There has been an important development in California commercial real estate law. California Public Resources Code Section 25402.10 requires owners and operators of certain non-residential buildings to disclose building energy performance data to prospective buyers, tenants of the entire building, and lenders who would finance or refinance the building before a sale. The law is in effect and is enforced by the California Energy Commission for nonresidential buildings over 10,000 gross square feet. However, the National Law Review reports that the next stage of regulations set to roll out under the law are being postponed.
What is Being Postponed?
Back on September 2 of this year, the Office of Administrative Law approved the California Energy Commission’s request to delay implementation of the next stage of this law. Originally nonresidential buildings with between 5,000 and 10,000 gross square feet of floor space were supposed to start complying with the regulations earlier this year. But now they will not be required to comply with the regulations until July 1, 2016. Of course, this does not mean that owners of such property should procrastinate in gathering the necessary information. Doing so can be a time consuming process, and getting an early start will make complying with the regulations when they go into effect substantially easier. Also, requesting the necessary information from utility companies takes time (sometimes months) so an early start is not just a good idea–it is a necessity.
It is extremely important to remember that the deadline had only been postponed for owners of nonresidential buildings between 5,000 and 10,000 gross square feet of floor space. The requirements have already gone into effect for owners of larger nonresidential buildings. The requirements have been in effect for buildings over 50,000 gross square feet since July 1, 2013, and they have been in place for buildings between 10,000 and 50,000 gross square feet since January 1, 2014. So if you intend to sell, rent, or finance/refinance one of these larger buildings, this delay in implementation will not apply to your situation.
So What Does 25402.01 Require?
Under the statute, building owners will have to benchmark their building’s energy use through the ENERGY STAR Portfolio Manager system. They will also be required to disclose certain documents that provide information about a building’s energy usage to any potential buyer, tenant, or lender. In order to comply with these disclosure requirements, the building owner is required to make the disclosure according to these time lines:
Disclosure to a potential buyer: no later than 24 hours before the execution of the sale agreement Disclosure to a lessee of the entire building: At least 24 hours before the execution of the lease Disclosure to a lender financing the whole building: No latter than the submission of the loan documentation.
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