From 1st July 2017, this expansion of the CBD program will require most sellers and lessors of office space of 1000 square metres or more to obtain a Building Energy Efficiency Certificate (BEEC) before the building goes on the market for sale, lease or sublease.

BEECs include a Part 1 – the building’s National Australian Built Environment Rating System (NABERS) Energy for offices star rating which is valid for 1 year, and a Part 2 – Tenancy Lighting Assessment (TLA) of the relevant area of the building which is now valid for 5 years (since September 2016).

What hasn’t changed?

As the owner or lessor of a disclosure affected building:

• You must provide a current, valid BEEC to potential buyers or lessees free of charge, as early as possible in the transaction enquiry process and when requested;
• BEECs must be publicly accessible on the Building Energy Efficiency Register; and
• The building’s NABERS Energy star rating, Part 1 from the BEEC, must be included in any advertising material for the sale, lease or sublease of the building or office space.

The defined Exceptions to the CBD program, and Exemptions from disclosure obligations, have not changed.

What will change?

By lowering the mandatory threshold to 1000 square metres, the upcoming changes will effectively increase the number of disclosure affected commercial office buildings that will require a BEEC when for sale or lease.

Simultaneously leasing more than one floor space in a commercial office building (which may require adding together the net lettable area for those spaces), is more likely to now be over the 1000 square metre threshold.

What do I do now?

While maintaining a constantly valid BEEC is not required by the CBD program, most savvy building owners / managers have already realised conducting an annual NABERS rating for their building achieves benefits beyond simply complying with the CBD mandatory requirements.

Maintaining a valid NABERS rating each year makes the process of applying for a BEEC significantly easier and quicker should a mandatory disclosure trigger event (i.e. sale, lease or sublease) occur.

The documentation required to be gathered by the building owner / manager, and provided to the NABERS Accredited Assessor, is over at least a 12-month operational period. Therefore, if you think you may need a BEEC from July 2017, then you will need to have the correct building documentation and records dating back to at least July 2016.

The CBD website has a number of self-help fact sheets and guides available (www.cbd.gov.au).

However, if you think you may have a disclosure affected building this year and have never previously had an accredited NABERS rating, then we recommend discussing your particular situation with a CBD Accredited Assessor who can explain the relevant CBD and NABERS requirements.

Napier & Blakeley has CBD Accredited Assessors in each of our offices, if you have any enquiries or need to engage a NABERS or CBD Accredited Assessor as below:

SYDNEY
Rod Clarke
o.  02 8113 7104
m. 0417 736 402
e.  rclarke@napierblakeley.com

MELBOURNE
Paul Bullen
o.  03 9915 6300
m. 0418 407 863
e.  pbullen@napierblakeley.com

BRISBANE
Clayton Stewart
o.  07 3815 0498
m. 0419 528 707
e.  cstewart@napierblakeley.com

BRISBANE
John Proctor
o.  07 3815 0428
m. 0415 422 313
e.  jproctor@napierblakeley.com

For 32 years and counting Napier & Blakeley have been providing the following services to the property industry:

• Property Acquisition & Disposal Technical Due Diligence
• Property Development Due Diligence
• Quantity Surveying
• Capital Expenditure Forecasting
• Make Good Reporting
• Energy Management
• Development Monitoring
• Property Tax Depreciation

Please contact any of the people below for more information or assistance:

SYDNEY
Alastair Walker
Managing Director
o.  02 9299 1899
m. 0419 503 289
e.  awalker@napierblakeley.com

MELBOURNE
Craig Smith
Director
o.  03 9915 6300
m. 0407 371 664
e.  csmith@napierblakeley.com

BRISBANE
Paul Mazoletti
National Director
o.  07 3221 8255
m. 0408 749 202
e.  pmazoletti@napierblakeley.com

PERTH
Graham Rigby
Senior Associate
o.  08 9489 4895
m. 0419 847 998
e.  grigby@napierblakeley.com

Importantly, this impending expansion of the regulatory requirements of the CBD program to include additional commercial office buildings, also comes with the announcement of reducing the regulatory requirements for the Tenancy Lighting Assessment (TLA) component by increasing the TLA validity period from 1 to 5 years from 1st September 2016.

