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More buildings affected by the Commercial Building Disclosure Program changes

NewsFlash 06 July 2016

On Tuesday 21 June 2016, the Federal Member for Kooyong, and Minister for Resources, Energy and Northern Australia, the Hon. Josh Frydenberg announced the Government’s plan to extend the scope of the Commercial Building Disclosure Program by lowering the disclosure threshold requirement on commercial office buildings from 2,000 to 1,000 square metres from 1 July 2017. There are also changes to the tenancy lighting assessment requirements from 1 September this year. Although changes to the disclosure threshold requirement are due to commence next year, it may be that preparation for such change may need to begin as of 1 July 2016.

Lowering the Disclosure Threshold

At present, s 11 of the Building Energy Efficiency Disclosure Act 2010 (the Act) imposes disclosure obligations on constitutional corporations to not offer, sell, lease or sublease a disclosure affected building or disclosure affected areas of a building without a valid, current Building Energy Efficiency Certificate (BEEC) being registered for that building or area.

Generally, under ss 10 (1) of the Act and s 5 of the Building Energy Efficiency Disclosure (Disclosure Affected Buildings) Determination 2015 (the Determination), a building is considered a disclosure affected building if at least 75% of the space in the building (by net lettable area) is for administrative, clerical, professional or similar information-based activities (including support facilities for those activities), the net lettable area is at least 2,000 square metres and no exceptions apply. A similar principle is applied under ss 10 (2) of the Act and s 6 of the Determination for areas of a building. The intention being that smaller buildings and smaller office areas are eliminated from complying with disclosure obligations by the 2,000 square metre threshold.

The Minister has announced that the Government will lower the disclosure threshold requirement of commercial office buildings from 2,000 to 1,000 square metres. Accordingly, certain owners and landlords of buildings which come within the disclosure affected range of 1,000 square metres or more will need to disclose energy efficiency when they sell or lease unless an exception applies. The Minister estimates that this change will affect an additional 1,000 commercial buildings. Although the Minister did not refer to a sublease in the Media Release, we suspect this is included in the scope of the announced change.

In accordance with the current Act and regulatory materials, this will mean certain owners and landlords will need to obtain a BEEC before the property goes to market and accordingly disclose a valid, current energy efficiency rating as per s 15 of the Act in advertisements for sale, lease or sublease of a disclosure affected building or disclosure affected area of a building. A key factor to consider is that a component of the BEEC, the National Australian Built Environment Rating System (NABERS) for the energy star rating requires 12 months of actual data. This suggests that preparation for such change may need to begin as of 1 July 2016. 

The Media Release does not provide guidance on how this regime will apply for a 1 July 2017 start. The Australian Government’s website on Commercial Building Disclosure suggests there will be a one year transition period, however no legislative amendments or the like have been introduced at this stage to indicate whether this is or is not correct.

Tenancy Lighting Requirements

The Minister has also announced changes to the tenancy lighting assessment requirements. This is an important component of a BEEC.

Currently, under the CBD Tenancy Lighting Assessment for Offices Rules a lighting assessment is valid for a period of 12 months from the date of assessment.

As of 1 September this year, building owners will only need to undertake these assessments every 5 years, as opposed to the current requirement of every 12 months. The Minister has not elaborated any further on these plans and as far as we know no legislation or the like has been introduced at this stage.

Preparation for 1 July 2017

Accordingly, for owners, landlords and tenants subleasing who suspect they fall under the disclosure obligations and as such will require a Building Energy Efficiency Certificate, we recommend out of caution that you save and collate the necessary performance data and documentation over the coming 12 months required by you to obtain an energy star rating in time for 1 July 2017. We expect to hear more information on the disclosure threshold and the tenancy lighting assessment changes shortly.


Gary Newton, Partner
Sydney

Alicia Yurka, Solicitor
Sydney

NewsFlash 06 July 2016
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