Local Government (Building Upgrade Agreements) Regulations 2017

Building upgrade agreement (BUA). A voluntary statutory contract under Schedule 1B of the Local Government Act. The council agrees to provide or facilitate funding for upgrade works; the building owner agrees to repay the amount via a building upgrade charge that runs with the land. The charge is not a tax but a contractual debt secured against the land, enforceable by the council like unpaid rates.

Upgrade works. For the purpose of a BUA, upgrade works are defined in Schedule 1B of the Act. These regulations (regulation 4) prescribe additional works that qualify if the building is a heritage building - works maintaining, repairing, upgrading or reinstating heritage significance; works for compliance with building rules or the Commonwealth Disability Discrimination Act 1992; and works facilitating ongoing occupation of the building. This means heritage buildings can use BUAs for conservation‑related projects, not just environmental upgrades.

Prescribed buildings. Only buildings used primarily for commercial, industrial or other non‑residential purposes are eligible for a BUA (regulation 5). Residential buildings are excluded entirely, so the mechanism is targeted at businesses, factories, offices, retail and similar.

Building upgrade charge. The amount the building owner must pay the council under the BUA. It is registered against the land and enforceable by sale of the land if unpaid (regulation 8). The charge can be apportioned among units in a strata or community scheme (regulation 7).

Ministerial‑designated requirements. The Minister for Local Government may designate mandatory reporting and information‑use requirements for BUAs (regulation 6(1)). These designations can be varied or revoked at any time and published in any manner the Minister thinks fit (regulation 6(3)-(4)). They override inconsistent terms in the BUA (regulation 6(2)). This gives the Minister unilateral power to alter the obligations of parties to existing BUAs, creating uncertainty for owners and councils who negotiated terms in reliance on earlier designations.

Cost savings methodology. Regulation 9(1)(b) refers to cost savings from upgrade works calculated in accordance with an ‘approved methodology’. The regulations do not define this methodology; it must be set out elsewhere - presumably in the BUA or in ministerial guidelines. The concept is used to limit what lessors can recover from lessees: contributions cannot exceed cost savings, and any excess must be refunded or credited.

Register of building upgrade agreements. Each council must maintain a register recording the address of the building, description of upgrade works, total value of the charge, and duration of the agreement (regulation 10(1)). Entries must be made within five business days of execution and removed within five business days of full payment or termination (regulation 10(2)). The register is public and provides transparency but also imposes a compliance burden on councils.

Building owners. Owners of commercial, industrial or other non‑residential buildings (including heritage buildings) who wish to enter a BUA with a council. They must negotiate the BUA, agree to the ministerial‑designated reporting requirements (which they cannot contract out of), and bear the risk of default leading to sale of the land. Owners also face the ongoing cost of preparing annual environmental‑performance reports (regulation 6(1)(a)).

Councils. South Australian councils must decide whether to offer BUAs, must maintain a register, must follow a strict procedure before selling land for non‑payment (regulation 8), and must comply with any ministerial designations. Councils also take on the administrative burden of verifying cost savings and overseeing lessor‑lessee arrangements. The regulations do not require councils to offer BUAs - it is permissive - so the decision imposes a cost‑benefit analysis for each council.

Lessees. Tenants of commercial buildings subject to a BUA are indirectly affected. Under regulation 9, a lessor can recover a contribution from a lessee only if the BUA entitles it and the lessor provides an annual report on cost savings. Contributions are capped - they cannot exceed the cost savings made by the lessee (calculated by approved methodology). If contributions exceed savings, the lessee must get a refund or credit. If savings exceed contributions, the lessor cannot demand additional payment. Lessees can agree to modify these rules (regulation 9(2)), but that agreement may shift risk onto the lessee. Lessees also have the right to be informed when the charge is fully paid or the BUA terminated (regulation 9(3)).