What does that mean?

If you own / manage a building, or an area of a building, that is:

• Now greater than 1,000 square metres;

• For administrative, clerical, professional or other information-based activities, including any support facilities of those activities (i.e. office space); and

• For sale, lease or sublease.

… then it could be disclosure affected from 1^st July 2017. If you have a disclosure affected building, it will need a valid Building Energy Efficiency Certificate (BEEC) before it is put to the market for sale or lease.

A BEEC comprises two parts that need assessment by an Accredited Assessor, these are:

1. A National Australian Built Environment Rating System (NABERS) Energy star rating for the building; and
2. An assessment of the energy efficiency of tenancy lighting in the area of the building that is being sold or leased, called a Tenancy Lighting Assessment (TLA).

A BEEC is valid for up to 1 year, but is no longer valid when either of the two parts listed above reach their respective expiry dates (currently both assessment parts have 1 year validity periods).

By lowering the mandatory threshold, the upcoming changes to the CBD program effectively increases the number of commercial office buildings that are expected to require BEEC’s, and hence increase the requirement for the Part 1 – NABERS Energy ratings to be conducted on those disclosure affected buildings.

The increase of the validity period from 1 year to 5 years of the Part 2 – Tenancy Lighting Assessment (TLA) from 1st September 2016, reduces the potential burden of having to re-assess the TLA component for the tenancy lease spaces each time a BEEC requires renewal in the future.

While maintaining a constantly valid BEEC is not required by the CBD program, most savvy building owners / managers have already realised conducting an annual NABERS rating for their building achieves benefits beyond simply complying with the CBD mandatory requirements.

Maintaining a valid NABERS rating makes the process of applying for a BEEC significantly easier and quicker should a mandatory disclosure trigger event (i.e. sale, lease or sublease) occur.

What do I do now?

The documentation required to be gathered by the building owner / manager to conduct a NABERS performance rating, is over at least a 12 month operational period. Therefore, if you think you may need a BEEC from 1st July 2017, then you need to start assembling the correct documentation and records from 1st July 2016.

Some office buildings or areas of buildings are not disclosure affected if they are:

• Mixed use buildings with less than 75% office space by net lettable area;

• New buildings, where there is a certificate of occupancy less than 2 years old;

• Strata-titled buildings;

• Transferred through the sale of shares or units of interest;

• Leased in a short term lease, (i.e. for a period of less than 12 months); or

• Leased by exercising an option to renew or extend an existing lease.

However, if you think you may have a disclosure affected building from 2017, and have never previously had an accredited assessment for a NABERS rating or TLA, then we recommend discussing your situation with a CBD Accredited Assessor. The CBD website also has a number of fact sheets and guides available (www.cbd.gov.au).

Napier & Blakeley has CBD Accredited Assessors within each of its Sydney, Melbourne and Brisbane offices, if you have any enquiries or need to engage a NABERS or CBD Accredited Assessor.

For any further information on this please contact:

SYDNEY
Rod Clarke
o.  02 8113 7104
m. 0417 736 402
e.  rclarke@napierblakeley.com

MELBOURNE
Paul Bullen
o.  03 9915 6300
m. 0418 407 863
e.  pbullen@napierblakeley.com

BRISBANE
Clayton Stewart
o.  07 3815 0498
m. 0419 528 707
e.  cstewart@napierblakeley.com

BRISBANE
John Proctor
o.  07 3815 0428
m. 0415 422 313
e.  jproctor@napierblakeley.com

For 30 years and counting Napier & Blakeley have been providing the following services to the property industry:

• Acquisition & Disposal Technical Development Due Diligence

• Quantity Surveying

• Capital Expenditure Forecasting

• Make Good Reporting, Energy Management

• Development Monitoring

• Property Tax Depreciation

Please contact any of the people below for more information or assistance:

SYDNEY
Alastair Walker
o.  02 9299 1899
m. 0419 503 289
e.  awalker@napierblakeley.com

MELBOURNE
Craig Smith
o.  03 9915 6300
m. 0407 371 664
e.  csmith@napierblakeley.com

BRISBANE
Paul Mazoletti
o.  07 3221 8255
m. 0408 749 202
e.  pmazoletti@napierblakeley.com

PERTH
Graham Rigby
o.  08 9489 4895
m. 0419 847 998
e.  grigby@napierblakeley.com

“This was particularly evident in buildings with relatively low initial levels of energy performance,” an ACIL Allen report found.

