Commercial Building Energy-Use Disclosure Requirements
- May 21, 2014
By Randolph T. Mason, CCIM, SIOR, Partner, Commercial Realty Specialists
Once again, the government is attempting to help the general public by getting into our business. I’m not saying it’s a bad thing, but it’s more regulation and bureaucracy that building owners and tenants will need to deal with. Effective Jan. 1, 2014, building owners will be required to provide energy benchmark reports for the prior year when a commercial property is leased, sold or refinanced.
The law will be phased in over the next 18 months depending on the size of the property. Buildings that exceed 10,000 square feet of total floor area need to begin their energy usage benchmarking Jan. 1, 2014. Buildings measuring between 5,000 to 10,000 square feet must begin their energy use disclosure by July 1, 2014.
The owner of the building is required to disclose the energy benchmark reports no later than 24 hours prior to the execution of the purchase agreement, to prospective tenants no later than 24 hours prior to the execution of the lease and to a prospective lender no later than the submittal of the loan application. Currently, disclosure is not required to be made to a tenant who is leasing less than the entire building, or a perspective lender providing financing on less than the entire building. Owners of properties need to open an account for the building at the U.S. Environmental Protection Agency’s Energy Star Portfolio Manager website. The owner must provide information including the building address, year of construction, owner contact information, as well as all sources of energy used in the operation of the building. After the account has been opened, the owner can request through the account, that all utilities that provide energy to the building provide the energy use data for the building for the most recent 12 months. (As you can imagine, utility companies are not thrilled about this additional burden.) Utilities have 30 days from the date of the request to provide this data. Now, let’s have more fun. Once the information is available, the owner must complete a compliance report, download energy use disclosure materials, which include a disclosure summary sheet, statement of energy performance, facility summary, and data checklist. They then submit them to the proper parties in accordance with the appropriate timeline.
After the building data is retrieved, it must be entered into the EPA’s Energy Star Portfolio Manager System, which then generates an energy efficiency rating for the building from 1 to 100, with 100 being the most energy efficient building. After all of this work, and if the building receives a rating of 75 or above, the building owner joyously can apply for an energy star plaque that they can post on their building.
There are other nuances that are involved with this Energy Star Portfolio Manager System, and this article is intended to broadly bring one’s attention to this new law. Many experienced building owners will be able to effectively retrieve energy data, however most should consider getting professional assistance as small mistakes can skew the results and put building owners at risk. Building owners should treat the collection of a building’s energy data as part of the due diligence and a material fact that will be required for a sale or lease of the property. It makes sense for owners to be proactive and begin the procurement of the required information so the documents are readily available when needed.