Strata and community corporations. Where the building is subject to a strata or community scheme, the corporation may decide to pay the building upgrade charge from its administrative or sinking fund (regulation 7(1)(a)). If it pays, the charge ceases to be a charge on that unit or lot. Unit holders or lot owners can request a copy of the BUA (regulation 7(1)(c)). This creates potential for disputes among owners about whether to enter or pay the charge, and may affect unit values.

Registered mortgagees. Mortgagees receive a copy of any notice of intended sale for non‑payment (regulation 8(b)(ii)). They have an incentive to ensure the building owner pays the charge to avoid losing security. The regulations give mortgagees no other rights; they cannot block the BUA.

The Minister for Local Government. The Minister gains power to designate mandatory reporting and information‑use requirements, and to vary or revoke designations unilaterally. This centralises control over BUA content outside the contractual process.

Building owner’s duty to report. Where the BUA involves environmental upgrade works, the owner must provide a report to all parties within 15 months of practical completion. The report must cover improvements in energy or water efficiency, other performance improvements, cost savings, and any environmental performance rating from a designated accredited body (regulation 6(1)(a)). The content of that report can be supplemented by ministerial designations (regulation 6(1)(b)) which also cover use and disclosure of information. The owner cannot contract out of these reporting requirements (regulation 6(2)).

Council’s duty before selling land. Before selling land for non‑payment of a building upgrade charge, the council must send the building owner a notice stating the amount owed, the period of non‑payment, and that sale will proceed if the amount is not paid within one month (or longer if council allows). Copies must go to any other ratepayer and any registered mortgagee (regulation 8(a)-(b)). If the notice is unlikely to come to the attention of the person, the council can publish in a state‑wide newspaper and leave a copy conspicuously on the land (regulation 8(c)). The sale must be by public auction, advertised at least twice in a state‑wide newspaper, and with a reserve price (regulation 8(e)-(f)). If the amount plus costs is paid before auction, the auction must be cancelled (regulation 8(g)). If auction fails, the council may sell by private contract for the best price reasonably obtainable (regulation 8(h)). This procedure creates a clear timeline and multiple checks, but the one‑month payment window is relatively short.

Lessor’s duty to report and cap contributions. A lessor recovering a contribution from a lessee under clause 12 of Schedule 1B must provide an annual report on cost savings within three months of the period end (regulation 9(1)(a)). If contributions exceed savings, the lessor must refund the excess or adjust the next contribution (regulation 9(1)(b)(i)), and reduce future contributions to reflect savings (regulation 9(1)(b)(ii)). The lessor cannot recover any contribution until the upgrade works (or a relevant element or stage) are completed (regulation 9(1)(b)(iii)). The lessor has no right to demand additional contributions if savings exceed contributions (regulation 9(1)(c)). However, lessor and lessee can agree that these reporting and refund obligations do not apply or apply with modifications (regulation 9(2)). This opens a door for contracting around the protections, which may benefit both parties but could be used to bypass lessee protections in a bargaining imbalance.

Lessee’s right to information. The lessee has a right to the annual cost‑savings report, and to a refund or credit if contributions exceed savings. The lessee also has the right to be informed when the building upgrade charge is fully paid or the BUA terminated (regulation 9(3)). If the lessee does not request a refund, the lessor must credit the next contribution (regulation 9(1)(b)(i)(B)). The lessee can also request a copy of the BUA if the building is subject to a strata or community scheme (regulation 7(1)(c)).

Strata corporation’s discretion to pay. The strata or community corporation may decide to pay the building upgrade charge from its funds (including from an administrative or sinking fund if it has determined to do so). Once it pays the charge for a particular unit or lot, the charge ceases to be a charge on that unit or lot (regulation 7(1)(b)). This gives the corporation a tool to relieve individual owners but also imposes a financial burden on all unit owners collectively.

Minister’s power to designate. The Minister may designate mandatory requirements for reporting and information use. These designations can be varied or revoked at any time, and published in any manner the Minister thinks fit (regulation 6(3)-(4)). No consultation process is specified; no publication in the Gazette is required; no notice to affected parties is mandated. This creates a risk of sudden changes to obligations under existing BUAs without contractual consent.

