New commercial office building energy efficiency disclosure obligations

Tom Cantwell, Partner, Head of Property Infrastructure and Development Group, DLA Phillips Fox

Originally published in the March 2010 issue of Facility Perspectives Magazine.

In December 2008, the Australian Government’s Department of Environment, Water, Heritage and the Arts (DEWHA) issued a Consultation Regulation Impact Statement and Consultation Regulation Document (Consultation Documents) regarding the proposed Mandatory Disclosure of Commercial Office Building Energy Efficiency scheme. Such a scheme was considered necessary after finding that commercial buildings account for at least 10% of Australia’s greenhouse gas emissions, having risen 87% between 1990 and 2006, and that office buildings contribute the most significant proportion of emissions for the commercial sector.

The scheme required particular disclosure of the building’s energy efficiency to prospective purchasers or lessees of commercial office buildings. The scheme would apply to the sale, lease or sub-lease of premises with a Net Lettable Area (NLA) greater than 2000m2 or any part of a building with a NLA that is greater than 2000m2. It would initially only apply to commercial office buildings, as defined in the building Code of Australia, and not to State and Territory governments.

Under the Consultation Documents, the scheme required the disclosure of each of the following:
•    A National Australian Built Environment Rating System (NABERS) Energy star rating in any advertisement about the sale or lease. The NABERS Energy rating specified was a whole of building rating.
•    A valid Building Energy Efficiency Certificate (BEEC) to prospective buyers and tenants. The BEEC would include the NABERS Energy star rating as well as detailed energy consumption and greenhouse gas emissions data.
•    An Energy Efficiency Assessment Report (EEAR) to prospective buyers and tenants. The EEAR would include targeted information with respect to the opportunities to improve energy efficiency in buildings and would be valid for seven years.
•    A valid BEEC and EEAR to a central registry.

In January and February 2009, information forums were held across Australia to discuss the scheme. Over 400 representatives from industry and government attended these forums and over 40 written submissions were received on the Consultation Documents. The information forums and written submissions demonstrated broad support for the scheme. The majority of players indicated strong support for the mandatory disclosure of base building ratings and for the use of NABERS Energy in the scheme.

The consultation process uncovered two major concerns with the proposed scheme. The first was with the requirement for NABERS whole building ratings as opposed to base building ratings. Whole building ratings involve both a tenancy rating and a base building rating. Tenancy ratings account for tenant lighting, general power loads for IT and other equipment, as well as tenant installed supplementary air-conditioning systems. Base building ratings include energy used by common services, for example environmental control systems for heating, cooling and ventilation, lifts, hydraulics, car parks, lobbies etc. The concern was that Energy tenancy ratings are generally a measure of tenant behaviour rather than the energy efficiency of the tenancy itself. The configuration and area of tenancies can vary substantially from one tenant to the next and tenancy energy efficiency is largely beyond the control of building owners. There were also concerns raised regarding the legal, practical and technical barriers to obtaining the necessary information from tenants and that the burden fell solely on the landlord or building owner.

The second major concern was about the usefulness of the EEARs, the additional burden they created and whether the seven year validity period was too long. There was general consensus that EEARs should be more comprehensive if they are to be useful to potential purchasers and lessees countered by concern as to the cost and availability of the expertise required to produce accurate reports and the general skills shortage in this area.
The Australian Government listened to industry, responding effectively and comprehensively to these concerns. In response to the first, the scheme was refined so that instead of NABERS whole of building ratings being required, the scheme will require the disclosure of base building ratings and only tenancy lighting power density and lighting control details. This information would be included in the BEECs for ease of administration. A number of industry submissions supported this approach as the basic tenancy lighting and its control systems are generally provided by the owner of the building.

In response to the second concern, instead of separate EEARs, the scheme will require guidance on potential energy efficiency improvements to be assessed concurrently and disclosed as part of BEECs. The RD states that this will streamline the assessment process and ensure that the guidance provided is meaningful and up-to-date -the BEECs remain valid for 12 months only.

The consultation process raised other less significant issues. The Australian Government responded to these in the following ways:
•    Where offices have been substantially refurbished within the previous 12 months, the scheme will allow star ratings to be modelled in accordance with the NABERS Energy design protocol, rather than using data which would be inaccurate.
•    Strata title buildings will be excluded from the requirement for disclosure of base building ratings. Their disclosure will be limited to tenancy lighting efficiency.
•    The base building star ratings are to be publicly accessible on the central registry. Public disclosure by exhibition on the buildings will be promoted on a voluntary basis.
•    A number of submissions considered the 2000m2 threshold would not capture enough office buildings and that it should be reduced to 1000m2. The Government maintained that the 2000m2 threshold is reasonable and is to be retained.
•    There was widespread concern that governments will not be legally obligated to participate in the scheme. While the scheme was not revised to make government disclosure mandatory (creating the legislation under the Corporations power of the Constitution means there is no room to do so), the RD confirms that agreement should be sought from all levels of government to opt-in to the scheme and for the public disclosure of certificates.
•    A number of submissions requested a gradual phasing in of the scheme as opposed to full implementation in mid-2010.

The RD retained the current implementation timeframe, noting that given the publicity the project has achieved over the past 18 months, a large proportion of industry are well aware of the impending implementation and have been taking steps to ensure compliance.

Cost effectiveness and administration of the scheme had been expressed by industry as concerns. Although the RD specifies that financial support for the installation of sub-metering could be considered as a complimentary measure, it falls outside the scope of the scheme and would need to be delivered through a separate mechanism. The RD goes no further in terms of addressing the financial burden the scheme will immediately place on those required to disclose.



Cantwell had echoed industry’s concern that the NABERS Energy scheme was intended to be voluntary and has not undergone the scrutiny that a compulsorily rating system might have had. Further he pointed out that by the nature of the scheme; there is a state-by-state differentiation between the actual energy consumed and the rating obtained due to different operating base lines and different energy sources in each state.

The RD specifies that there will be an investigation into the development of one nationally-consistent rating band and that it is intended that NABERS Energy will use a nationally-consistent rating band prior to the implementation of the scheme.

The Mandatory Disclosure of Commercial building Energy Efficiency is set to be implemented in mid 2010. Cantwell provided some recommendations that might help landlords and Facility Managers to be prepared for the commencement of the scheme. These included collecting and analysing power bills, collecting NLA surveys, tracking occupancy levels and hours of use and gaining an intimate knowledge of the building to find out how it’s performing in its current state and what adjustments could be made to achieve a higher rating.

With the scheme due to commence mid 2010 it is now more important than ever to begin to take these measures. The Australian Government has indicated that compliance with the scheme will be required immediately. Until the legislation and regulations are introduced the form of the scheme will continue to evolve. It will be interesting to observe how the scheme comes into operation and in the coming years to judge the effectiveness of the scheme in reducing Australia’s greenhouse gas emissions from commercial office buildings.

FM Innovations can help you manage your environmental impact with our Sustainability management module, integrated into our Facility and Property Management Software.

It is our belief that effective overall environmental management needs to combine the daily works maintenance management (ad hoc & planned maintenance schedules) together with the day to day management of the sustainability impacts of the building. This is reducing risk as well as deterring liability for building owners and managers.

To read more about our Sustainability software please click here or contact us for a demonstration.