News & Insights

The Commercial Building Disclosure (CBD) program is an initiative to encourage the energy efficiency of buildings through mandatory disclosure of efficiency ratings.

Most building owners or tenants will have heard of the NABERS rating scheme. The big news for owners of commercial buildings is that from 1 July 2017, pursuant to the Building Energy Efficiency Disclosure Act 2010, the threshold for mandatory disclosure of the energy efficiency of a commercial office building will be reduced to incorporate more buildings.

Owners of a commercial office building of 1000m2 or more will be required to disclose their NABERS energy efficiency rating when advertising the sale or lease of the property.

This also means that owners will have to obtain a Building Energy Efficiency Certificate prior to placing the property or tenancy onto the market.

However, these provisions do not apply if:

1. The building is yet to have a certificate of occupancy issued
2. A certificate of occupancy was issued less than two years earlier
3. The building has had a major refurbishment and a certificate of occupancy was issued less than two years prior
4. It is a strata-titled building, or
5. It is a mixed use building where the office space is less than 75% of the total lettable area.

Failure to comply with these requirements may result in a fine of up to $121,900.If the property continues to be advertised without the proper disclosure, an additional fine will be imposed for each day after the original contravention.

Of practical importance, there is no clause within standard commercial contracts or provision in the legislation that provides potential purchasers or lessees with a right to terminate or claim damages should the seller or lessor fail to comply with disclosure requirements. It is likely that as energy efficiency and environmental awareness increase, there will be conditions added to contracts to reflect this provision in the future. However, presently, it seems that this requirement might be a ‘toothless tiger’ with the exception of failure to comply potentially resulting in penalties.

Furthermore, when negotiating a lease, there is currently no prohibition on passing the cost of obtaining NABERS ratings for particular premises onto a tenant as a cost under the lease (although expect some resistance to this).

If you are intending to sell or lease a commercial office property, your disclosure obligations may have changed. For further information and advice, contact Macpherson Kelley’s Property and Construction team in your State.

This article was researched by Roma Patel and written by Ralph Praegar, Principal – Property and Construction.