- Commercial Property Owners Contend With New Disclosure Requirements!
- October 4, 2013
- Law Firm: Tharpe & Howell - Santa Ana Office
All California commercial property owners should be aware of two new disclosure laws which go into effect this year. First, California Civil Code Section 1938 requires that all commercial leases and/or rental agreements entered into on or after July 1, 2013 specifically state on the lease or rental agreement whether the property has been inspected by a Certified Access Specialist (CASp) and, if so, whether the property has or has not been determined to meet all applicable construction-related accessibility standards. It is important to note that this new law does not require that such an inspection actually take place. Instead, it simply requires that the property owner and/or lessor specify on the lease or rental agreement if the inspection has occurred and, if so, whether the applicable accessibility standards were met. Commercial property owners (and their agents) should be very careful when deciding whether or not to have a CASp inspection performed. On the one hand, a CASp inspection could identify, in writing, previously unknown conditions which, once known, may possibly need to be addressed. On the other hand, having had a CASp inspection performed could allow the property owner to pro-actively address any issues discovered - arguably making the location more attractive to prospective tenants. Either way, all commercial property owners (and/or their agents) should carefully review their form lease and rental agreements to insure compliance with this new law.
Additionally, effective September 1, 2013, California Public Resources Code Section 25402.10 will require owners of non-residential property having 50,000 gross square feet or more to disclose the prior 12 months of energy usage when selling, leasing, or financing the property. Under this new law, the property owner must disclose the 12-month energy usage history to a prospective buyer no later than 24 hours prior to execution of the purchase agreement; to a prospective tenant no later than 24 hours prior to lease execution; and to a lender at the time (or before) the loan application is submitted. This disclosure is not required if the tenant will be leasing less than the entire building, or if the lender will be lending on only a portion of the property. Beginning January 1, 2014, this new law will be expanded to include commercial properties with 10,000 to 50,000 gross square footage; and will also include commercial properties having 5,000 square feet or more beginning July 1, 2014. To comply with this new law, the property owner will open an account at the U.S. Environmental Protection Agency's ENERGY STAR® Portfolio Manager website at least 30 days before any anticipated sale, lease, or financing. Once opened, the owner can request that all utility providers provide energy usage data for the previous 12 months. The utility companies then have 30 days to comply.
Although no penalties are currently in place for property owners who fail to comply with these new laws, failure to do so will certainly create increased risk. Therefore, we strongly recommend that all commercial property owners and their agents consult with real estate and legal professionals to make sure the new laws are clearly understood and incorporated into their business practices.