ORANGE, CA-Two new California bills that will go into effect as laws soon were the topic of discussion at the recent AIR Commercial Real Estate Association seminar series here: Assembly Bill 1103 and Senate Bill 1186. Both will impose requirements on property owners and brokers once they take effect, but early planning can go a long way toward easing the growing pains predicted for each, said Elizabeth Watson, a partner in the Los Angeles law firm Greenberg Glusker, who spoke at the meeting.

Watson tells GlobeSt.com that the original date the laws were supposed to go into effect is expected to be postponed from July 1 to August 1 due to the unavailability of the Energy Star Portfolio Manager site for a time later this month and extending into early July. That said, as of yet, no formal action has been taken to extend the effective date.

AB 1103 is an energy benchmarking initiative that tracks energy usage of comparable buildings. While Watson assured attendees that the new law requirement will ultimately become routine, “there will be growing pains in the interim.”

Watson, a LEED accredited professional, explained, “The purpose of the law is to require the disclosure of the energy usage of a building and compare it to the energy efficiency of comparable buildings nationwide. In most cases, a building would receive an Energy Star rating of from 1 to 100, with 75 or above being the most energy efficient.”

The legislation is being phased in according to building size and is applicable to sale, lease or financing transactions for entire buildings, Watson added. As of July 1, buildings greater than 50,000 square feet must comply. The law does not apply to space leases or transactions involving less than the entirety of a building or buildings. As of January 1, 2014, buildings larger than 10,000 square feet are affected, and on July 1, 2014, all buildings greater than 5,000 square feet will be subject to the disclosure requirements, she explained.
Property owners need to disclose the energy usage of their buildings at least 24 hours before signing a purchase/sale, lease agreement or concurrent with the signing of loan application, Watson emphasized. Also, 30 days prior to the disclosure, the property owner must open an account on the Energy Star website for the building to start the process to obtain the disclosure and the energy Star rating. “Ultimately, the process will be mechanical, but the challenge is planning ahead. It's critical to access your utility bills for the past 12 months,” Watson said.

Also during the seminar, consultant Marika Erdely, CEO of GreenEconoME.com in Calabasas, CA, provided a step-by-step guide to setting up an account on the Energy Star website, first underlining that it is critical to determine initially a building's use designation based on activities that encompass more than 50% of the space. “Reporting the number of workers in a facility, the percentage of a space within a building that is air conditioned and how much parking is provided all can impact the template you create in the Energy Star account to report your data at www.EnergyStar.gov,” Erdely said.

In addition, Erdely said the most recent energy-usage data can either be entered manually or certain utility companies will provide the information via a download. She noted that multi-tenant buildings require authorizations from each tenant, yet the transaction has to include the entire building. “The energy-efficiency disclosures can be equated to a home inspection. Brokers need to advise their clients to open an account at the website and plan ahead.”

Next, Watson commented on SB 1186, which, as GlobeSt.com previously reported, requires a commercial property owner to state, in every lease form or rental agreement executed on or after July 1, whether the property being leased or rented has undergone an inspection by a Certified Access Specialist. She said that the law affects commercial brokers in that after July 1 any documents for lease have to disclose whether a building has been inspected as regards compliance with disability-access regulations. “It's up to the owner whether to get an inspection. But, if they do it, it must be disclosed to the tenant whether the building is in compliance.”

A silver lining to the law is that owners can benefit from SB 1186 in the event of any legal claims for deficiencies under the Americans with Disabilities Act because they can show that the building has been certified by a Certified Access Specialist, Watson said.

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Growing Pains Predicted from Energy-Use Bill

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