If you own commercial property, or intend to own commercial property you should read the following from Joseph Cobert, attorney, at The Cobert Blawg.
This is yet another example of the over-burdening of the private sector through excessive regulations by agencies of the Federal Government. The government is asserting itself into every aspect of commerce at an unprecedented rate of expansion
DISCLOSURE OF ENERGY EFFICIENCY WILL SOON BE REQUIRED BY LAW WITH RESPECT TO COMMERCIAL BUILDINGS THROUGHOUT THE NATION
By: Joseph M. Cobert
2013 must be commercial real estate’s year for new disclosure obligations. Earlier this month, California’s certified access specialist inspection statutes, including disclosure requirements, went into full effect.
On the horizon, nonresidential realty owners will be facing compliance mandates from some federal environmental legislation and interpretive regulations. The Environmental Protection Agency (“EPA”) spearheaded the effort which will make commercial building owners have to do the following:
- open an account with the EPA for each commercial real estate building;
- by means of on-line access to the account for the building, request a printout of data detailing energy consumption from that site during the immediately preceding 12 months; and
- disclose the data to (a) a prospective purchaser not later than 24 hours prior to execution of the purchase agreement, (b) a prospective tenant for the entire building not later than 24 hours prior to execution of the lease and (c) a prospective lender for the whole building not later than the date on which the owner submits his, her or its loan application.
Compliance with these rules is being phased in based on commercial property building size. Structures exceeding 50,000 square feet of floor area must begin compliance beginning on September 1, 2013. Buildings with 10,000 to 50,000 square feet of floor area have until January 1, 2014 to be in compliance. Those with 5,000 to 10,000 square feet of floor area get a delay up to July 1, 2014. Buildings having less than 5,000 total square feet of floor area are currently exempt.
How will the disclosures be used by purchasers, tenants and lenders? Besides the raw data showing energy consumption, the report which will be sent to an owner will specify an efficiency rating on a scale from 1 to 100, with 100 being the most efficient. Factors considered will include building size, usage of energy and location. In theory, the rating is to reflect how the building ranks in energy efficiency compared to other commercial structures across the country. For example, a rating of 60 would mean that the building so rated is in the 60th percentile among all buildings analyzed and a rating of 90 would put the building in the 90th percentile.
Owners should not wait until the deadlines for disclosure to open their EPA accounts because the utilities which are to furnish the requested data have 30 days to supply same. Late action in opening an account could delay a deal. For instance, if you are an owner who expects to lease out a commercial building of 60,000 square feet to a single tenant and that lease is to be signed on September 1, 2013, you have to open the account by August 2 to comply and still avoid delay.
For the specifics of how to comply, owners can look at the EPA’s “Energy Stars” website. For legal advice as to these new energy consumption requirements, do not hesitate to contact Joseph M. Cobert, A Professional Corporation.