The report estimated large amounts of energy consumption and greenhouse gas emissions would be reduced as a result.  The scheme covers about 5,000 buildings with 26 million square metres of space.  It applies to office floor spaces of 2,000 square metres or more at the time of sale, lease or sublease.

One recommendation is to extend the program to more buildings, by lowering the disclosure threshold to 1,000 square metres.  Another is to extend the validity of office lighting assessments from one to five years.

The Green Building Council of Australia’s Romilly Madew backed the extension of the scheme: “There are an estimated 80,000 mid-tier commercial office buildings around Australia, but this sector has traditionally lagged behind in energy efficiency upgrades.”

Engineer Paul Bullen, an assessor with property consultants Napier & Blakeley, said there was a greater amount of spaces leased below 2,000 square metres, aside from multiple floor tenancies.  “It sounds like it’s going to be busier,” he said.

Colliers International’s John Marasco said landlords were motivated to “future-proof” their assets because tenants wanted more energy efficient buildings.

Published in The Financial Review
Written by Nick Lenaghan
11 February 2016

On the 4th February 2016, The Minister for Resources, Energy and Northern Australia, The Hon. Josh Frydenberg MP, released the report on the Commercial Buildings Disclosure (CBD) Program Review (http://cbd.gov.au/overview-of-the-program/cbd-review).
 
The independent review, produced by ACIL Allen Consulting, found the CBD Program to be a successful and effective way of delivering significant benefits at a minimal cost to industry and government. The review concluded the CBD Program has delivered $44 million in benefits over the last four years by assisting to improve the energy efficiency of Australia’s large office buildings. The Hon. Josh Frydenberg MP agreed that the CBD Program will continue and consideration would be given to the recommended regulatory changes that are projected to deliver an additional $13 million in energy efficiency benefits by 2028 and streamline industry regulatory obligations.

The proposed changes to the CBD Program include:

• Lowering the threshold for mandatory disclosure of energy efficiency information on buildings from 1,000 square metres and up to capture smaller office buildings.
• Extending the validity period for the tenancy lighting assessment from one to five years.

Any changes to the CBD Program will be preceded by a one year transition period following Ministerial approval. It is anticipated that the proposed changes won’t be introduced until July 2017.

A Regulatory Impact Statement on the proposed changes has been prepared and is available on the CBD website (http://cbd.gov.au/overview-of-the-program/cbd-review).

A consultation survey on the proposed changes to the CBD Program is open to the public until 5 pm AEST on the 12 March 2016. The public consultation can be accessed here:
https://consult.industry.gov.au/energy-division/cbd-public-consultation

They also welcome feedback from stakeholders through the CBD Hotline: 1800 020 131 and through the CBD email address: info@cbd.gov.au

Napier & Blakeley are pleased to have the following CBD Assessors and they invite you to contact them if you have any queries regarding this or anything else related:

SYDNEY Rod Clarke o.  02 8113 7104 m. 0417 736 402 e.  rclarke@napierblakeley.com	MELBOURNE Paul Bullen o.  03 9915 6300    m. 0418 407 863 e.  pbullen@napierblakeley.com
BRISBANE Clayton Stewart o.  07 3815 0498 m. 0419 528 707 e. cstewart@napierblakeley.com	BRISBANE John Proctor o.  07 3815 0428 m. 0415 422 313 e. jproctor@napierblakeley.com

Transitional Provisions Ending this Year

The current transitional provisions of the CBD program that require only a NABERS base building energy rating to be disclosed will end on 31 October 2011, with full mandatory disclosure requirements commencing on 1 November 2011.

