By Aaron Gadiel, Partner

The NSW Government has published new rules for ‘sustainable buildings’.  These new rules will significantly change the way that many development applications are handled.

The new rules will take effect on 1 October 2023.  These new rules are set out in:

• amendments to regulations (the Environmental Planning and Assessment Amendment (Sustainable Buildings) Regulation 2022); and
• a new State Environmental Planning Policy (Sustainable Buildings) 2022 (the Sustainable Buildings SEPP).

Non-residential buildings

With some limited exclusions, there will be a series of new state-level requirements that apply to non-residential buildings, when the development involves:

• the erection of a new building; or
• alterations, enlargement or extension of an existing building (but only if the development has a capital investment value of $10 million or more).

Once the new rules start, applications for development applications for such development will need to:

• disclose the amount of embodied emissions attributable to the development; and
• describe the use of low emissions construction technologies in the development.

When determining these development applications, the consent authority will be required to consider whether the development is designed to enable the following:

• the minimisation of waste from associated demolition and construction, including by the choice and reuse of building materials;
• a reduction in peak demand for electricity, including through the use of energy efficient technology;
• a reduction in the reliance on artificial lighting and mechanical heating and cooling through passive design;
• the generation and storage of renewable energy;
• the metering and monitoring of energy consumption; and
• the minimisation of the consumption of potable water.

This means that such a development application will be able to be refused by a consent authority on any of the above grounds — even if it is otherwise compliant with planning controls.

There will be a new prohibition on the grant of development consent.  It will be unlawful for a consent authority to grant development consent (for the above non-residential development) unless it is first satisfied the embodied emissions attributable to the development have been quantified.  This will require a consent authority to expressly consider this issue for every such development.

On top of the requirements that apply at the development application stage, applications for construction certificates (for the above non-residential buildings) will need to disclose the amount of embodied emissions attributable to the development.

The information for these applications will need to be supplied via a form on the NSW Planning Portal, based on an itemised list of building materials for the development prepared by a quantity surveyor (eg a bill of materials or a bill of quantities).

The amount of embodied emissions disclosed will need to be certified by either a quantity surveyor, a qualified designer or an engineer.

Large commercial development

Under the regime, additional rules apply to ‘large commercial development’.  This is defined to be non-residential development that involves the erection of new:

• office premises with a net lettable area of at least 1,000sqm;
• hotel or motel accommodation with at least 100 rooms; or
• a building with at least 100 serviced apartments.

‘Large commercial development’ also includes non-residential development involving alterations, enlargement or extension of these development types — if the development has a capital investment value of $10 million or more.

Some of these rules will also apply to the following types of non-residential state significant development:

• cultural, recreation and tourist facilities;
• hospitals, medical centres and health research facilities; and
• educational establishments.

Once the new rules start, development applications for ‘large commercial development’ (and the above types of state significant development) will need to include a ‘net zero statement’.  This means that evidence will need to be supplied that the development will either:

• not use ‘on-site fossil fuels’ after the occupation and use of the development commences; or
• incorporate the infrastructure, or space for the infrastructure, necessary for the development to not use ‘on-site fossil fuels’ after 1 January 2035.

The use of back-up electricity generators does not count as the use of ‘on-site fossil fuels’.  (That is, a development can include back-up electricity generators without affecting the net zero statement.)

Development applications will also need to include details of:

• any renewable energy generation and storage infrastructure forming part of the development;
• passive and technical design features that minimise energy consumption by users of the development;
• if available — the estimated annual energy consumption for the building in kilowatt hours per square metre of floor area; and
• if available — the estimated amount of emissions relating to energy use in the building including direct and indirect emissions.

The above evidence and information will need to be certified by a mechanical or electrical engineer.

Additionally, for ‘large commercial development’ only the development application will need to be accompanied by a copy of a ‘National Australian Built Environment Rating System’  (NABERS) commitment agreement that demonstrates the development is capable of achieving new standards for energy and water use.

The energy use standards are:

• for office premises with a net lettable area of at least 1,000sqm — a 5.5-star NABERS energy rating;
• for hotel or motel accommodation with at least 100 rooms — a 4-star NABERS energy rating; and
• a building with at least 100 serviced apartments, a 4-star NABERS energy rating.

