Posted on February 16, 2011 by Frances Tse
New Scheme For Levying Charges For Environmental Upgrades
Councils will soon have the option of participating in a scheme to encourage upgrades of existing commercial and large strata residential buildings which will improve the energy, water and environmental efficiency or sustainability of the buildings.
The scheme will be given effect through an amendment to the Local Government Act 1993 (Act). The legislation has been passed, and is awaiting proclamation.
Under the scheme, building owners, councils and financial providers may enter into voluntary environmental upgrade agreements, under which a financial provider lends money to a building owner for upgrade works, and the loan is recovered through charges levied by the council on the land on which the building is located. The council is then required to remit the charges to the financial provider.
A council will clearly incur costs in administering the levying of the charge, particularly because the scheme requires councils to use their best endeavours to recover any charges levied. The provisions of the agreement relating to recovery of council’s costs, and council’s obligations in respect of recovery of charges, would need to be carefully considered.
However, whilst councils must use best endeavours to recover charges, they are not liable to pay any outstanding amounts to the financial provider. Therefore, councils do not bear the risk of the loan.
The scheme’s aim is to encourage lending for such upgrade works, by providing additional security to the finance providers. Whilst councils will presumably have a general interest in seeing buildings upgraded for environmental purposes, the scheme is not directed at protecting councils.
In that respect, the scheme differs from the provisions inserted into the Act in October 2010 enabling councils to levy charges for coastal protection services, which are directed at ensuring councils can recover their own costs, incurred in relation to coastal protection works.