The regulations themselves do not create penalties or offences. Enforcement occurs through the underlying mechanisms in Schedule 1B of the Local Government Act and through ordinary contractual remedies. The most severe enforcement tool is the council’s power to sell the land for non‑payment of the building upgrade charge (regulation 8). That power is not a criminal penalty but a proprietary enforcement mechanism: the council can force a sale to recover the outstanding charge. The procedure requires a notice, a one‑month payment period, public auction, and the possibility of private sale after a failed auction. The building owner loses the land at auction, with no apparent right to redeem after the auction date unless the auction is cancelled by payment before the auction (regulation 8(g)). There is no second notice or additional grace period beyond the initial month.

If a lessor fails to provide the annual cost‑savings report or fails to refund or credit excess contributions, the lessee’s remedies are civil - the lessee could sue for breach of contract, seek an injunction, or apply for an order under the relevant lease. There is no express penalty for non‑compliance in the regulations. The lessor and lessee can also agree to remove these obligations, so enforcement might be waived by contract.

A council that fails to maintain its register of BUAs on time - within five business days for entry or removal (regulation 10(2)) - may be in breach of its statutory duty but no penalty is stated. A ratepayer or interested party could potentially seek judicial review to compel compliance, but there is no fast‑track enforcement mechanism.

The ministerial power to designate mandatory requirements does not include an express enforcement mechanism either. If a building owner or council breaches a ministerial‑designated requirement, the other party could argue that the breach makes the BUA void or unenforceable, but this is uncertain. The only explicit consequence is in regulation 6(2): ministerial requirements prevail over inconsistent terms, so any contractual term that contradicts them is unenforceable.

Overall, the regulations rely on private law remedies and the ultimate threat of land sale rather than a fines‑based regime. That reduces state discretion but also means that a building owner who stops paying the charge can face loss of the land with relatively limited procedural protections (one month’s notice, no right to a payment plan or hardship consideration beyond what the council may allow).

Local Government Act 1999 (SA). The regulations are made under that Act and fill in details for Schedule 1B. The Schedule creates the BUA framework; the regulations prescribe the types of buildings, contents of agreements, and procedural rules. The Act’s general rate‑recovery and enforcement provisions likely apply where the building upgrade charge is treated like a rate for collection purposes, though the regulations provide a bespoke sale procedure (regulation 8) which overrides any general sale power.

Development Act 1993 (SA). Regulation 4(1)(b) includes upgrade works associated with compliance with requirements under the Building Rules (defined in the Development Act). A BUA can therefore fund works needed to bring a heritage building into compliance with modern building standards. This creates an interaction with planning and building approval pathways - the upgrade works may still require development approval independently of the BUA.

Heritage Places Act 1993 (SA). The definition of heritage building in regulation 4(2) includes a building that is a State Heritage Place under the Heritage Places Act or designated as local heritage under the Development Act. Any upgrade works on such buildings must also comply with heritage approvals. The BUA does not override heritage controls.

Disability Discrimination Act 1992 (Cth). Upgrade works for compliance with this Commonwealth Act are also prescribed works for heritage buildings (regulation 4(1)(b)). This links state local government finance mechanisms to federal anti‑discrimination obligations.

Strata and community titles legislation. Regulation 7 interacts with the Strata Titles Act 1988 or Community Titles Act 1996 (SA) by allowing the strata or community corporation to pay the charge from its funds. The rights of unit holders and lot owners to request the BUA and the effect on apportionment of the charge are additional rules beyond those general Acts.

Commonwealth Environmental legislation. The reporting requirements in regulation 6 may overlap with National Greenhouse and Energy Reporting or other mandatory disclosure regimes, but the regulations do not address this. Building owners may face double reporting.

Contract law. The BUA is a hybrid of contract and statutory instrument. The regulations limit freedom of contract by making ministerial designations mandatory and overriding - but they also allow lessor‑lessee modifications of the contribution rules (regulation 9(2)). The interaction with general contract law is standard: the BUA must be interpreted according to its terms, subject to the overriding regulations.

