• AB 1103 - New Energy Use Disclosure Required by Commercial Building Owners
  • January 14, 2013
  • Law Firm: Stradling Yocca Carlson Rauth A Professional Corporation - Newport Beach Office
  • A new law, Assembly Bill  1103, requires nonresidential building owners throughout California to benchmark and disclose their building’s energy use in advance of the sale, lease, or financing of the entire building.  Known as the “Energy Use Disclosure Law,” it is codified at California Public Resources Code section 25402.10.   This new obligation creates additional work for property owners and their brokers and property managers, and failure to make the required disclosures creates risk of potential claims by lenders, buyers and tenants.  This new law becomes effective as early as July 1, 2013.

    The first steps in complying with the Energy Use Disclosure Law are for building owners to (i) open an account at the EPA’s ENERGY STAR® program Portfolio Manager website, and (ii) request all utility and energy provider companies serving the building to release energy use data for the entire building from the most recent twelve (12) months to the owner’s Portfolio Manager account.  The utility companies are required to upload at least the most recent twelve (12) months of the entire building’s energy use within fifteen (15) days of receiving a request from a building owner.  After all the utility companies serving the building have uploaded the building’s energy use data, a building owner must then access the website and download from its Portfolio Manager account the following disclosures: “Disclosure Summary Sheet, Statement of Energy Performance, Data Checklist and Facility Summary”, and also complete and submit a Compliance Report.  The disclosures expire thirty (30) days after they are generated.

    The compliance schedule proposed by the California Energy Commission requires commercial property owners to comply with the reporting requirements starting July 1, 2013.  The disclosure obligation will be phased in over six-month time spans based on the square footage of the building.  Owners of buildings with a total floor area measuring more than 50,000 square feet will be required to comply first, followed by owners of buildings measuring more than 10,000 square feet and those of buildings measuring at least 5,000 square feet.  Initially, the proposed regulations required owners of buildings in excess of 50,000 square feet to comply with the Energy Use Disclosure Law on January 1, 2013, but the compliance schedule was delayed by the Energy Commission to July 1, 2013, to allow for substantial notice to the public before the regulations take effect.

    Although section 1681 of the proposed regulations adopted by the Energy Commission provides that the law applies to all nonresidential buildings in California, it is unclear whether or when buildings of less than 5,000 square feet will be required to comply.  The schedule of implementation stated in section 1683 of the proposed regulations omits any such effective date for small building owners, creating some confusion.

    Finally, based on the definition of “Building Owner” in the proposed regulations, the Energy Use Disclosure Law will impact the owner and “an agent authorized to act on behalf of a person possessing title” (i.e., the owner’s broker and property manager).

    Owners, brokers and property managers should be aware that the disclosure must be made as soon as practicable prior to execution of the sales contract or lease, or submittal of the loan application.  Failing to make the disclosure is a potential source of liability.  Thus, real estate professionals should now update their standard form purchase and sale agreements, leases, and financing documents in order to ensure compliance with this new requirement prior to the July 1, 2013 effective date.