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Going green in commercial construction: green rating regimes

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Stakeholders and contracting parties that want to commit to a green rating regime in a commercial construction project need to adopt a rigorous contract tendering and drafting approach in order to avoid unexpected allocation of risk or indeterminate liability.

Green rating schemes

Two of the dominant voluntary green rating regimes for commercial construction in Australia are:

  • The Green Star rating scheme operated by the Green Building Council of Australia (GBCA)
  • The National Australian Built Environment Rating System administered across Australia by the New South Wales Department of Environment and Climate Change (DECC).  This previously was known as the Australian Building Greenhouse Rating / ABGR scheme

If parties want to achieve one of these ratings, they need to work through what is required to obtain it in setting up the project’s legal framework, the roles of each party and the consequences if the rating is not obtained.

Green Star

Green Star assesses the environmental design of buildings at the concept stage and then at completion.  Green Star does not assess the building’s operation, rather it rates the achievement without assessing operational factors.  Clearly, the level of green commitment and risk allocation in the preparation of the contract documents will be informed heavily by the way the Green Star scheme operates in this respect.  It assesses potential environmental impact across the following building element categories:

  • environmental management
  • indoor environment quality
  • energy use
  • transport arrangements
  • water use
  • use of materials
  • land use and ecology
  • emissions
  • innovation

The GBCA has developed and continues to develop rating tools for different stages of the building’s life cycle such as design, construction / fit out and use and for different types of buildings such as office, retail, industrial and residential, since the responsibility for each phase may (subject to contractual arrangements) rest with different parties including the developer, principal / owner, design team, consultants, the contractor and the tenant.

One also needs to appreciate that the date of registration of a project determines the applicable version of a rating tool.  For example, office projects that register after 1 May 2008 must register under Green Star – Office Design v3 and Green Star – Office As Built v3.  Version 2 ceased to be available for unregistered projects as from that date.

Once a project goes through the certification process and is awarded a Green Star rating of four stars and above, the applicant is granted a non-transferable, non-exclusive licence from the certification date to use and display the Green Star trademark showing the rating.  Once achieved, it does not lapse nor does it need to be renewed.  Reference during the project to the commitment to obtain a Green Star rating also is permitted before achieving certification, provided the project is registered with the GBCA, otherwise such statements cannot be made and would generate exposure to a claim for trade mark infringement.  Green Star only certifies buildings that achieve a rating of four (“Best Practice”), five (“Australian Excellence”) or six (“World Leadership”) stars with commensurate point scoring systems for each rating.

NABERS

NABERS is a performance based voluntary rating scheme aimed at existing and new commercial office buildings and hotels.  The NABERS scheme rates an existing building by reference to an assessment of its operational impacts on the environment.  It deploys rating tools to assess energy and water efficiency.  There are other elements that are being developed to allow ratings on a broader range of assessed operational impacts and there is a proposal to introduce NABERS Energy and Water tools for education and retail premises.

A NABERS rating for an existing building is called a performance rating and the process for achieving a performance rating coincides with the process for the rating of a new building.  A rating for a new building is called a commitment rating which is available only for NABERS Energy.  Both types of ratings (performance and commitment) can be awarded for base buildings, (for example central services, air conditioning, lifts and common lighting), tenancies or whole buildings.

Broadly speaking, some aspects of the NABERS certification process are analogous with the Green Star process (including “commitment advertising” and the use of NABERS certification marks).  There is a regime for the applicant to enter a commitment agreement with the DECC, with the expectation that there be a commitment to achieve at least four stars.  A performance rating can be given using 12 months’ worth of data based on the actual amount of energy or water consumed in a year and accounts for some operational factors as well as building design efficiency.  If the commitment rating has been met or exceeded, the DECC will grant a performance certificate stating the rating achieved and this certificate is effective for 12 months.  There is a yearly assessment to maintain the rating.

Contract review due diligence

Key considerations that are relevant to the decision to commit to a voluntary green rating regime include the following:

  • there must be careful scoping of the role of each project participant who is involved in or who may affect the ability to achieve the rating
  • generic provisions as to the achievement of one type of rating or another simply ask for trouble, rather there needs to be a precise description
  • all parties need to be on notice of the commitments in respect of Green Star or NABERS as the case may be and their obligations need to be contractually stipulated back to back with the relevant ratings process
  • boilerplate clauses and reliance on standard form design risk allocation clauses in design and construct contracts still will need a thorough review
  • consider the timing requirements of the rating systems especially as to when obligations arise and when ratings can be achieved
  • it is critically important to address the liability of design consultants
  • the impact on tenants, agreements to lease and leases needs to be addressed
  • there would have to be design constraints on fit-outs, access rights for monitoring ongoing compliance and decisions as to whether the contractor is to be involved after the “final certificate” that is the norm under many construction projects
  • the application of usual provisions relating to practical completion may need to be amended significantly
  • contractors should ensure that all consultants and subcontractors have back to back obligations

As green building ratings, standards and practices are evolving constantly, the project delivery and legal framework must still have some flexibility while at the same time deal effectively with the scope and longevity of each party’s responsibility for the as-built result.

Our Construction & Engineering Team would be pleased to discuss this article or answer any questions you have.

Author:  Stuart Miller