The water use standard is a 3-star NABERS water rating across all large commercial development types.

The development application must identify the method under Section J of the Building Code of Australia that will be used to demonstrate the development is capable of achieving the above energy use standards.

Significantly, these requirements apply to concept development applications (as well as the more regular detailed development applications).  (‘Concept development applications’ are often informally called ‘stage 1’ development applications, particularly in the City of Sydney.)  At present, many concept development applications are for building envelopes only.  These new requirements are likely to complicate the preparation of concept proposals for approval by concept development consents.

There is a further new state-level requirement for a consent authority to consider whether the development minimises the use of on-site fossil fuels, as part of the goal of achieving net zero emissions in NSW by 2050.  This requirement applies (with some limited exceptions) to:

• the erection of a new building; or
• alterations, enlargement or extension of an existing building, if the development has a capital investment value of $10 million or more.

Additionally, for that development, a consent authority will not be able to lawfully grant development consent unless it is satisfied the development is capable of achieving the above standards for energy and water use.  A development should be regarded as being capable of achieving a standard if there is a NABERS commitment agreement in place to achieve the standard.

Again, with some exceptions, a consent authority will need to consider — when determining a development application — whether state significant development for:

• cultural, recreation and tourist facilities;
• hospitals, medical centres and health research facilities; and
• educational establishments,

will minimise the use of on-site fossil fuels, as part of the goal of achieving net zero emissions in NSW by 2050.

Applications for construction certificates for large commercial development will need to be accompanied by reports about the standards for energy and water use achieved by the development.  These reports will need to address new standards for energy and water use for large commercial development (as outlined above).  The report for energy use must be in the form of a report under Section J of the Building Code of Australia.  The report for water use may be in the form of annotated drawings and specification.

New prescribed condition of consent

For development consents for ‘large commercial development’ there will be a new mandatory condition of consent.  This condition will not be able to be varied or waived by a consent authority.

Within the first 24 months after the issue of an occupation for the development, the following must be given to the consent authority using the NSW Planning Portal:

• an assessment of the NABERS rating for water use achieved by the development, prepared by an assessor accredited by NABERS; and
• an assessment of the NABERS rating for energy use achieved by the development, prepared by an assessor accredited by NABERS.

Additionally, the consent authority will have a new role to determine required offsets for a ‘large commercial development’.  This power will be exercised after a development consent is granted.

The number of offsets required for particular development will be determined using the assessment of the NABERS rating for energy use achieved by the development (supplied within the first 24 months, as per above).

If the consent authority is satisfied that the development will use on-site fossil fuels (excluding back-up electricity generators) it may require:

• the purchase and surrender of ‘Australian carbon credit units’; or
• the obtaining of ‘Climate active’ certification.

If the consent authority is satisfied that the development will not achieve the energy use standards, it may require the purchase and surrender of ‘large-scale generation’ certificates.  This appears to be a safeguard measure — as a development application will already need to be accompanied by a NABERS commitment agreement that demonstrates the development is capable of achieving new standards for energy and water use.  This offsetting provision appears to be addressing the possibility that actual building performance will fall short of what the development was capable of (when the development application was lodged).

We consider that you can appeal to the Land and Environment Court about:

• a failure by a consent authority to make a timely decision; or
• an unsatisfactory decision by a consent authority,

about the type and number of any offsets required.

Evidence that any required offsets for the development have been purchased/surrendered (for ‘Australian carbon credit units’ or large-scale generation certificates) or obtained (for ‘Climate active’ certification) will need to be supplied to the consent authority within the first 24 months after the issue of an occupation certificate for the development.

BASIX certificates

BASIX certificates govern the energy and water use of residential developments.  BASIX certificate are not new, but will be significantly changed once the new rules come into effect.

BASIX certificates will be re-designed so that they confirm achievement of the standards that apply to the development under Chapter 2 of the Sustainable Buildings SEPP.

Unsurprisingly, this involves a new, more complex, regime.

