How the New Minimum Energy Efficiency Standards Affect Melbourne Rental Properties, and How to Prepare
TL;DR: From 1 March 2027, when a fixed heater in a Victorian rental property fails and cannot be repaired, it must be replaced with energy-efficient electric heating, not another gas heater. From the same date, new rental agreements also trigger a requirement for energy-efficient cooling in the main living area. A reverse cycle ducted system can meet both standards with one installation.
What Do Victoria’s 2027 Rental Heating Regulations Require?
The 2027 regulations require rental providers to replace failed heating with energy-efficient electric heating and to install efficient cooling in the main living area. The standards are set by the Residential Tenancies Amendment (Minimum Energy Efficiency Standards) Regulations 2025, made under the Residential Tenancies Act 1997 (Vic).
According to Consumer Affairs Victoria, the new minimum energy efficiency standard covers six areas: heating, cooling, hot water, shower heads, ceiling insulation and draughtproofing. For landlords with a gas heater in Melbourne rental properties, the heating and cooling standards matter most.
| Standard | What is required | When it applies |
|---|---|---|
| Heating | An energy-efficient fixed electric heater with an outlet in the main living area | From 1 March 2027, when the existing fixed heating system fails and cannot be repaired |
| Cooling | An energy-efficient fixed cooling system with an outlet in the main living area | From 1 March 2027, at the start of a new rental agreement or conversion to month-to-month. All rental properties from 1 July 2030 |
For ducted systems, Consumer Affairs Victoria sets these minimums for the climate area of the property:
- Heating: an electric ducted heating system with a GEMS Heating Seasonal Performance Factor of 3.2 or above
- Cooling: a ducted electric air conditioner or heat pump with a Total Cooling Seasonal Performance Factor of 3.8 or above.
For non-ducted systems, the minimum is a 2-star heating rating and a 3-star cooling rating.
Two points are easy to miss. First, you do not need to replace a functioning heater, as long as it meets the existing minimum standard for rental properties. Second, if a property has no heating, or its heater does not meet the existing standard, the rental provider must install compliant heating straight away. Rental properties must also meet minimum standards before they are advertised.
Which Heating Systems Will and Will Not Comply?
From 1 March 2027, a failed gas heater in a rental property cannot be replaced with another gas heater. Reverse cycle systems that meet the efficiency thresholds comply with both the heating and cooling standards.
Systems that will not meet the new standard when they fail:
- gas ducted heaters, including ageing Brivis, Bonaire and Braemar units
- gas space heaters and wall furnaces
- electric resistance heaters that do not meet the efficiency thresholds
- any portable heater, which does not meet the standard at all.
Systems that generally comply:
- reverse cycle ducted air conditioning that meets the HSPF 3.2 heating and TCSPF 3.8 cooling thresholds for the property’s climate area
- non-ducted reverse cycle split systems with at least a 2-star heating rating and 3-star cooling rating.
Compliance depends on the specific model and its rating for the property’s climate area, so always confirm the figures before you buy. A gas heater also does nothing to meet the cooling standard. Landlords with gas-only heating will need to add efficient cooling at the next new lease from March 2027, or by 1 July 2030 at the latest.
For a deeper look at how the two technologies compare, see our guide to gas ducted heating vs reverse cycle.
Why Should Landlords Act Before 2027?
Landlords should plan now because a heater that fails in winter will need a compliant electric replacement quickly, and installers will be busy. Planning ahead gives you control over timing, cost and tenant disruption.
The practical reasons to act early:
- Installer capacity: Demand for reverse cycle ducted installations is likely to rise as the deadline approaches and as older gas heaters fail in cold weather.
- Site inspection lead times: Inspections, quotes and scheduling take time, particularly in winter.
- Electrical upgrade requirements: Some properties need a switchboard upgrade or additional circuits before a ducted system can be installed.
- Urgent repair obligations: If heating stops working during a tenancy, renters can request an urgent repair. A planned upgrade avoids a rushed, more expensive decision.
- VEU rebate availability: Discounts through the Victorian Energy Upgrades program are market-based and vary over time. Upgrading on your own schedule lets you secure a quote with the discount applied.
Rental compliance in Melbourne is easier when the upgrade is planned between tenancies. If your current gas ducted heater still works, keeping it maintained buys you time to plan. Our ducted heating repairs team can assess its condition and advise on remaining life.
Can Landlords Get a VEU Rebate for Investment Property Upgrades?
Yes. Private rental properties are eligible for heating and cooling discounts under the Victorian Energy Upgrades program, and Consumer Affairs Victoria states that every upgrade under the new standards is eligible for a VEU discount.
The VEU program is administered by the Essential Services Commission. The discount is applied at the point of installation, so it comes off the price you pay rather than being claimed back later. Key conditions include:
- the new system must be a VEU-approved, high-efficiency reverse cycle air conditioner
- an existing system being replaced must be more than two years old
- the discount must be arranged before any work starts.
King & Sons manages the VEU process for landlords and property managers, from confirming eligible models to applying the discount in your fixed upfront quote. Read our full guide to the VEU rebate for reverse cycle ducted air conditioning.
What Does the Replacement Process Look Like for a Rental Property?
The replacement process for a rental property follows the same steps as a home upgrade, with extra attention to tenant access and compliance records. Most changeovers are completed within a few days.
- Site inspection: A licensed technician inspects the heater, roof cavity, ceiling layout and switchboard, and identifies the main living area outlet.
- System selection: We recommend a reverse cycle ducted system that meets the heating and cooling thresholds for the property.
- Fixed upfront quote: Your quote includes the system, ductwork, electrical work and any VEU discount.
- Decommissioning: The old gas heater is disconnected and removed.
- New insulated ductwork: Existing gas ducts cannot be reused for refrigerated air, so new insulated ductwork, ceiling vents and a return air grille are installed.
- Installation and commissioning: We install the indoor and outdoor units and refrigerant piping, then test the system in heating and cooling modes.
- Compliance documentation: You receive the product details, star ratings and certificates you need to keep as proof of compliance.
Our guide to replacing a gas heater with reverse cycle ducted explains each step in more detail.
What Should Landlords and Property Managers Do Now?
Start with an audit of your heating and cooling, then book inspections for the properties most at risk. This checklist covers the essentials.
- Identify properties with gas heating: List every property with a gas ducted heater, gas space heater or wall furnace.
- Check age and condition: Note the age, brand and service history of each heater. Older units are more likely to fail.
- Check cooling: Note which properties have no fixed cooling in the main living area, as they will need it at the next new lease from March 2027.
- Book a site inspection: Have a licensed technician assess the property and its electrical capacity.
- Confirm VEU eligibility: Check that the proposed system is VEU-approved and that the discount is applied before work starts.
- Get a fixed upfront quote: Compare the cost of a planned upgrade with an emergency replacement.
- Plan around the tenancy: Schedule work between tenancies or with plenty of notice to renters.
- Keep records: Store installation documents, product ratings and any exemption evidence.
Frequently Asked Questions
Ready to Get Your Rental Property Compliant?
King & Sons helps Melbourne landlords and property managers plan compliant heating and cooling upgrades with minimal tenant disruption. Our ARCtick certified, VBA registered technicians handle the inspection, installation, VEU paperwork and compliance documentation. Every job starts with a free site inspection and a fixed upfront quote. Learn more about King & Sons, or contact us to book your inspection.