What is Mandatory Disclosure?
Commercial buildings account for at least ten percent of
Australia's greenhouse gas emissions which are predominantly caused by
poor energy efficiency, poor energy management and outdated technology.
The Government’s spotlight on the effects of climate change and
Australia’s obligations under the Kyoto Protocol to limit greenhouse
gas emissions has put the attention on the nation’s largest
contributors. Therefore, in line with a world wide focus on reducing
emissions, the Government in 2008 released a Regulation Impact
Statement and Regulation Document for the introduction of ‘mandatory
disclosure of energy efficiency’ for commercial buildings from 2010.
Mandatory disclosure will affect all owners and developers of
commercial office buildings and tenants occupying premises with a Net
Lettable Area (NLA) of 2000m2 or more and will also try to encourage
smaller building owners and tenants to ‘voluntarily disclose’
information. The format is similar to the UK’s current scheme, known as
the EPC (Energy Performance Certificate) and the DEC (Display Energy
Certificate). This requires mandatory disclosure at the time of first
interest for purchase or letting through production of an EPC. The EPC
provides prospective purchasers and tenants with information on the
energy efficiency potential of a building or tenancy with the DEC
targeted at raising public awareness of energy efficiency within the
In addition to reducing greenhouse gas emissions the purpose of
the mandatory disclosure scheme is to assist commercial buyers and
tenants who will be able to compare a building’s energy efficiency when
choosing to buy or rent. The other key objectives will be to overcome
market impediments and ensure that both parties in a transaction have
access to credible and meaningful information. This will also encourage
incentives for energy efficiency improvements in office buildings and
hopefully stimulate investment.
With the scheme any commercial building (initially only Class 5) to be sold, leased or sub-leased will require the following:
An accredited energy efficiency rating under the NABERS Energy star system for office buildings with NLA of 2000m2 or greater.
- Mandatory disclosure of energy efficiency to any prospective
buyers or tenants. This will comprise of a Building Energy Efficiency
Certificate (valid for 1 year) and an Energy Efficiency Assessment
Report (valid for 7 years).
Disclosure of the NABERS Energy star rating in any property advertisements.
Property energy rating details to be held in a central registry.
Management of the scheme together with regulation enforcement and
monitoring systems will be from a new central administration unit.
The BEEC (Building Energy Efficiency Certificate) will be valid
for 12 months from its date of issue and its proposed core requirements
are, together with the building name and address, certificate reference
number and validity dates:
Building data, including NLA.
Accredited Assessor details.
The appropriate NABERS star rating, including the type of rating.
Detailed energy consumption and emissions information.
An EEAR (Energy Efficiency Assessment Report) will be valid for 7
years. In addition to the information contained in a BEEC, the EEAR
will target information in relation to improving a building or tenants
energy efficiency through detailed analysis and advice, including:
Maintenance and operation issues, including information on the age and standard of equipment and related efficiencies.
Design and economic life analysis of major equipment with replacement costs.
- A review of sub-metering and building management systems with
information to improve the building’s energy efficiency, including
potential changes to the associated building services and operational
A review of lifts and common area lighting.
A review of hot water systems.
A review of tenants’ general office equipment and appliances.
First of all we should observe that the design and construction of
the majority of Australia’s existing building stock has far less
efficient technology than the current new building stock. The average
energy rating under NABERS Energy for commercial buildings is 2.5 stars
on a 5 star system. Therefore, action to increase energy efficiency of
existing commercial buildings will be required to enable compliance
with the new regulation. A minimum NABERS Energy rating of 4 stars
(base building) should be considered by property owners.
Successful property owners have the ability to adapt to meet
market demands, which is reflected in their potential to attract
tenants. Currently if a potential tenant demands an energy rating and
efficiency report when considering a business premises the property
owner, although under no obligation, will generally provide it. The new
regulation will now make this compulsory as part of any purchase or
lease. Therefore owners and developers will now have to ensure that
their properties are competitive in the new more informed environment
this new regulation will create.
Secondly, with mandatory disclosure building owners may not have considered:
The time required to undertake the EEAR and BEEC.
The specific data required to enable a NABERS Energy assessment in accordance with the associated validation protocols.
The actual availability of NABERS accredited assessors who can undertake ratings at possible short notice.
The actual time required to implement changes to achieve the required mandatory rating.
The impact on their existing tenants.
And more importantly, the influence the above has on a property
sale under the new regulation when considering a typical due diligence
period. In addition to potential expenditure associated with property
upgrades, property owners will also be required to bear the cost of
energy efficiency assessments and certification, together with
additional application fees.]
From the above property owners should be aware that it will not be
a simple case of achieving a rating within a couple of weeks of
submitting a request. For works to be undertaken in the correct manner
sufficient time and appointment of suitably qualified personnel will be
required. There will also be an increased requirement for building
services engineers and NABERS accredited assessors to work directly
with property owners to achieve positive end results.
Undoubtedly, mandatory disclosure will establish a new precedent
and introduces a real challenge within the market. True energy
efficiency lies in the transformation and refurbishment of existing
commercial building stock to support much greater sustainable
environments. Property owners who embrace this challenge will not only
reduce their energy consumption and costs but should also improve the
value of their existing asset. Another consideration is the positive
impact a good BEEC rating will have on valuation, reflecting rental
premiums which have been proven in America.
In a more competitive market where energy efficiency is an
important factor in acquisition or leasing, the advantage of a good
energy efficiency rating should not be simply rejected without
considering all the facts. With the intention to improve energy
efficiency, it is worth considering that it is possible to reduce
energy consumption for little expenditure by low cost ‘good
housekeeping’ initiatives, sometimes significantly enough to increase a
Whilst there is a downturn in property disposals and acquisitions
this is an ideal time for property owners to get their ‘house in
order’. Initially and prior to the introduction of mandatory disclosure
this can be simply achieved by means of good advice and a preliminary
audit to see where their asset sits in terms of a NABERS rating. This
will give property owners a more informed understanding of where there
building is currently placed in the market in terms of energy
Source: Apex Property