SAN DIEGO-Five years after the enactment of the governing legislation, the California Energy Use Disclosure Requirements go into effect on September 1, and attorneys with California real estate firm Allen Matkins are are assisting building owners to achieve compliance with the new law.

The attorney team of Emily Murray, Matthew Fogt and Heather Riley have compiled the following descriptions and suggestions:

Assembly Bills 1103 and 531 require owners of nonresidential buildings located in California to disclose energy usage of such buildings prior to the sale, lease, or financing thereof. The California Energy Commission is implementing the legislation pursuant to the following compliance schedule:

On and after September 1, 2013, for buildings with a total gross floor area of more than 50,000 square feet.
On and after January 1, 2014, for buildings with a total gross floor area between 10,000 square feet and 50,000 square feet.
On and after July 1, 2014, for buildings with a total gross floor area between 5,000 square feet 10,000 square feet.

The regulations, sample forms, and a FAQ are available on the CEC's website.

Recommendations

Owners of nonresidential buildings should take the following steps at least 30 days before the sale, lease, or financing of an entire building:

Register for an account with "Portfolio Manager," the U.S. Environmental Protection Agency's ENERGY STAR program online tool and create a profile for each nonresidential building.
Request that applicable utilities release the last 12 months of energy use data for the building to Portfolio Manager.
Download the Disclosure Summary Sheet, the Statement of Energy Performance, Data Checklist and Facility Summary "Disclosure Data".
Provide the Disclosure Data to a prospective buyer, lessee or lender of the entire building.

Owners should also update form documents to acknowledge receipt of the Disclosure Data, waive the owner's liability for inaccurate and incomplete data, and require a tenant's consent to the disclosure of energy use data and cooperation with the utilities.

Assembly Bills 1103 and 531

AB 1103, which was signed into law on October 12, 2007, requires owners to track and disclose energy use as part of the sale, lease, or financing of an entire nonresidential building. This requirement seeks to "motivate building operators to take actions to improve their buildings' energy profiles" and "to allow building owners and operators to compare their buildings' performance to that of similar buildings and to manage their buildings' energy costs." AB 531 subsequently removed the original January 1, 2010 compliance deadline, but it did not otherwise alter the requirements of AB 1103. The implementation schedule has since been delayed several times.

Compliance Requirements

A building owner is required to provide the Disclosure Data to:

1. A prospective buyer of the entire building, no later than 24 hours prior to execution of the sales contract;

2. A prospective lessee of the entire building, no later than 24 hours prior to execution of the lease; or

3. A prospective lender financing the entire building, no later than submittal of the loan application.

Although there is no specific penalty for non-compliance, a failure to disclose a building's energy usage may be viewed as a material fact in the transaction. Moreover, a failure to timely commence the disclosure process could result in transaction delays. Therefore, owners of nonresidential buildings should build compliance into their schedule for significant transactions and should update their transaction documents to ensure compliance.

Allen Matkins, founded in 1977, is a California-based law firm with approximately 220 attorneys in four major metropolitan areas of California: Los Angeles, Orange County, San Francisco and San Diego. The firm's core specialties include real estate, real estate and commercial finance, bankruptcy and creditors' rights, construction, land use, natural resources, environmental, corporate and securities, intellectual property, joint ventures, taxation, employment and labor law, dispute resolution and litigation in all these matters.

Instant Insights /

New California Energy Disclosure Requirements Take Effect in September

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