From 1 November 2011, the Building Energy Efficiency Disclosure Act 2010 (BEED Act) requires corporations selling, leasing or subleasing certain large (>2000sqm) office spaces to register a full Building Energy Efficiency Certificate (BEEC), not just a NABERS rating.

What is a BEEC ?

The BEEC is comprised of three parts:

1.   NABERS Energy base building rating
2.   Tenancy lighting energy efficiency assessment
3.   General energy efficiency guidance for building owners and tenants

The BEEC may be valid for up to 12 months, however will only be valid to the date of the expiry of either Parts 1 or 2 whichever occurs first, as Parts 1 and 2 individually may be valid for up to 12 months but may be completed at different times.

At the time of disclosure, the BEEC will need to be valid, current and registered on the publicly accessible registry on the CBD program’s website.

Importantly, both the NABERS rating and new tenancy lighting assessments take a significant amount of time to complete the assessment and certification process, so need to be undertaken and certified well before a need to disclose for advertising may arise to avoid the risk of non-compliance with the legislation.

What’s the difference?

The required BEEC now incorporates a tenancy lighting assessment. A CBD tenancy lighting assessment of a building is based on a methodical survey of the general lighting system installed in the tenant office spaces of a building (the system that is reasonably expected to be left in a tenant space when the tenant leaves and the tenancy fitout removed).

The NABERS base building rating requirements remains the same as the current transitional provisions, and still requires a full 12 months of building operational data to provide a valid accredited NABERS assessment. Note that a NABERS estimate or non-accredited assessment has no credibility in terms of the BEEC, it requires a current certified NABERS Energy base building rating.

The general energy efficiency guidance will be provided as part of the BEEC when issued.

Accredited tenancy lighting assessments

For a lighting assessment to be valid under the BEED Act, it must be performed in accordance with the new CBD Tenancy Lighting Assessment for Offices Rules, by a CBD accredited assessor.

The tenancy lighting assessments may be completed for all of the building, in which the total office space NLA is assessed, or for a selection of tenancies only within the building. Typically, an all building assessment would be undertaken if the building is being prepared for sale. Assessments of tenancies typically would be undertaken if these areas are to be advertised for lease or sub-lease.

The lighting assessment measures only the energy used by the lighting on an area basis. It does not assess or measure lighting output, quality or suitability of the lighting for use in offices.

Penalties for failure

Failure to disclose may result in civil penalties of up to $110,000 for the first day and $11,000 for each subsequent day may be imposed by a Court for each breach of a disclosure obligation. Alternatively, the Secretary of the Department of Climate Change and Energy Efficiency can issue an infringement notice of up to $11,000 for the first day and $1,100 for each subsequent day of non-compliance.

Further penalties may apply for various breaches of the CBD. Refer to the website for further information with links to the Act and subordinate legislation: www.cbd.gov.au

Have you got a CBD action plan?

Napier & Blakeley are experts in the provision of strategic property advice and can assist in getting your property ready for the demands of the full disclosure requirements.

Meeting the requirements for a BEEC in obtaining an accredited NABERS rating and tenancy lighting assessment for your building is time consuming and intensive, which many people underestimate, so be pro active and plan ahead.

The CBD accreditation and training process for performing tenancy lighting assessments is underway. It is expected that tenancy lighting assessments and hence full BEECs will be available from July 2011, so don’t leave it to the last minute to meet your mandatory disclosure requirements and organise a BEEC with a CBD accredited assessor.

Contact 

Our strategic, cost effective advice will best position your property for the future.

Call Napier & Blakeley today to ensure you are ready for the upcoming changes to this legislation on 1 November 2011 or if you want further information on the Commercial Building Disclosure, or any other Napier & Blakeley services please contact any of our offices below:

Melbourne - Rob Howells            03 9915 6300             rhowells@napierblakeley.com
Sydney – Gavin Peach                02 9299 1899              gpeach@napierblakeley.com

Napier & Blakely services:

• Accredited CBD Tenancy Lighting Assessments
• Accredited NABERS Ratings
• Technical Due Diligence
• Capital Expenditure Planning
• Quantity Surveying
• Strategic Asset Management
• Building & Sustainability Consulting
• Property Depreciation

Reduced Life Expectancy and Premature Capex
Recent technical due diligence and condition assessments have also found that the lack of R&M and Capex budgets for economic life driven plant and equipment overhauls and refurbishments has resulted in increased short and medium term Capex.

