HANSARD
SITTING CALENDAR
SEARCH
LIVE BROADCAST
Hansard Dynamic Member Index
Legislative Council - Fifty-Third Parliament, Second Session (53-2)
2015-05-07 Daily Xml
Contents
Pdf Xml

Local Government (Building Upgrade Agreements) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 5 May 2015.)

The Hon. D.G.E. HOOD (15:51): I rise to speak to the Local Government (Building Upgrade Agreements) Amendment Bill. I indicate that, whilst Family First is supportive in principle of what the government is trying to achieve in this case, we do have some very significant concerns about this bill.

The government has identified several barriers that landlords face when attending to necessary building upgrades. Whilst we share the concern in regard to improved energy, water and environmental performance of these existing buildings, we do, as I have said, share the concern that some of the members of this chamber have already expressed as to the effect this bill may have on small business.

Business in South Australia is already prohibited from functioning efficiently and is subjected to numerous inefficient taxes and substantial red tape. The government has noted some of these issues in their recent taxation review discussion paper. We are heartened that changes of this nature have been flagged; however, we are, as always, aware that seemingly well-intentioned legislation can have significant unintended consequences.

Accordingly, whilst a bill such as this one, correctly implemented, could bring a wide spectrum of benefits to South Australian businesses, it is entirely possible that it could become even more prohibitive if incorrect or ill-informed decisions are made. It is imperative that any measure affecting business in this state be carefully considered to ensure that appropriate measures are taken to encourage and not prohibit economic growth.

Under this bill, landlords are able to pass the costs of this upgrade on to tenants where they consent. In instances where consent has not been given by the tenant, the landlord can require a contribution to the reasonable estimate of the cost saving that results. It is especially concerning that the methodology for calculating the reasonable estimate has yet to be determined. How then can a reasonable assessment of the cost to tenants be made? The answer is that we simply do not know how much cost will be passed on to tenants.

To be clear, we certainly are not opposed to landlords upgrading their properties and passing some cost on to tenants where the tenant clearly derives a benefit. Family First sees this as appropriate and, in some instances, obviously highly beneficial. However, we want to ensure that all parties are treated equitably through this process, and it is essential that tenants are given some measurable benefit for what would almost certainly be an added cost to them, especially when they have not consented to this additional cost in the first instance. This bill does not clearly ensure that this will occur.

There is a risk that added cost will be passed on to the tenants already struggling to make their businesses work and it could be what, to use the vernacular, pushes them to the wall. I note that Business SA has asked that all reference to landlords being able to recover contributions from tenants for environmental building upgrade finance without their express consent be removed. One of the greatest concerns that Family First has in relation to this bill is that there is no clearly expressed remedy or so-called make good provisions in instances when no savings actually occur. A business which is forced to incur costs under the guise of long-term saving should have the protection of a provision allowing tenants to recover their loss.

It is foreseeable that a small business owner would not be in a position to force a landlord to repay money for capital works which did not return the expected or promised cost savings. As there is no make good provision in this bill, the tenant would have to bear the cost for which they receive no tangible benefit and will have no reasonable option from recourse. We do not believe this is acceptable.

Business SA has raised concerns about the lack of clarity as to who will administer this scheme as well. There has been some suggestion that the Local Government Association may be the organisation who will administer the scheme, and no doubt the minister will clarify this in the summing up. I, too, share the concern that this could essentially become a conflict of interest between the organisation that represents the councils and a particular council which is imposing the levies on the building upgrade agreement. It would be helpful to know which administrative unit would be charged with oversight of this scheme during debate, but it seems that that may be unlikely.

Given the nature of this legislation, it is entirely possible that disputes will arise between landlords and tenants. It would therefore be prudent to have set out an appropriate dispute resolution process to ensure the equity of this proposal for both parties. The bill is silent as to dispute resolution.

I note that a number of my colleagues have raised similar concerns, and I look forward to ongoing debate and hearing from the government in relation to these issues in the summing up when we all decide our final positions.

The Hon. T.T. NGO (15:56): I rise to support the Local Government (Building Upgrade Agreements) Amendment Bill. Energy use in buildings accounts for over 20 per cent of South Australia's greenhouse gas emissions. There are a number of old commercial buildings in South Australia which could be made more energy efficient, and by upgrading these buildings to be more energy efficient we can reduce these emissions. This bill aims to achieve this by making it easier for commercial building owners to environmentally upgrade their buildings.

Currently, there are a number of reasons why commercial building owners may choose not to retrofit their buildings to be more environmentally efficient. These include difficulty in obtaining finance and not receiving the benefits of upgrade works as energy-efficient savings are passed on to the tenant through reduced energy bills.

Finance lenders have been reluctant to provide loans for such upgrades because of the lack of collateral security. This bill aims to solve these problems by introducing a finance mechanism for building upgrades for commercial buildings. South Australia will be the third region to implement such a mechanism. The City of Melbourne and New South Wales already have similar mechanisms.

According to the Sustainable Melbourne Fund, which administers environmental upgrade finance in Melbourne, agreements in place to date have resulted in annual cost savings of $571,000 to two building owners alone and reduced carbon by about 6,267 tonnes. The first building to sign an agreement was 460 Collins Street, which was built in 1939. Its old air conditioner was replaced with an energy-efficient cooling system. It resulted in energy bill savings of $11,000 per annum and carbon emissions savings of 170 tonnes.

This building's owner has proposed more upgrades, including a new boiler, for a total proposed saving of around $33,000 per annum. A number of other buildings in Melbourne have undertaken various upgrades, from coolers and boilers to motion sensor lighting. This scheme has been so successful in the City of Melbourne that Victoria is looking to expand its scheme to the rest of the state.

Building upgrade agreements are loans which can be taken out by building owners to environmentally upgrade their commercial building. These agreements are voluntarily undertaken between the council, a finance provider and a building owner.

Finance companies provide the funds, but the loan is administered by the relevant local council through rate collection. The loan agreement is a charge over the building. It takes precedence over mortgages and liens that may already be in place. A lien is a security interest granted over a property, or part of a property, to secure payment of a debt or obligation. This provides excellent security to the finance provider.

This bill also includes safeguards to ensure that these loans are commercially viable. These include that the value of the loan must be less than the value of the building before it is upgraded, minus any mortgage or charge, etc., that is already over the land.

Through building upgrade agreements, owners will also be able to enjoy the benefits of upgrading their building. Currently, a tenant may receive all or nearly all of the cost benefits of any efficiency improvements made to the building through reduced utility bills. Building upgrade agreements will allow the owner to recover a contribution to the cost of the building upgrade from the tenants, either by consent or notifications, subject to conditions set out in the bill.

If the contribution is to be recovered through notice, it cannot exceed a reasonable estimate of the amount the tenants will save from the upgrade works. This protects the tenants from paying more for use of the building than they currently do, while the owner is able to benefit from the upgrades made to the building. It is anticipated that there will be other benefits, including an increase in demand for energy efficient mechanisms. Such an increase could lead to an increase in employment in our renewable energy sector.

Building upgrade agreements are a vital step towards reducing our greenhouse gas emissions while also providing economic opportunities. They also provide opportunities for local governments to partner with their ratepayers to improve the amenity of their local area.

Debate adjourned on motion of Hon. J.M. Gazzola.

PARLIAMENTARY BUSINESS
MEMBERS
GET INVOLVED
ABOUT PARLIAMENT
VISIT
LEGISLATIVE COUNCIL
HOUSE OF ASSEMBLY
CONTACT