Firstly, there is a new ‘Climate Zones for BASIX Buildings Map’.  It divides the state into numbered climate zones.  Sydney is generally split between three different climate zones: the very inner city/CBD, the inner and middle ring suburbs and western Sydney.  Climate zone designation in regional NSW vary considerably, depending on the region.

Secondly, there is a new ‘Climate Zones for BASIX Alterations Map’.  Broadly speaking, this also divides Sydney into different climate zones: the inner/middle ring suburbs, Western Sydney and the Blue Mountains.  Again, the climate zones in regional NSW vary considerably, depending on the region.  The zoning system is not the same as the ‘Climate Zones for BASIX Buildings Map’.

Thirdly, there is a new ‘Water Use Map’ setting minimum water use standards for different localities.  The minimum water use standard is a percentage reduction in mains-supplied potable water use from a ‘baseline’.  Sydney and coastal regional areas are generally subject to a 40 per cent reduction.  The percentage appears to generally fall the further a locality is positioned away from the coast.

It is not yet possible to say precisely what these maps will actually mean in practice.  This is because the way that the maps are used are subject to a further decision of the Secretary of the Department of Planning and Environment.  Sometime between now and 1 October 2023 the Secretary must publish on the NSW Planning Portal:

• a baseline amount of greenhouse gas emissions resulting from the use of energy (attributable to occupants) of types of development over a year;
• a baseline average daily amount of mains-supplied potable water use (attributable to occupants) of development over a year; and
• the standard occupancy rates.

The energy use standard for BASIX buildings (and change of use to BASIX buildings) limits the amount of greenhouse gas emissions resulting from the use of energy (attributable to an occupant of the development) over a year.  The energy use must be less than a mandatory percentage below the ‘baseline’.  Different mandatory percentage reductions are nominated for different development types and climate zones.  (As per above, the ‘baseline’ — and the standard occupancy rate per dwelling — has to be determined by the Secretary in a further decision.)

The water use standard for BASIX buildings (and change of use to BASIX buildings) limits the average daily amount of mains-supplied potable water use (attributable to an occupant of the development) over a year.  Again, it must be less than a mandatory percentage below the ‘baseline’.  The required percentage reduction on the ‘baseline’ is set out in the new ‘Water Use Map’.  However, again, the ‘baseline’ (and the standard occupancy rate per dwelling) still has to be determined by the Secretary in a further decision.

There will also be a series of prescriptive standards for alterations to BASIX buildings (and BASIX swimming pools and spas).  These, in part, vary depending on the climate zone for the locality shown on the new ‘Climate Zones for BASIX Alterations Map’.

There is a flexibility provision that allows the Secretary to waive the new BASIX standards for a development involving a heritage item or in a heritage conservation area.  This applies if the Secretary is satisfied that the development is not capable of achieving a standard because of other development controls that apply.

It will also be unlawful for a consent authority to grant development consent for BASIX development unless the consent authority is satisfied the embodied emissions attributable to the development have been quantified. As with other development types (above) it will require a consent authority to expressly consider this issue for every development for which the BASIX standards apply.

Local provisions

Local planning controls for BASIX development will have no effect if they aim:

• to reduce consumption of mains-supplied potable water or greenhouse gas emissions related to the use of a building or the land on which a building is located;
• to improve the thermal performance of development; or
• to quantify and report on the embodied emissions attributable to development.

However, local planning controls may prescribe more onerous requirements to a part of BASIX development (or BASIX optional development) that will not be used for residential purposes.

Additionally, local planning controls may encourage, or offer incentives for, the adoption of measures beyond the state-level BASIX standards.

Pending development applications

Most of the above new requirements will not apply to:

• a development application submitted, but not finally determined before the new rules come into effect; or
• an application for modification of a development consent under ‘section 4.55’ or ‘section 4.56’ that is submitted but not finally determined before the new rules start.

Bottom line

This is a significant change to the way that building energy and water use is managed under the NSW planning system.  While the aims of the rules are laudable, the rules will further complicate the development and construction approval process.  Some aspects of the rules are not straightforward.  There is a risk that, for some sites, legal complications will arise.