Residential tenancies law. The regulations specifically exclude residential buildings from BUAs (regulation 5), so residential tenancies legislation is not directly affected. However, mixed‑use buildings (e.g., residential units above shops) may be affected if the building is primarily non‑residential - but the definition of ‘primarily’ is not elaborated.

The Local Government (Building Upgrade Agreements) Regulations 2017 were made on 25 July 2017 (Gazette 25.7.2017 p2943) and commenced on 1 August 2017 (regulation 2, referring to the commencement of the enabling amendment Act). The legislative history note shows no subsequent amendments. The principal regulations are therefore the only version. They have been in force for over seven years without revision or amendment. This stability could indicate either that the regulations function adequately or that they have been rarely used and have not generated sufficient demand for amendment. Given the Minister’s power to designate mandatory requirements by notice without amending the regulations (regulation 6(3)-(4)), substantive changes to BUA obligations can occur without formal amendment, making amendment of the regulations themselves less necessary. Any changes to the underlying Schedule 1B of the Local Government Act (which is not these regulations) would also affect BUA operation and might prompt future amendment, but none is recorded here.

The regulations themselves do not mention any court cases, and as of the knowledge cut‑off there is no publicly reported litigation specifically construing these regulations. Given their limited scope and the relatively niche nature of BUAs in South Australia, the absence of reported case law is not surprising. However, several potential sources of dispute can be identified from the text. Disputes over ministerial designations - particularly their validity, scope or retrospective application - could arise, though ministerial decisions would be subject to judicial review under the Administrative Decisions (Judicial Review) Act or the general law. Disputes over the calculation of cost savings under the approved methodology (regulation 9) could lead to litigation between lessors and lessees, especially where no agreement modifies the default rules. The procedure for sale of land for non‑payment (regulation 8) could be challenged if a council fails to follow the notice or auction requirements, or if the council sells for an inadequate price at private sale after auction fails. Mortgagees who received notice might also challenge a sale that destroys their security. The strata provisions (regulation 7) could give rise to internal disputes within corporations about whether to pay the charge. To date, no court has interpreted the interplay between regulation 6(2) (prevailing effect of ministerial designations) and the general contractual provisions of a BUA. This lacuna means that the true scope of ministerial power remains untested.

Ministerial designations are unpublished and mutable. The Minister may designate mandatory requirements and publish them “in such manner as the Minister thinks fit” (regulation 6(4)). There is no requirement for notice, consultation, or gazettal. A building owner could be bound by a designation they cannot easily find, and the Minister can change the rules at any time, even for existing BUAs. This creates significant uncertainty for long‑term agreements.

One‑month payment window for land sale. A council can proceed to auction to sell the land if the amount is not paid in full within one month of the notice (regulation 8(a)(iii)). There is no statutory right to a longer period or to a payment plan; it is at the council’s discretion. Any minor delay or dispute over the amount could trigger loss of the property.

Lessor‑lessee modifications can strip protections. Regulation 9(2) allows the lessor and lessee to agree that the annual report and refund obligations do not apply or apply with modifications. A lessee in a weaker bargaining position may agree to remove the cost‑savings cap or the reporting requirement without realising it. The regulation does not require the agreement to be in writing or prescribe any safeguards.

Cost‑savings methodology is not defined in the regulations. The term “approved methodology” (regulation 9(1)(b)) is left undefined. This means the methodology must be set elsewhere - likely in the BUA itself or in ministerial guidelines. If the methodology is not clearly stated, disputes over calculation are guaranteed.

Strata unit owners can be forced to pay. Under regulation 7(1)(a), the strata corporation may decide to pay the building upgrade charge from its administrative or sinking fund. A majority vote of the corporation could force all unit owners to bear the cost, even if some owners did not consent to the BUA. There is no opt‑out for dissenting owners, though once the charge is paid for a particular unit, it ceases to be a charge on that unit (regulation 7(1)(b)). If the corporation does not pay, the charge remains on the individual units and the council could sell each unit for non‑payment.

