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ENERGY BENCHMARKING / AB 1103S
By: Jeffrey L. Marcus
June 2014
Introduction
California has now implemented commercial building energy usage benchmarking requirements for sales, leasing, and financing under Assembly Bill (AB) 1103. The law took effect January 1, 2014 for buildings over 10,000 square feet and commencing July 1, 2014, the threshold will be reduced to 5,000 square feet or more. The purpose of the law is to promote energy efficiency. AB 1103 establishes a system that allows commercial buildings to be compared based upon energy efficiency.
Compliance
Under AB 1103, owners of qualifying commercial buildings must benchmark and disclose the building’s energy consumption to a prospective buyer, tenant or lender.
From the California Energy Commission website,
Who Is To Comply?
Commencing July 1, 2014, owners of buildings 5,000 square feet or larger for sale, lease of the entire building, or finance. There are certain exceptions based upon the classification of the building type.
Penalty
Currently, there is no specific penalty for noncompliance but the California Energy Commission may take administrative or judicial action to enforce the judicial requirements. It is anticipated that in the future, there will be regulations outlining the penalty for failure to comply with energy benchmarking. Notwithstanding the lack of a stated administrative or judicial penalty, a failure to disclose a building’s energy usage can be viewed as a material fact in the transaction. Therefore, a failure to disclose energy benchmarking could be a breach of a statutory duty imposed upon a seller or lessor.
Conclusion
All those involved in commercial real estate dispositions, leases and/or financing should be aware of the pending disclosure requirements and should carefully consider how their purchase and sale agreements, leases and financing documents are prepared to ensure compliance with energy benchmarking. For additional information on AB 1103, please contact our office.
