Environmental Upgrade Agreements (EUAs) now make it easier to access finance for environmental improvements to existing commercial, industrial, strata scheme and large multi-unit residential buildings in NSW. Under this agreement, a finance provider lends funds to a building owner for water, energy and other environmental upgrades and this low-risk loan is repaid through a local council charge on the land. Tenants of commercial buildings can be asked to contribute to the costs. However, these additional costs must be offset by their reduced energy and water bills.
How do Environmental Upgrade Agreements work?
The building owner, council and finance provider voluntarily enter into an EUA.
• The building owner agrees to carry out the environmental upgrade works.
• The finance provider agrees to advance the funds for the works.
• Council agrees to levy environmental upgrade charges to pass repayments on to the finance provider (minus council’s processing fees).
EUAs can unlock funding for cost-effective upgrades that save natural resources, reduce operating costs and improve the capital value of buildings, benefiting building owners, tenants and the environment.
EUA loans are secured, making it possible to access capital for retrofits at a competitive rate, over a longer term and for larger projects. Under EUAs, building owners are able to share the costs of improving the building with tenants, who can also enjoy the benefits of the upgrades and lower operating costs. The loan is tied to the property and does not increase the personal debt of building owners. If the property is sold, the environmental upgrade charge may be transferred to the new owner. EUAs finance a wide range of retrofit activities with cost savings and environmental benefits that will improve the long-term value of assets.
Tenants can enjoy the benefits of a more efficient, comfortable and environmentally friendly tenancy that may include reduced day-to-day operating costs and energy bills. Building owners can ask tenants to contribute towards the cost of the upgrade through an increased contribution to outgoings in net leases. This amount should not exceed a reasonable estimate of the cost savings that tenants will gain from the upgrade.
Upgraded buildings attract investment, reduce environmental impacts, reduce pressure on infrastructure and increase the competitiveness and liveability of local building stock. Building upgrades can also boost local jobs and business opportunities for efficiency products and services. EUAs help councils encourage building owners to increase the performance of their building to save water, energy and greenhouse gas emissions.
Whether you are a building owner or a tenant, it is a good idea to consider using an Environmental Upgrade Agreement to finance your building upgrades. To find out more about EUAs, or to discuss other financing options, contact the experienced team of lawyers and accountants here at The Quinn Group – submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.