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Building Upgrade Finance

Building Upgrade Finance

South Australia’s Building Upgrade Finance (BUF) mechanism is designed to help stimulate investment and jobs in South Australia, while also delivering environmental outcomes.

Two commercial buildings in South Australia will be the first to undergo environmental upgrades using the mechanism.

The City of Salisbury and City of Adelaide, City of Onkaparinga and the City of Marion are the first in South Australia to collaborate with local business to offer the mechanism in their areas.

To assist with the implementation and operation of the mechanism in South Australia, the State Government entered into a grant agreement with the City of Adelaide to establish and maintain for a period of four years, a central facilitation service for the mechanism.

The central facilitator will offer services to assist the local government, finance and property sectors with the use of the mechanism to maximise the uptake of the mechanism and facilitate Building Upgrade Agreements.

Background

Building Upgrade Finance (formerly referred to as Environmental Upgrade Finance) is a mechanism which helps building owners to access loans to improve the energy, water and environmental efficiency of existing commercial buildings.  

The Building Upgrade Finance mechanism is designed to tackle market barriers that often impede commercial building upgrades from going ahead.  These barriers include access to the capital to fund upgrade projects, and the split incentive between landlords and tenants in leased buildings, where the building owner incurs the cost of the upgrade, but the tenant receives the benefits through reduced utility bills and improved accommodation. The Building Upgrade Finance mechanism thereby helps to unlock retrofitting activity and realise the associated environmental and economic benefits.

The enabling legislation for the mechanism and the supporting regulations came into operation on 1 August 2017.

The ‘no worse off’ methodology for estimating tenant cost savings was approved by notice in the gazette on 8 August 2017.

The ‘no worse off’ Methodology for Estimating Tenant Cost Savings is to be used for building upgrade projects where the lessee/s of a building are requested to provide a contribution to the building upgrade charge without the tenant’s explicit consent. The methodology makes sure that tenants are not financially disadvantaged and any contribution they make to the building upgrade charge does not exceed the money they save on their utility outgoings as a result of the upgrade.

The State Government has developed the Building Upgrade Agreement template in consultation with the local government, property and finance sectors to assist the parties to use the mechanism. Clauses 12-14 of the Building Upgrade Agreement template are mandatory for all building upgrade agreements.

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