The implementation of AB 1103 – California's commercial building energy disclosure law - has been delayed a number of times to consider a host of concerns from the real estate industry. The tentative release date has now been set for early next year.

When the new law goes into effect, the energy performance of all non-residential buildings with a total gross floor area greater than 50,000 sf must be disclosed prior to executing a whole building sale, lease or financing of the asset.

Why should we disclose a building's energy data?

The idea behind AB 1103 is to make building owners and operators more aware of their building's energy use, and provide extra incentives to reduce on-site energy consumption. It will also provide more transparency in real estate transactions – giving buyers a better understanding of the buildings they're buying, tenants a better understanding of their utility costs, and perhaps, lead market forces to reward more energy efficient buildings.

If you're not the sort that gets excited about energy efficiency, keep in mind that it has been noted that the energy performance information could now be considered material to a transaction and not disclosing it up front could cause closing delays or open up the potential for price negotiations and lawsuits. So even if “Green” isn't your “thing”, this particular measure will be important to keep in mind for those of you involved in commercial real estate transactions.

The next steps ...

AB 1103 requires a building's energy performance data to be reported through the EPA's online ENERGY STAR Portfolio Manager System, which is free to use. Additionally, third-party providers can provide building owners with varying levels of support to meet the requirements: from a preliminary review of the data for submittal, to an Audited Energy Disclosure Report or a full-service Energy Disclosure Report.

Do you know how the new law will affect your commercial real estate deal? Are you ready to comply with, and interpret results and ratings? Commercial business owners may need to implement appropriate policies and procedures to meet the new requirements of AB 1103, so now is the time to consider its implications and prepare for the changes.

AB 1103 expert Tony Liou, President of Partner Energy and I will host a webinar on August 20^th to discuss these issues in more detail, help you understand and prepare for the new law and provide the opportunity to ask questions. Register here.

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What will AB 1103 mean for the commercial real estate industry?

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