AB1103 for Buildings: California Energy Star Disclosure Explain
It’s said if you can make it in NYC, you can make it anywhere. Well after the successful Local Law 84 program in NYC benchmarked over 1.8 Billion Square feet, California is rolling out their building efficiency program AB1103 starting July 1st requiring Energy Star benchmarks.
The idea behind Energy Star disclosure laws is similar to the miles per gallon (MPG) rating for cars. By requiring building owners to calculate their Energy Star score on a scale of 1-100 buyers and leasors will start to notice a building’s efficiency. Just like consumers ask car dealers “What’s the MPG?”, “What’s the Energy Star score?” will become a common question in real estate. This will ultimately positively affect the market for energy efficient buildings.
These are the key components of the law according to the Institute for Market Transformation and buildingrating.org:
AB 1103 requires owners of nonresidential buildings over 5,000 SF to rate their buildings using Energy Star building rating software. They must disclose a Statement of Energy Performance to the California Energy Commission (CEC) as well as to prospective buyers, lessees or lenders prior to the closing of a transaction.
Although the law was scheduled to come into effect in 2010 for building owners, the benchmarking mandate was delayed until 2012. Final regulations were published in March 2012. These rules state that owners must submit energy performance to the CEC by:
- July 1, 2013 for buildings 10,000 SF and larger
- January 1, 2014 for buildings 5,000 to 9,999 SF
AB 1103 does not apply to multifamily buildings or the partial sale, lease or financing of nonresidential buildings. The Statement of Energy Performance is valid for 120 days following its generation. If a building owner makes a subsequent disclosure outside of this time period, they must re-benchmark the building and generate a new Statement of Energy Performance.
What does this mean if you are an owner?
- Keep your score up to date at least ever 120 days so that you will be ready to sell or lease your building to a single tenant
- Energy Star is a whole building energy rating, so make sure you have access to your tenant utility bills
- Utilize the Energy Star score to drive behavior change in the building and rally management support to invest in the building to improve its efficiency
- More efficient buildings will have lower operating costs that lead to higher NOI and increased asset values