Reports – 20 July 2010 – With the initial phasing in of mandatory disclosure laws commencing in October, Global real estate services firm Jones Lang LaSalle has issued a report detailing all the major implications of the new laws to help commercial property owners and lessees with the transition:

Mandatory Disclosure of Building Energy Efficiency to Commence in October 2010

The Government recently passed the Building Energy Efficiency Disclosure Bill 2010, also known as Mandatory Disclosure. This is expected to have a major impact on commercial property sales and leasing from commencement in October 2010.

Supporting regulation which will address many key details have not yet been released, resulting in some degree of uncertainty regarding the scheme. Clients are advised to seek expert legal advice on their individual circumstances.
What is Mandatory Disclosure?

The aim of the scheme is to ensure that credible and meaningful energy efficiency information is given to prospective purchasers and lessees of large commercial office space (>2000 square metres) or part thereof if the part exceeds 2000sqm.

To meet this aim, the scheme requires the disclosure of energy efficiency performance information at the point of sale, lease or sublease of a disclosure affected building.

When will the scheme commence?

The scheme will commence in a transitional capacity from approximately October 2010 for 12 months, and with full disclosure requirements from October 2011.

What needs to be disclosed?

Depending on the nature of the sale or lease, the following may be required:

Transition period requirements (approx October 2010 – October 2011)

A valid base building NABERS Energy rating, obtained up until the end of the transitional period can be disclosed in lieu of the full Building Energy Efficiency Certificate (BEEC). Where a base building rating cannot be achieved, a whole of building rating will be required.

Full disclosure requirements (approx October 2011 onwards)

After the transitional period ends, a full BEEC must be disclosed, and registered on the Building Energy Efficiency Register. A BEEC includes:

1. Energy efficiency rating

Base building NABERS Energy rating, or where this cannot be achieved, a whole of building rating.

2. Tenancy lighting register

Accredited assessors will benchmark existing tenancy lighting (that will be passed on to the incoming tenant/owner) against best practice.

3. Building energy efficiency guidance

This must include general advice to building owners/tenants on common energy efficiency opportunities in commercial office buildings. This is not tailored to the individual building and will not be an energy audit.

Penalties

Failure to comply with the scheme may incur severe penalties. Jones Lang LaSalle recommends you seek specific advice on how penalties may affect your business.

Exemptions

A limited number of exemptions may apply for genuine cases where disclosure requirements cannot be satisfied.

What will this mean for landlords?

The energy efficiency of buildings will now be available for all to see. This will likely increase attention on poor performing assets, and raise interest in more efficient buildings, which may impact on building selection decisions.

What will this mean for occupiers?

Occupiers will no doubt welcome the ease of information that will be a flow on benefit from the scheme. Just like comparing appliances, occupants will be able to make informed decisions that will help them limit their carbon footprint while also saving on energy costs.

What will this mean for investors?

As with occupiers, investors will likely welcome the new disclosure requirements, allowing them to understand the performance of assets, and make informed investment decisions.

Where to from here?

Based on individual circumstances, you many need to do any of the following:

1. Obtain and maintain a National Australian Built Environment Rating System (NABERS) Energy rating for all relevant buildings

Failure to do so may delay transactions, or incur substantial penalties. As NABERS is a retrospective rating, you will need information for the preceding 12 months, including energy use, floor space surveys and lease information.

If this is the first time you have conducted a NABERS rating, additional steps may be required, including the installation of sub- metering. It is important that you start early, as this can be a complex or time consuming process.

2. Implement an energy efficiency plan

The scheme aims to encourage buyers and lessees to consider the energy efficiency of buildings, when they are making their investment and leasing decisions. If your asset performs poorly, this may negatively impact on the buyer’s or lessee’s decision making process.

Now is a perfect time to implement an energy efficiency plan for your asset. Our experience shows that many buildings yield significant energy efficiency opportunities, at low or no cost. Jones Lang LaSalle can provide you with advice and assistance to ensure capital is deployed effectively.

3. Implement changes in your buying/leasing process

If you are buying, selling or leasing buildings, mandatory disclosure and energy efficiency is now a part of conducting business. You will need to update processes, for tasks such as due diligence, marketing, investment and valuations.

4. Prepare for exemptions

Where you believe you may qualify for an exemption, you should seek specific legal advice at an early stage. Exemptions will not be granted automatically.

What will this mean for landlords?

The energy efficiency of buildings will now be available for all to see. This will likely increase attention on poor performing assets, and raise interest in more efficient buildings, which may impact on building selection decisions.

What will this mean for occupiers?

Occupiers will no doubt welcome the ease of information that will be a flow on benefit from the scheme. Just like comparing appliances, occupants will be able to make informed decisions that will help them limit their carbon footprint while also saving on energy costs.

What will this mean for investors?

As with occupiers, investors will likely welcome the new disclosure requirements, allowing them to understand the performance of assets, and make informed investment decisions.

Where to from here?

Based on individual circumstances, you many need to do any of the following:

1. Obtain and maintain a National Australian Built Environment Rating System (NABERS) Energy rating for all relevant buildings

Failure to do so may delay transactions, or incur substantial penalties. As NABERS is a retrospective rating, you will need information for the preceding 12 months, including energy use, floor space surveys and lease information.

If this is the first time you have conducted a NABERS rating, additional steps may be required, including the installation of sub- metering. It is important that you start early, as this can be a complex or time consuming process.

2. Implement an energy efficiency plan

The scheme aims to encourage buyers and lessees to consider the energy efficiency of buildings, when they are making their investment and leasing decisions. If your asset performs poorly, this may negatively impact on the buyer’s or lessee’s decision making process.

Now is a perfect time to implement an energy efficiency plan for your asset. Our experience shows that many buildings yield significant energy efficiency opportunities, at low or no cost. Jones Lang LaSalle can provide you with advice and assistance to ensure capital is deployed effectively.

3. Implement changes in your buying/leasing process

If you are buying, selling or leasing buildings, mandatory disclosure and energy efficiency is now a part of conducting business. You will need to update processes, for tasks such as due diligence, marketing, investment and valuations.

4. Prepare for exemptions

Where you believe you may qualify for an exemption, you should seek specific legal advice at an early stage. Exemptions will not be granted automatically.