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California’s Energy Use Disclosure Requirements for Certain Non-Residential Buildings Began January 1, 2014




by:
Kevin Angstenberger
Troutman Sanders LLP - Atlanta Office

Jennifer Bojorquez
Troutman Sanders LLP - Irvine Office

Michael J. Whitton
Troutman Sanders LLP - San Diego Office

 
January 30, 2014

Previously published on January 24, 2014

Beginning January 1, 2014, the owners of certain non-residential properties in California must comply with a new energy use disclosure requirement as part of the state’s goal of promoting energy efficiency and reducing energy consumption in the use and operation of commercial buildings in the state. In 2007, the California legislature enacted the Nonresidential Building Energy Use Disclosure Program (codified in Public Resources Code, §25402.10, which can be found here). After a series of delays, the California Energy Commission (CEC) recently adopted final implementing regulations for the new law, which require compliance starting January 1, 2014, for nonresidential buildings in excess of 10,000 square feet, and starting July 1, 2014, for nonresidential buildings between 5,000 and 10,000 square feet. (Nonresidential buildings less than 5,000 square feet are exempt from the disclosure requirements at this time.)

An anticipated purchase, lease, financing or refinancing of an entire nonresidential building that meets the above square footage requirements triggers the disclosure requirements. In general, the program requires property owners to benchmark the building’s energy use using the Energy Star Portfolio Manager system found on the Environmental Protection Agency website. To assist building owners, upon request, the applicable utilities and service providers must upload to the owner’s Portfolio Manager account the building’s energy use data for the most recent 12 month period. This information is then disclosed to the prospective buyer, lessee, or lender on a Data Verification Checklist, which is generated by the Energy Star Portfolio Manager system. The Data Verification Checklist must also be submitted to the CEC within 30 days of producing the report. A key component of the new law is the timing of the required disclosures - the report must be disclosed to a prospective buyer or tenant (leasing the entire building) at least 24 hours before execution of the sales contract or lease and to a prospective lender (providing financing for the entire building) no later than submittal of the loan application.

The CEC’s website provides the following helpful summary of the steps that must be followed to comply with the new law:

  1. Go to the ENERGY STAR Portfolio Manager® website and sign-up to create a new account.
  2. Contact your utility or energy provider to confirm their procedures for providing the energy use data for your building.
  3. Benchmark the building’s energy use via Portfolio Manager® at least 30 days prior to an applicable transaction.
  4. Produce a Data Verification Checklist report in Portfolio Manager®. (The website includes a list of frequently asked questions and answers to assist in producing the checklist.)
  5. Disclose the Data Verification Checklist to a prospective buyer or lessee (leasing the entire building) at least 24 hours prior to a signature agreement and to a prospective lender (providing financing for the entire building) no later than submitting the loan application.
  6. Submit the Data Verification Checklist to the Energy Commission at AB1103report@energy.ca.gov within 30 days of producing the report

At this time, neither the statute nor the regulations provide for specific penalties for noncompliance. However, the CEC has advised that it may investigate noncompliance allegations and impose appropriate sanctions.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Jennifer Bojorquez
Troutman Sanders LLP
 
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