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Australia will start requiring landlords to disclose energy efficiency ratings for their office buildings when leasing or selling from the start of November.
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Nearly a third of the Australian office market is currently rated for energy efficiency by the government and the new legislation will likely have an impact on valuations and create a push for upgrading efficiency.
Here are some questions and answers on how the new regulation works, how foreign investors and REITs will be affected, and what implications the new rules could have on the property market.
HOW DO THE NEW RULES WORK?
Sellers or lessors of office space of 2,000 sq metre (21,530 sq ft) or more will have to disclose an up-to-date energy efficiency rating. Starting from Nov. 1, owners will need an energy rating from the National Australian Built Environment Rating System (NABERS) when leasing or selling. When putting properties on the market, advertisments should include the ratings. The NABERS rating measures energy performance on a scale of 1 to 5 stars with the median market performance currently at 2.5 stars.
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After a one-year transition period, building owners will be required to provide further information such as an assessment of tenancy lighting.
Failure to comply with the regulations, could mean a civil penalty at a maximum of A$110,000 on the first day, with an additional daily fine of A$11,000 thereafter.
The building sector accounts for 19 percent of total energy consumption in Australia and is responsible for 23 percent of green house emissions.
The recently elected government of Prime Minister Julia Gillard has made proposals on funding aids including extending a Green Building Fund with A$30 million available ($29.56 million) for new applications and offering tax allowances when upgrading energy efficiency, according to property consultancy firm Napier & Blakeley.
WHAT ABOUT FOREIGN INVESTORS AND REITS?
Foreign investors who own buildings in Australia are also subject to the new regulation including those using a managed investment trust (MIT) structure, a popular method that makes buyers eligible for tax benefits.
They will be subject to the mandatory energy disclosure rules if they sell or purchase a whole building, or let or sublet all or part of a building. If, however, they own only part of a building and wish to sell their stake, they do not need a NABERS rating.
Foreign investors have been active buyers in Australia, despite global financial uncertainty, scooping up $1.7 billion of assets in the 12 months to June this year, and are responsible for 70 percent of the overall transactions in Australia.
Some property trusts, have already raised capital to beef up their balance sheets and to prepare for the new rules.