To put this in context, without appropriate R&M, major plant items may have an economic expected life of (say) 25 years, however the reduction of removal of maintenance can result in a major shortfall in expected life to around 15 years.

The Reaction
Astute purchasers have become aware of this risk and look for these patterns in their technical due diligence reporting to ensure that appropriate Capex costs are factored into the purchase price to account for a vendor’s R&M expenditure shortfalls. 

Condition assessments, maintenance reviews, energy assessments and risk weighted strategic Capex forecasts have become 2010’s essential tools for good asset and facility management and sustainable property solutions. 

Risk of Non-Compliance 
New legislation requires that most commercial office property will be required to have a formal energy performance rating in the next few years and many will require this imminently or in the next few months.  This Legislation has caught most by surprise.  The Building Energy Efficiency Disclosure Act 2010 has just been introduced with transitional provisions (1 November 2010 to 30 October 2011) requiring the disclosure of a building’s energy performance through a NABERS Energy base or whole building rating, for all commercial office property with a net lettable area of 2,000sqm or more that is offered for sale or lease. 

Anxious Vendors
With fines in excess of $100,000 for breaches of the Act’s obligations; including advertising the property for sale or lease, after November 1 2010 without an appropriate NABERS Energy rating, there is significant anxiety in the market place.  The latest information from the Department of Climate Change and Energy Efficiency (DCCEE) will surely increase anxiety levels, as they have confirmed that neither exemptions nor extensions will be granted for lack of knowledge or where assessments are currently underway but not yet completed.

 It will be interesting to see how owners, selling and leasing agents and DCCEE react. 

Astute Purchasers
The story doesn’t end once the rating has been achieved.  Purchasers want to know about the processes and procedures that owners have in place, the potential risks of maintaining the rating at the current level and what plans are in place, or could be implemented, to improve the rating, perhaps strategically in line with planned Capex or future lease expires.

Such initiatives are considered in terms of funding opportunities, reduced energy costs, pay back periods and commercial outcomes. 

Published in the Brisbane Legal Magazine November 25, 2010

………

Using depreciation as a way to encourage the greening of the build environment has been a hot topic for a number of years. During the recent federal election the Labor party announced policies that included the delivery of such incentives.

Last week via their web site Labor provided a little more flesh to their approach in this area.

We outline the salient details below:

• Scheme starts from 1 July 2011 – 30 June 2015.
• Applies to Retro-fits of existing buildings.
• Applicable to buildings 2 Star NABERS rating or lower looking to achieve 4 stars or higher.
• Available for Office buildings, Hotels and Shopping Centres.
• Provides a 50% increase in deductions over the life of eligible assets.
• Anticipated cost $1bn.

How does it work?

• The scheme will run in the same manner as the recent investment allowances scheme.
• From the 1 July 2011 applications will need to be made to the Government for review and approval prior to any works taking place.
• NABERS assessments will be required before the works commence.
• Upon completion of the works 12 months will need to pass to enable a post construction NABERS assessment to be completed.
• Application with results will need to be submitted to the Government for approval.
• Claim for depreciation may be made with approval in that year accounts.
• Depreciation claims that would otherwise be available can be claimed from the date of practical completion.

The Good

• Fairly generous deduction available given the scale of likely expense to achieve a two star rating increase.

The Uncertain

• This is a proposal and not final legislation.
• There is no current indication what assets will be considered eligible for the 50% allowance.
• The $1bn may be capped by the Government so fewer projects may be eligible.
• How the Government will effectively assess applications.
• Likely to take 3 – 4 years before the incentive reaches owners returns.

Napier & Blakeley’s head of sustainability Roger Walker is one of the members of the committee reviewing the assets that will be included within the scheme.

Napier & Blakeley will keep you informed as more information comes to light. In the mean time should you wish to discuss the above article or any other matters relating to Sustainability or Tax Depreciation please does not hesitate to contact us at Napier& Blakeley.