Register entries must be made within five business days. Regulation 10(2)(a) requires a council to enter a record within five business days after execution of the BUA. If the council fails to do so, the agreement may still be valid, but the register may mislead third parties. Conversely, removal must occur within five business days of full payment or termination. Delays in removal could prevent the building owner from obtaining clear title or refinancing.

No minimum value for upgrade works. The regulations do not prescribe a minimum total value for the building upgrade charge. This means that very small works could theoretically be covered, but the administrative burden of reporting and registration may make BUAs uneconomic for small projects.

Heritage building definition is narrow. Only buildings that are State Heritage Places or designated local heritage under the Development Act qualify for the extended upgrade works (regulation 4(2)). A building that is simply old or of local interest but not formally listed cannot use the heritage provisions to secure BUA funding for maintenance.

For building owners entering a BUA. Before executing, ensure the building is eligible - it must be used primarily for commercial, industrial or other non‑residential purposes (regulation 5). If the building is a heritage building, confirm that the proposed upgrade works are of the prescribed type under regulation 4. Check with the relevant council whether the Minister has designated any mandatory reporting or information‑use requirements; if so, those terms must be included in the agreement and cannot be varied. Prepare to provide an environmental performance report within 15 months of practical completion of works (if environmental upgrade works). Maintain records of cost savings and performance data to satisfy any ministerial requirements. Understand the payment timeline - non‑payment can lead to sale of the land after only one month’s notice (regulation 8(a)(iii)). Consider building the charge into a sinking fund or lease payments to avoid default.

For councils offering BUAs. Before finalising a BUA, check whether the Minister has current designations under regulation 6(1). Incorporate those requirements into the agreement. Provide the building owner with a clear statement of the reporting obligations. Establish a register of BUAs and ensure entries are made within five business days of execution, and removed within five business days of full payment or termination (regulation 10). Before any sale for non‑payment, follow the precise notice, publication and auction procedure in regulation 8. Do not attempt to sell by private auction without first holding a public auction and having it fail. If the building is subject to a strata or community scheme, be aware that the corporation may pay the charge - treat the corporation as a payor and update the register and charge accordingly.

For lessors recovering contributions from lessees. First, ensure the BUA entitles the lessor to recover contributions under clause 12 of Schedule 1B. Then, provide the lessee with an annual report on cost savings within three months of the period end (regulation 9(1)(a)). Use the approved methodology to calculate savings. If contributions exceed savings, refund or credit the excess immediately and reduce future contributions. Do not recover contributions until the upgrade works giving rise to the savings are completed (regulation 9(1)(b)(iii)). If the lessee does not request a refund, adjust the next contribution as a credit. Do not demand additional contributions if savings exceed contributions (regulation 9(1)(c)). Inform the lessee when the building upgrade charge is fully paid or the BUA is terminated (regulation 9(3)). If the lessor and lessee want to modify these obligations, enter into a written agreement under regulation 9(2) - but note that the agreement cannot override any ministerial designations that directly apply.

For lessees subject to contribution recovery. Request the annual cost‑savings report. If you believe contributions exceed your cost savings, ask for a refund or credit within a reasonable time. If you want to keep the default protections, do not agree to modify them without legal advice - once you waive the reporting or refund requirement under regulation 9(2), you lose the statutory cap. If your lessor fails to provide the report or fails to refund excess contributions, you may need to pursue a contractual remedy.

For strata or community corporations. Before deciding to pay a building upgrade charge from the corporation’s funds, ensure the corporation has the legal authority to do so under its own rules (e.g., a determination to use the administrative or sinking fund). If you pay, the charge ceases to be a charge on the relevant units or lots. If you do not pay, the charge remains and individual unit owners face the risk of the council selling their unit. Provide a copy of the BUA to any unit holder or lot owner upon request (regulation 7(1)(c)). Keep records of any decisions to pay the charge, as these may affect future levies.