Depending on the type of lease transaction in relation to a disclosure affected buildings, you may have disclosure or other obligations under the Building Energy Efficiency Disclosure Act 2010 (the BEED Act).
Your obligations and rights in relation to leases also depend on whether you are:
Offering to lease or sublease, or inviting offers to enter a new lease or sublease
Obligations under the BEED Act apply to these commercial leasing transactions unless a term of 12 months or less is proposed (including any option to extend). Read more in disclosure affected buildings.
Examples of offering to lease or sublease, or inviting offers to enter a new lease or sublease include:
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issuing a lease proposal or heads of agreement outlining the terms on which the owner/landlord will agree to lease or sublease a disclosure affected building or area
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engaging in negotiations with a prospective tenant during which the parties discuss terms for a lease or sublease of a disclosure affected building or a disclosure affected area of a building are discussed
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issuing a lease or sublease for execution by a prospective tenant on the provision that they make an offer to lease or sublease a disclosure affected building or area by executing the lease or sublease and returning it to the landlord within a specified timeframe.
Note that certain exemptions may apply.
Assignment of a lease or sublease
An assignment of a lease is not considered an ‘offer’ and so does not trigger the CBD Program obligations.
An assignment of a lease can occur in several different ways.
The most typical example is where a tenant (the assignor) transfers all their interest in a lease to a third party (the assignee) by way of a deed. In this scenario is it usual for the assignee to be the substitute for the assignor. Consequently, the assignee pays rent directly to the landlord. The assignor steps out of the lease arrangement.
Importantly, an assignment of a lease is not the same as a sublease.
We recommend you obtain professional legal advice if you are unsure whether an assignment of a lease or sublease applies.
Exercising an option to renew a lease or sublease
Exercising an option to renew a lease or sublease is not considered an ‘offer’ and so does not trigger the CBD Program obligations.
An option to renew is an offer contained within the lease or sublease, which applies from the commencement date of the lease or sublease.
The offer remains available for a specified period until the conditions (if any) for exercising the option are satisfied, or the lease or sublease comes to an end.
Exercising an option to renew a lease or sublease doesn’t constitute an ‘offer to lease or sublease’ if the option was already contained within the original terms of the lease or sublease.
Exercising an option to extend a lease or sublease
Exercising an option to extend a lease or sublease is not considered an ‘offer’ and so does not trigger the CBD Program obligations, providing the lease terms remain the same.
Exercising the option to extend in a current lease or sublease is a variation of the lease. It doesn’t constitute an ‘offer to lease or sublease’ if the option was already contained within the original terms of the lease or sublease.
If the parties agree to further amend the terms of the lease or sublease so that they differ from what was contained in the original lease or sublease, this may constitute an ‘offer’ and the CBD Program obligations may apply.
A company’s 5-year lease agreement with a building owner is about to expire.
They want to renew their lease agreement, so they choose to use the provision containing the option to renew which is in their current lease agreement.
This is not considered a new offer and no new terms are negotiated.
This means the building owner does not need to provide a Building Energy Efficiency Certificate (BEEC).
A company’s 5-year lease agreement with a building owner is about to expire.
They want to extend their lease agreement, but there is no option to renew or extend in their current agreement.
As their proposed extension contains the same terms, including leased area and conditions, the lease is not viewed as a new offer.
This means the building owner does not need to provide a BEEC.
A company’s 5-year lease agreement with a building owner is about to expire.
They want to extend their lease agreement for another 5 years.
In addition to the space they’re currently leasing, they wish to lease additional space in the building but at a lower cost per square metre.
As their proposed extension will alter the terms of the previous lease, this will be regarded as a new offer.
This means the building owner is required to provide a BEEC, if the building or area is disclosure affected.
Read more
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Read about the advertising rules for disclosure affected buildings or areas.
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Read the definition of ‘building or area’ for the purposes of the CBD Program
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Check whether an exemption may apply