The California Energy Commission (CEC) adopted regulations implementing the Nonresidential Building Energy Use Disclosure Program. (California Code of Regulations, Title 20, §1680 et seq.) The regulations require nonresidential property owners to comply with certain requirements prior to the sale, lease and/or financing of an entire building, including:
- Not less than 30 days prior to the date the applicable disclosure is required (see below for timing requirements), owners must open an account on the U.S. Environmental Protection Agency’s Energy Star Portfolio Manager website and upload or cause its utility company to upload benchmarking data and ratings from the prior twelve months to the account; and
- Owners must disclose energy use reports to prospective buyers, lessees and lenders prior to entering into a transaction.
These disclosures must be delivered as follows:
- To the prospective buyer no later than 24 hours prior to execution of the purchase agreement;
- To the prospective tenant (leasing the entire building) no later than 24 hours prior to execution of the lease; and
- To the prospective lender, if the lender is providing financing for the entire building, no later than the date the loan application is submitted.
Owners of buildings with a total gross floor area greater than 50,000 square feet will be the first group subject to the regulations. The requirements were originally scheduled to be effective July 1, 2013, but the CEC issued a notice delaying the initial compliance date until September 1, 2013.
Owners of smaller buildings have more time to come into compliance, as follows:
- Owners of buildings with a total gross floor area in excess of 10,000 square feet and up to and including 50,000 square feet must comply with the disclosure requirements beginning January 1, 2014
- Owners of buildings with a total gross floor area equal to 5,000 square feet up to 10,000 square feet must comply with the disclosure requirements beginning on July 1, 2014
Owners subject to the disclosure requirements may incur civil penalties up to $2,000 per day for noncompliance of. Further, it is feasible that noncompliance could give buyers or tenants a loophole to back out of transactions or provide a defense to a seller or landlord’s claim for damages.
Non-residential property owners concerned about compliance or with other questions should contact the experienced attorneys at Glass & Goldberg. Glass & Goldberg provides high quality and cost-effective legal services and advice for clients in all aspects of business litigation, commercial real estate and transactional law. Call us at (818) 888-2220, email us at email@example.com or visit us at www.glassgoldberg.com to learn more about our firm and sign up for future newsletters.