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Funding for Environmental Upgrade – By Barry van Heerden – Senior Associate – Attwood Marshall Lawyers

Building owners now have the opportunity to do environmental upgrades to their buildings with local Councils providing security for any funds required for the upgrade.

On 18 February 2011 the Local Government Amendment (Environmental Upgrade Agreements) Act 2010 (NSW) commenced in terms of which a new system to secure lending for energy efficiency improvements to buildings was introduced.  Buildings that qualify under the legislation are commercial, industrial or strata buildings of at least 20 strata lots.

Funding is not always available for major long term upgrades to buildings.  These upgrades may include heating, ventilation lighting and cooling systems.

The new legislation provides for an Environmental Upgrade Agreement to be entered into between the building owner, the financier or lender and the relevant local Council.

The local Council will provide security for the loan and will levy an environmental upgrade charge against the rateable land.  This charge is similar to paying rates and all monies paid to the Council under the charge will be paid to the lender by the Council.

The Council has the same rights to recover the levy under the Environmental Upgrade Agreement as it has to recover rates and other charges.  However, it must be noted that the Council will not be liable to pay any outstanding amounts to the lender.

Most commercial leases contain clauses stating the lessee should pay a portion of the landlord’s outgoings.  It is however important that the definition of “outgoings” in the lease makes provision for the payment of a “new” or “future” tax, otherwise landlords may not be able to recover the new charge from tenants.  The legislation provides that a new lease may contain a term that the lessee must contribute towards the payment of an environmental upgrade charge.

Lenders may now be more willing to provide loans to building owners with the ultimate effect to improve energy efficiency in buildings.

Should you require any further information in relation to the above you can either contact our offices or your local Council to discuss entering into an Environmental Upgrade Agreement.


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