Managing the risks of energy efficiency disclosure with technology

Like it or not, owners of Australian commercial property and the agents representing them have to face up to the reality of complying with energy efficiency disclosure legislation.

As well as being required to disclose a NABERS (National Australian Built Environment Rating System) energy rating when advertising affected properties (commercial offices of at least 2,000 m2 being sold, leased or sub-leased), owners now have a legal requirement to disclose a Building Energy Efficiency Certificate (BEEC). Furthermore, since a BEEC is only valid for twelve months, it is entirely possible - particularly in a subdued market - that a BEEC may expire during the time it takes to sell or lease a property.

Given that non-compliance can result in severe financial penalties involving initial fines of up to $110,000, there are substantial risks involved if disclosure compliance processes are not in place or are reliant on manual intervention. Fortunately, modern technology provides a way to minimise the risks and track energy compliance.

When issued, a BEEC is given a unique reference number and an expiry date. By entering this information into a database, software can be used to track the expiry date and issue an appropriate expiry alert to the agent at an agreed interval prior to the expiry date. For example, an agency might establish a BEEC expiry alert and set the number of days prior to expiry that an alert should be issued. At that time, the agent handling the property will receive a task alert and can then prompt the owner to authorise renewal of the BEEC. Reports can also be created to identify those properties where disclosure is required but is not available.

Rather than viewing energy disclosure as a troublesome burden, agents can use technology to turn the compliance regime to their advantage, especially when convincing owners they are equipped to manage the risks involved with non-compliance. Owners of affected properties should routinely request that their leasing or selling agent has the necessary technology in place to meet the energy disclosure obligations of the Building Energy Efficiency Disclosure Act.

Then there is the question of how to meet the disclosure needs of potential tenants or buyers.

Energy Efficiency in Government Operations (EEGO) policy guidelines already stipulate a minimum 4.5 star NABERS energy rating when Australian government agencies assess commercial office space for lease or purchase. As energy costs escalate, it can be expected that corporate lessees and buyers will also routinely set minimum sustainability standards when reviewing their future needs for commercial real estate.

Technology can also play an important role in helping agents accurately capture and quickly respond to leasing or purchasing requirements that incorporate energy standards. For example, property agents can use a NABERS search filter to locate commercial property listings within a desired area that have a NABERS rating of 4.5 or above. The same filters can be used to alert agents when a new or existing property match is found for a client’s specific requirements.

Despite the political controversies, future legislation can be expected to tighten disclosure requirements, perhaps to commercial offices of less than 2,000 m2 and to other types of commercial real estate, such as retail premises and industrial buildings. A recent UK government report estimated that commercial offices represented 9 per cent of UK Service Sector energy consumption in 2009, versus 33 per cent for retail and warehouses. Australia’s National Strategy on Energy Efficiency explicitly states that a key policy measure will be to “significantly increase over time the stringency of energy efficiency provisions for all commercial buildings.” It is therefore likely that additional property types will become subject to energy efficiency disclosure if emission reduction targets are to be met.

Even if not currently affected, owners of commercial property would be wise to begin planning for energy disclosure and establishing processes to deal with it.

Steve Clark is the chief executive of Adept Business Systems, an Australian developer of business software applications.

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