Mandatory Energy Efficiency Disclosure: Bill released
The Commonwealth Parliament has released the Building Energy Efficiency Disclosure (BEED) Bill 2010. EVAN ECONOMO of Gadens Lawyers, Sydney, explains the fine print.
The BEED Bill (and accompanying Explanatory Memorandum) reveal much of the fine print following the two Regulation Documents circulated by the Government in 2009, including some significant changes. This article identifies the key features of the Bill.
By way of re-cap, broadly speaking the BEED Scheme requires disclosure of detailed energy efficiency information:
- by owners who sell or lease a tenancy, base building or whole building of 2000m2 NLA or greater; and
- by tenants who sub-lease a tenancy of 2000m2 NLA or larger.
WHAT TYPES OF BUILDINGS/TENANCIES ARE CAPTURED?
The scheme will apply to buildings or tenancies that are used, or capable of being used, as an office. In order to trigger the threshold in the scheme, the area being sold, leased or sub-leased must be 2000 square metres in size NLA (net lettable area) or greater.
WHAT ARE THE FUNDAMENTAL OBLIGATIONS?
There are three primary obligations placed on owners:
- An owner is precluded from offering to sell or lease a building (or part of a building) unless a valid and current Building Energy Efficiency Certificate (BEEC) has been registered for that building (or part of the building). This includes where the owner invites offers to purchase or lease the building, eg: where the owner goes to tender or invites expressions of interest.
- An owner is required to give a copy of the registered BEEC to a potential purchaser or tenant if requested expressly in writing by that purchaser or tenant. The BEEC must be provided ‘as soon as is reasonably practicable’ after the owner receives the written request. The disclosure obligation does not automatically arise when the owner lists the property for sale or lease – it only arises upon receipt of the request from the potential purchaser or tenant.
- In all advertisements for the sale or lease of a building (or part of a building) a valid ‘energy efficiency rating’ will need to be clearly disclosed. It is envisaged that the energy efficiency rating will be a NABERS energy rating, at least in the initial transitional period of the scheme. Each advertisement will give rise to a separate disclosure obligation, eg: if an owner fails to disclose the rating in three separate advertisements relating to the same property, there will be three separate infringements.
The same obligations apply to tenants who propose to sublease a tenancy (or part of a tenancy).
A breach of each of those obligations attracts a civil penalty of up to $110,000 per breach, plus ongoing penalties for every day that the person remains in breach.
WHAT MUST BE IN A BEEC AND WHO CAN PREPARE ONE?
Broadly, there are two types of BEECs – a building BEEC and a tenancy BEEC.
A building BEEC, to be used for the sale or lease of a whole building, must set out:
- the energy efficiency rating of the base building only (initially this will be the NABERS energy rating), except where inadequate sub-metering precludes separate ratings for the base building and tenancies (in which case a NABERS energy rating for the whole building will be required);
- an assessment of the energy efficiency of the lighting for both the base building and any tenancies that might reasonably be expected to remain if the building is sold, leased or subleased; and
- guidance as to how the energy efficiency of the whole building might be improved.
A tenancy BEEC, to be used for the lease or sub-lease of a tenancy, must set out:
- the energy efficiency rating of the base building only (initially this will be the NABERS Energy Rating), with the same exception as set out above regarding the building BEEC where there is inadequate sub-metering;
- an assessment of the energy efficiency of the lighting for the tenancy that might reasonably be expected to remain if the building is leased or subleased; and
- guidance as to how the energy efficiency might be improved – it is unclear as to whether the guidance will need to include both tenancy and base building or tenancy only (this should be clarified in the Regulations).
BEECs are valid for 12 months only, commencing from the date the certificate is issued.
The ‘Building Energy Efficiency Register’ will be established as a central (federal) registry to register and hold records of all BEECs.
Only accredited assessors will be authorised to prepare and register a BEEC. It is envisaged that most accredited assessors will be sourced from the current pool of NABERS assessors. It is also likely that in order to achieve accreditation under the scheme, NABERS assessors will need to undergo further training on the assessment of energy efficiency of lighting and the Scheme’s legislative framework.
WHEN WILL THE DISCLOSURE OBLIGATIONS IN THE BEED SCHEME COMMENCE?
It is envisaged that the Act will commence on 1 July 2010, however, the “disclosure obligations”, i.e. the three primary obligations referred to above will commence some time within six months after 1 July 2010 on a date to be determined. This is referred to in the Bill as the ‘implementation day’.