NSW / ACT / WA / NZ  -  Roger Walker, Alastair Walker -  02 9299 1899
VIC /  SA  / TAS  -  Peter Frith, Rob Howells -  03 9915 6300

……..
Today the Australian government announced that mixed use buildings will be excluded from the CBD legislation for a period of twelve months and major new refurbishments will have a two year exclusion from date of refurbishment.

Following industry consultation the Australian Government Department of Energy Efficiency  and Climate Change set up an industry forum to review the implementation of the Commercial Building Disclosure legislation (mandatory rating legislation).

This group includes Roger Walker, Head of Sustainability at Napier &  Blakeley. We are pleased to advise that Roger’s advice that the legislation should exclude buildings which do not have a minimum of 75% office use has been accepted by the Hon Minister Combet.

The legislation which looks to enable comparison of energy performance of office space will now exclude mixed use buildings, this releases most industrial and retail premises which have an office component over 2,000sqm from the requirements of the legislation for a period of twelve months.

The Department announced today:

” The Government has worked with industry stakeholders to address these complex issues and decided as an interim approach that buildings with less than 75 per cent office space (of the net lettable area 1), will not be required to disclose a NABERS Energy rating. This approach to mixed use buildings is an interim measure during the transition year of the program and will be subject to review by a panel of industry experts. This panel will report back to the Government before the end of July 2011 on their recommendations. Industry will be given clear advice and an appropriate time frame to adapt to any changes, recognising the possible need for metering changes and collection of 12 months data for a NABERS Energy rating.” 

This is a positive move and ensures that the intent of the legislation, to provide comparative ratings for office space, is delivered, with the buildings which are impacted by other uses being excluded.

Whilst parts of the industry would like to see the exclusion as permanent the transition period provides mixed use building owners with a period to review the impact and assess costs to implement metering and other changes to ensure that their office areas can be comparatively assessed against predominately office buildings. Owners in this mixed use category will still need to review their strategy quickly as changes to metering and other areas will take twelve months from implementation to be fully accounted for in a NABERS Energy rating.

Importantly transactions underway and in the pipeline will now be able to move forward without the risk of non compliance or further delay of the transaction for the completion of compliance under the Act. This will alleviate some legal costs and risk reviews for these impacted transactions where the details to obtain a NABERS Rating are not easily met.

To read more information on the legislation and to find out what is needed for NABERS rating please click here to review our earlier update http://napierblakeley.info/sustainability/commercial-building-disclosure-cbd/

Further information on the CBD program, including the amended Determination, is available at www.cbd.gov.au or e-mail Napier & Blakeley for a copy.

Roger Walker, Head of Sustainability at Napier & Blakeley is a representative on the Commercial Building Disclosure Implementation Forum, a representative on the NABERS Stakeholder Advisory Committee, Chairs the ADPIA Sustainability Committee, is a member of the APREA Sustainability Committee, is a registered Valuer and Associate of the Australian Property Institute and works with other industry organisations, business groups and client strategy groups.

Napier & Blakeley can provide you with strategic portfolio planning advice, applications for funding and complete your NABERS ratings for you.

For more info please contact your local office.

NSW / ACT / WA / NZ  -  Alastair Walker -  02 9299 1899
VIC /  SA  / TAS  -  Peter Frith, Rob Howells -  03 9915 6300

Napier & Blakeley offer a wide range of consultancy services that will help you deliver  a more efficient and marketable solution for your property. Our services include:

• Energy assessments      
• Sustainable design advice
• Government Funding advice
• Project financing options
• Cost Planning and Life Cycle analysis
• Project Management
• Property Tax profiling

Government Funding & Project Finance

Napier & Blakeley have successfully raised on behalf of its clients over $5 million of green building government funding in the past 18 months alone.  In some cases this was up to 50 % of the actual project cost.  Napier & Blakeley, through an associated party, may also be able to provide project finance for the sustainable property solution if required.

