 to 4.5 star performance is categorised as 'strong' or 'excellent', and 5 star performance as 'best' or 'exceptional'.
A recent review of the NABERS Energy system analysed the NABERS Energy ratings for almost 500 buildings nationwide, almost all of which were carried out after the year 2000. This review concluded that the median performance for base buildings (or 'house services' such as common area lights and lifts) that achieved their ratings without the help of Green Power is at 2.5 stars, being around 150 kg CO2/m2/yr.
In October 2008, there were 33 commercial buildings that had achieved a NABERS Energy rating of 4.5 stars or better. Many of these commercial buildings purchased Green Power products so as to offset their greenhouse gas emissions and achieve higher rating. Due to improved energy efficiency technologies, many new commercial office building projects have achieved or are committed to achieving this level of performance without the use of Green Power.
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.