The obligation to obtain and disclose a BEEC will apply to any offer (or invitations for offers) to sell, lease or sublease a building or tenancy on foot as at the implementation day. The obligation to disclose an energy efficiency rating in any advertising material will apply to any advertisements published, or continued to be published, on or after the implementation day.
Significantly, there is a 12-month transitional period beginning on the implementation day. During this period, in certain circumstances, those entities with an existing NABERS energy rating, i.e. obtained prior to the implementation day, may disclose that rating (up until the rating expires) in lieu of a BEEC.
Therefore, if you have a NABERS energy rating before the implementation day, you may not need to obtain or disclose a BEEC in the first 12 months of the scheme.
ARE THERE ANY EXCEPTIONS?
Any person who has a disclosure obligation can apply for an exemption. Applications must be in writing and accompanied by a fee. The following scenarios have been identified in the Bill as exempt from the scheme:
- where the building (or tenancy) is used for police or security operations;
- where, due to the characteristics of the building (or tenancy), it is not possible to obtain an energy efficiency rating or assess the energy efficiency of lighting of the building (or tenancy);
- any other category identified in the regulations – this is expected to include strata title buildings/tenancies, newly constructed buildings, buildings that have recently undergone major refurbishments, transactions where the sale of the building is through a sale of shares or units and where the sale is of only a partial interest in the property.
Importantly, any liable entity must formally apply for and obtain exemption from the scheme administrator before the disclosure obligation arises. Entities cannot assess themselves as being exempt.
ARE THERE ANY PROVISIONS THAT DEAL WITH HOW THE INFORMATION WILL BE GATHERED?
There are specific provisions that deal with how and when information required to obtain a BEEC can be gathered. The provisions essentially empower accredited assessors to obtain from third parties all information necessary to enable it to prepare a BEEC.
An assessor engaged to prepare a BEEC for a building or tenancy may require an owner, lessee or sub-lessee of the building:
- to provide information (the notice period must be not less than 14 days for the provision of the information); and
- to provide access to areas of the building for the purposes of carrying out a physical inspection (the notice must specify the date and time, but must be a reasonable date and time).
Penalties will be imposed on any owner, lessee or sub-lessee who fails to comply with a notice. The penalty may be up to $55,000 per breach, plus ongoing penalties for every day the person remains in breach.
There are also numerous obligations placed on accredited assessors. For example, it is a criminal offence for an assessor to copy, make a record of or use the information it obtains from an owner, lessee or sub-lessee for any purpose other than preparing the BEEC (or an audit under the scheme). There are also strict confidentiality provisions and severe penalties for non-compliance of up to two years imprisonment.
An assessor’s accreditation must be revoked if he is found to have provided false or misleading information in relation to a BEEC.
Also, owners, lessees and sub-lessees that suffer damages as a result of an assessor failing to carry out an assessment in accordance with the methods and standards in the scheme may recover those damages in court.
HOW WILL THE SCHEME BE ADMINISTERED?
There is a fairly rigorous auditing regime and auditors appointed by the scheme administrator will have powers to inspect documents and information (including electronic equipment) and to obtain warrants to authorise the search of premises and seizure of documents and to interrogate relevant persons involved with BEED compliance.
In addition to the penalties referred to above, an ‘Energy Efficiency Non-Disclosure Register’ will be created that publicly records instances of a person failing to disclose information two or more times in a 12-month period.
WHAT YOU NEED TO DO
The BEED scheme as presently proposed provides a real incentive for potentially liable companies to obtain a NABERS energy rating for their buildings before the ‘implementation day’ (which will be between 1 July and 31 December 2010). This will enable those companies to take full advantage of the transitional period.
The transitional period also provides both owners and tenants with additional time to upgrade their building stock/tenancies, gather information that will ultimately need to be disclosed and ensure that appropriate policies and systems are put in place to enable compliance with the more detailed requirements of the Scheme.
Gadens Lawyers’ climate change team specialises in carbon/energy compliance and disclosure as well as advising on green retrofit and construction projects, energy performance contracting and green leases. All of these measures can be used as effective tools to achieve ‘green’ outcomes, including improving energy efficiency and to achieve compliance with new regulations such as the BEED scheme.
Evan Economo is a senior associate of Gadens Lawyers, Sydney, specialising in climate change law. The information provided is a general guide only and Gadens Lawyers accept no responsibility for people relying on this publication.
Phone (02) 9931 4950.