Effective January 1, 2014, owners of nonresidential buildings of 10,000 square feet or more must disclose energy use information to prospective purchasers, lessees and lenders. Owners of nonresidential buildings 5,000 square feet or more can look forward to the same disclosure obligations beginning July 1, 2014. The new law (AB 1103) establishes a benchmarking system for building energy consumption with the goal of motivating building owners to improve energy efficiency. AB 1103 mandates disclosure of a Data Verification Checklist containing a building’s energy score, which is generated by the EPA’s online ENERGY STAR Portfolio Manager. The disclosure must be made at least 24 hours before signing a purchase and sale contract, at least 24 hours before executing a lease and prior to submitting a loan application. Building owners must also submit the Data Verification Checklist electronically to the California Energy Commission.
Given the difficult disclosure deadlines, building owners would be well-advised to be proactive by setting up a profile with the Portfolio Manager and making themselves familiar with the system. To generate the Data Verification Checklist, a building owner must submit basic information regarding the building and its sources of energy use and request release of energy use data from utility providers for the most recent 12 months. It can take up to a month to generate the Data Verification Checklist as utility providers have 30 days to upload the requested energy use data. Data Verification Checklists are good for 30 days. Noncompliance could result in enforcement by the Energy Commission through its administrative proceedings.
While the disclosure requirements will touch most transactions involving nonresidential buildings, there are some exceptions. With respect to leases, disclosures are only required to be made to a prospective lessee of “an entire building”. Additionally, buildings of certain nonresidential uses, including factory, industrial, institutional and laboratory and buildings less than 5,000 square feet are exempt from the requirements.
AB 1103 is codified as California Public Resources Code section 25402.10 with implementing regulations promulgated by the California Energy Commission under Title 20 of the California Code of Regulations sections 1680 through 1684. More information can also be obtained from the California Energy Commission’s website: http://www.energy.ca.gov/ab1103/