Will You Comply with California's New RE Laws?

If you live in California you are used to new laws encumbering business seemingly everyday.  Well, this month is no different.  California has two new regulations that are supposed to take effect on July 1, 2013, the Accessibility Statute and the Energy Disclosures Regulations.  But of course, the state isn’t quite ready for the onslaught so on June 13th the Energy Commission postponed the energy disclosure regulations until September 1st.  Regardless, if you are in the process of transacting a deal you should be aware of and ready to comply with both of these regulations…. or you might consider moving to Texas.

Richard L. Miller of  Greenwald, Pauly, Foster & Miller has written a few words on both new regulations.  I think you will find his thoughts and recommendations compelling:

“Two new laws take effect on July 1, 2013.  The first is an accessibility statute that requires certain disclosures to be contained in every lease.  The second is an energy consumption disclosure which gets phased in over the next year with respect to full building sales, full building leases and real property loans.  The following is a very basic summary for informational purposes and the statements may not apply to your particular situation or property and a more detailed analysis of your facts may lead to a different conclusion.

1. Accessibility Statute.   The first new statute is SB 1186 and relates to construction-related accessibility claims.  While this bill was originally intended to protect building owners against frivolous ADA accessibility claims, the legislative compromise requires all new leases entered into on or after July 1, 2013  to include a provision that highlights the ADA issue even further in landlord/tenant negotiations.

a.  All leases executed in California after July 1 must state whether or not the project has undergone an inspection by a Certified Access Specialist (CASp) and, if such an inspection was done, whether the project complies with accessibility standards.

b.  If you have had your project inspected by a CASp, this will give you certain protections against frivolous lawsuits.  Unfortunately, if the inspection reveals deficiencies, the result could require project upgrades to cause your project to comply with applicable codes.  So, in many cases, and each project is different, an inspection may not outweigh the protections afforded by the new statue.

c.  The following website gives a good description of the details of SB 1186:

http://sonomachamber.org/home/chamber/SB%201186%20CASp%20Overview.pdf

d.  Suggested new lease language.

I.  If a site has been inspected and been certified:

“The Project has undergone inspection by a Certified Access Specialist (CASp) and it was determined that the Project met all applicable construction-related accessibility standards pursuant to California Civil Code Section 55.51, et seq..”

II.  If a site has been inspected but hasn’t passed:

“The Project has undergone inspection by a Certified Access Specialist (CASp) and it was determined that the Project did not meet all applicable construction-related accessibility standards pursuant to California Civil Code Section 55.51, et seq.”

III.  If the site has not been inspected:

“The Project has not undergone inspection by a Certified Access Specialist (CASp)”.

2.  Energy Disclosures.  The second statute is found in the Public Resources Code Section 25402.10 (and regulations adopted by the California Energy Commission) and require, effective July 1, 2013, that an owner of a “nonresidential building” must disclose energy consumption data to a buyer, lessee and lender.  Every situation is a little different but here is a basic review (The regulations are presented at: www.energy.ca.gov/2010publications/…/CEC-400-2010-004-CMF.pdf)

Basics:

a.  Every building owner must submit information on the EPA website no later than 30 days before the compliance date (below).

b.  That information will be used, along with information supplied by the utility companies, to generate reports and studies, etc.

c.  Those reports and studies must be provided to a prospective purchaser, lessee of an entire building, and Lender of the entire building.

Compliance with the statue is required at the following times:

July 1, 2013 for buildings exceeding 50,000 square feet

January 1, 2014 for buildings more than 10,000 square feet but less than 50,000

July 1, 2014 for buildings between 5,000 square feet and 10,000 square feet

Rules:

a.  30 days prior to the date above, a building owner must open an account (or update an existing account) on the EPA ENERGY Star program Portfolio Manager (this is the EPA on-line tool for managing building energy use), and provide information within that account:

(1) Provide the owner name and the owner e‐mail address;

(2) Provide the building name, the building street address, city and ZIP code, and

the year in which the building was constructed;

(3) Identify all sources of energy use data for the entire building, for at least the most

recent 12 months;

(4) Provide space use characteristics as specified by Portfolio Manager for all space

types in the entire building; and

(5) Request all utilities [that is, those supplying electricity and gas] and energy providers [that is, all energy providers who provide other than electricity or gas] serving the building to release energy use data for the entire building from at least the most recent 12 months for specified meters or accounts to the owner’s Portfolio Manager Account; or, the owner may manually enter all energy use data for the entire building from at least the most recent 12 months to the owner’s Portfolio Manager account.

b.  Within 30 days after receiving a request from owner, the utility or energy provider shall upload to the owner’s Portfolio Manager Account all energy use usage for the applicable building from the most recent 12 months.

c.  A building owner is required to disclose the following to (a) a prospective buyer of the building (no later than 24 hours prior to signing the sales contract), (b) a prospective tenant of the entire building (no later than 24 hours prior to signing the lease, or (c) a prospective lender financing the entire building (no later than submittal of the loan application):

(1) Disclosure Summary Sheet –  this is the Energy Commission document detailing the contents and relevance of disclosures by Portfolio Manager (see the form attached)

(2)  Statement of Energy Performance – this is a report generated by the Portfolio Manager that supplies data about a building’s energy performance and, if available, the building’s ENERGY STAR Energy Performance Score (this is an energy efficiency measurement created by the Portfolio Manager, on a scale of 1 to 100 [normalized for the building’s specific characteristics])

(3)  Data Checklist – this is an on-line report generated by the Portfolio Manager summarizing a property’s physical and operating characteristics.

(4)  Facility Summary – this is an EPA on-line report that summarizes the space and energy usage of a building and compares a building’s energy to national medians

d.  Note that prior to making the disclosure required by Rule c, above, the owner must access the Energy Commission’s AB1103 compliance website and do the following:

(1) Download the Disclosure Summary Sheet;

(2) Select the link to Portfolio Manager and log on to the owner’s account;

(3) Complete and submit the compliance report; and

(4) Download the building’s Statement of Energy Performance, Data Checklist, and

Facility Summary.

(Note that the Statement of Energy Performance, Data Checklist, and Facility Summary shall expire 30 days after they are generated).

e.  If there is information missing from a disclosure, and if the owner has made a reasonable effort to ascertain the missing information, the owner may be able to supply an approximation, subject to the terms of the code (including a prohibition on “circumventing or evading” the requirements).”