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As the number of “green” buildings in Queensland increases, it is becoming more and more important for land owners, developers, builders, tenants and other interested parties to ensure that certain property contracts, such as construction contracts and leases, and other property documents, such as by-laws and building management statements, are drafted carefully. Such documents need to be clearly written and must adequately deal with all the relevant green aspects of the transaction.
As “green law” is a relatively new area, green clauses in property contracts are too often drafted with little knowledge of what is actually required to obtain certain green outcomes (such as what is required to achieve a Green Star rating), making these clauses unworkable and uncertain.
Here are our top five tips for drafting green clauses.
- Be specific. Be careful not to use broad sweeping statements in clauses. Outline who is responsible for what and when certain milestones must be achieved. For example, using a clause that requires a builder to obtain a five-star Green Star rating may not be enforceable, given that a large part of the Green Star accreditation process requires data and submissions from the land owner, which is not information the builder will control.
- Deal with non-compliance. Make sure that if either party does not comply with the requirements under the contract, the contract provides for specific remedies. You will need to decide whether the contract will take a “soft” or “hard” approach to non-compliance. For example, a soft approach may be that a committee is established to ensure that each party is complying with its obligations, and that where one party cannot comply with its obligations, the committee meets to decide alterative approaches that may be taken. A hard approach under a lease may be that if the owner does not comply with its obligations, it is in breach of the contract, allowing the tenant to terminate the contract or to be entitled to a rent-free period.
- Ensure “make good” clauses in leases deal with green aspects. You may need to consider whether any reinstatement or make good clauses in leases include any necessary “carve outs”. For example, you may need to specify whether the tenant will be required to lease any equipment which the owner requires to maintain their NABERS rating at the end of the tenancy.
- Ensure dispute resolution is dealt with. Make sure that the relevant clauses state what will happen if either party does not do what they are required to do. Who is to resolve the dispute? What mechanisms are in place to deal with dispute resolution?
- Make sure the obligations on each party are capable of being performed by that party. The contract should not impose obligations on a party if that party is not capable of complying with them. For example, a builder should not agree to achieve or be responsible for a NABERS rating, as the tenant’s use of the property will affect the rating, and 12 months data on the performance of the building is required.
These tips are examples only and are by no means an exhaustive list of considerations for green contracts. Each contract will need to include green provisions that are appropriate in the circumstances.
For more information about green contract clauses or for assistance with drafting, please contact one of our team members.
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