Building Energy Efficiency Disclosure Bill 2010

The Building Energy Efficiency Disclosure Bill 2010 (“Bill”) aims to ensure that credible and meaningful energy efficiency information is given to prospective purchasers and lessees of large commercial office space.

The Bill will apply when vendors or landlords sell, lease or sublease property comprising 2000 square meters or more.

In essence, the Bill will create a legal requirement for owners of large commercial office buildings to obtain energy efficiency information for their building and then to disclosure it to prospective purchasers and lessees via a Building Energy Efficiency Certificate (“Certificate”). This requirement also extends to subleases.

The Certificate must set out:

(i) the energy efficiency for the building;

(ii) an assessment of the energy efficiency of the lighting for the building that might reasonably be expected to remain if the building is sold, let or sublet; and

(iii) how the energy efficiency of the building may be improved.

The key elements of the Bill are:

1. Developers/Landlords

(a) If a company owns an affected building, it must not offer to sell, offer to lease or sublease the building unless a Building Energy Efficiency Certificate (“Certificate”) for the building has been registered in the Building Energy Efficiency Register. A breach of this section attracts a penalty of up to 1000 penalty units.

(b) As the Bill currently stands, neither a vendor/landlord is prohibited from passing on the costs of obtaining a Certificate to the purchaser/lessee. However, it is important to note that as the Bill prohibits the vendor/landlord from offering the building for sale or lease without the Certificate, the vendor/landlord would initially have to incur the costs of obtaining the Certificate and arrange for its registration.

(c) The Bill is silent whether or not the Certificate needs to be updated and if so, at what frequency. If it does need to be updated, would such costs be required to be included in the Vendor’s Statement or in the lease as a possible future outgoing?  This would need to be clarified as it would affect the vendor’s/landlord’s obligations regarding disclosure.

2. Purchasers/Tenants

(a) A purchaser/tenant has the right to request for a copy of the Certificate to be produced. This seems to infer that the Certificate does not need to be disclosed by the Vendor unless the Purchaser specifically makes such a request. Additionally, as there would be no ongoing costs associated with the Certificate (unless the Certificates need to be renewed), such costs would not need to be disclosed as an outgoing in the Vendor’s Statement. If the premises you are seeking to purchase/lease is greater than 2000 square meters, the purchaser must conduct its own due diligence and request a copy of the Certificate from the vendor/landlord prior to signing the Contract of Sale.

(b) Purchasers/lessees do not have the power to terminate the Contract should the vendor/landlord fail in its obligations to obtain the necessary Certificate.

The interaction of the disclosure requirements of this Bill with the retail lease and conveyancing disclosure requirements of each state and territory will need to be carefully watched to ensure compliance in sale and leasing transactions.

Further updates will be provided as the provisions of the Bill are amended and finalised.   Please contact one of our Commercial Property lawyers should you require any additional information on this subject.

Authors: Mark Kemp and Daimon Goto