Delivering Extraordinary Projects

Napier & Blakeley can manage the project right through to the completion of the upgrade. Some recent projects where we acted as Project Director include:

North Ryde office building NSW:

• Largest office solar energy plant in Australia
• Emission reduction of 40%

North Sydney office building:

• Target to be the lowest emission building in Australia
• Tri-generation
• 70 % reduction in current emissions
• Upgrade carried out while building fully tenanted.

Tackle rising energy costs

With electricity costs forecast to rise substantially  over the next three years, or even higher if an emissions tax is introduced.

Contact Napier & Blakeley now to see how you can address this issue.
VIC – Rob Howells – 03 9915 6300 or rhowells@napierblakeley.com

Lack of Capital post GFC has lead to a significant neglect of R&M and Capex spend.

Having worked on property due diligence valued over $10B since the GFC, Napier & Blakeley have seen only nominal spend on upkeep compared with previous years.

Risk of Non-Compliance (i)

During this period the increasing trend has been a notable reduction of Repair and Maintenance (R&M) and Capital Expenditure (Capex)  budgets. Whilst this strategy may have been necessary in some circumstances e.g. postponement of non-essential Capex, we have found too commonly evidence of non-compliance regarding statutory maintenance such as testing, auditing and reporting of essential safety measures and fire safety systems.

Reduced Life Expectancy and Premature Capex 

Recent technical due diligence and condition assessments have also found that the lack of R&M and Capex budgets for economic life driven plant and equipment overhauls and refurbishments has resulted in increased short and medium term Capex.

To put this in context, without appropriate R&M, major plant items may have an economic expected life of (say) 25 years, however, the reduction or removal of maintenance can result in a major shortfall in expected life to around 15 years.

The Reaction

Astute purchasers have become aware of this risk and look for these patterns in their technical due diligence reporting to ensure that appropriate Capex costs are factored into the purchase price to account for a vendor’s R&M expenditure shortfalls.

Condition assessments, maintenance reviews, energy assessments and risk weighted strategic Capex forecasts have become 2010’s essential tools for good asset and facility management and sustainable property solutions.

Risk of Non-Compliance (ii)

Legislation requires that most commercial office property will be required to have a formal energy performance rating in the next few years and many will require this imminently or in the next few months.

This Legislation has caught most by surprise.

For purchasers and owners it is now important to understand where a property currently sits from a formally rated energy performance perspective.

It is also important to understand how the rating can be maintained at the same level over a period of time, and how it can be strategically and cost effectively improved to avoid future obsolescence.

The Building Energy Efficiency Disclosure Act 2010 is on the cusp of taking effect. The transitional provisions (1 November 2010 to 30 October 2011) require the disclosure of a building’s energy performance through a NABERS Energy base or whole building rating, for all commercial office property with a net lettable area of 2,000m² or more that is offered for sale or lease. However, with only 388 commercial office buildings registered nationally to date, it would seem the message may not have reached all concerned parties with property interests that fall under the Act’s disclosure requirements.

Anxious Vendors

With fines in excess of $110,000 for breaches of the Act’s obligations; including advertising the property for sale or lease, after 1 November 2010 without an appropriate NABERS Energy rating, there is significant anxiety in the market place.

The latest information from the Department of Climate Change and Energy Efficiency (DCCEE) will surely increase anxiety levels, as they have confirmed that neither exemptions nor extensions will be granted for lack of knowledge or where assessments are currently underway but not yet completed.

It will be interesting to see how owners, selling and leasing agents and DCCEE react.

Astute Purchasers

The story doesn’t end once the rating has been achieved. Purchasers want to know about the processes and procedures that owners have in place, the potential risks of maintaining the rating at the current level and what plans are in place, or could be implemented, to improve the rating, perhaps strategically in line with planned Capex or future lease expiries. Such initiatives are considered in terms of funding opportunities, reduced energy costs, pay back periods and commercial outcomes.

For more information on Technical Due Diligence, Capex Forecasts, NABERS Ratings and Sustainable Property Solutions contact Napier & Blakeley.

NSW / ACT / WA / NZ  -  Alastair Walker  -  02 9299 1899
VIC /  SA  / TAS  -  Peter Frith, Rob Howells -  03 9915 6300