Real Estate Sale Stalled by Non-Compliance with Energy Disclosure Law
AB 1103 – California’s energy disclosure law which requires commercial building owners to benchmark and disclose a building’s historical energy usage prior to selling, leasing or financing the entire building– is causing some issues for real estate transactions. I just took a call from a client needing an emergency Building Energy Disclosure Report, as their buyer refused to close without it! Unfortunately, these reports can’t be delivered instantly. While we’re of course rushing to get it done so that the client can complete the transaction, very short turnaround times can be problematic.
California law demands compliance with AB 1103 and now buyers are demanding it too. In this client’s case, did the buyer really need to know or was she just using it as an excuse to delay closure? While many in the CRE business see benchmarking and energy disclosure as “just another report that must be completed”, the bottom line is that in our regulated State of California, complying with the law is always the best course of action. AB 1103 needn’t always be painful, but the key is to plan for it early.
The most important element of AB 1103 compliance is the collection of building data, operating characteristics, and utility bills which can be time consuming, especially if the property has multiple tenants. Energy disclosure reports are inexpensive and easy to order, and will ensure you meet compliance requirements both cost- and time-efficiently. Third party consultants can provide energy benchmarking and disclosure services at varying levels of involvement to make the process as manageable as possible, from a preliminary review to a full-service Energy Disclosure Report.
As I explained in a previous blog, while there’s no specific financial penalty for non-compliance, the California Energy Commission (CEC) may initiate enforcement proceedings. The CA Code of Regulations authorizes a complaint to be filed by a person seeking remedies for an alleged breach of statutes or regulations enforced by the CEC. And, as was the case with the client who rang me, failure to comply with AB1103 may open up potential for significant delays, price negotiations or missed deals!
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Partner Engineering and Science, Inc. (Partner) is a full-service environmental and engineering consulting firm completing projects nationwide. We specialize in evaluating properties in connection with real estate transactions, development or management.