Nonresidential brokers: do you know about the new energy disclosure requirements? Read on for details about the California Energy Commission’s (CEC)’s new Nonresidential Building Energy Use Disclosure Program and instruct your clients how to comply on time.
Heads up, nonresidential brokers! New energy use disclosures requirements are on the horizon for nonresidential property owners under the Nonresidential Building Energy Use Disclosure Program. This program is administered by the California Energy Commission (CEC). The purposes of the new program are to:
- establish a system that provides energy consumption data for all nonresidential California buildings;
- enable owners to evaluate their building’s energy performance with similarly situated buildings, called benchmarking;
- enable owners to monitor energy costs; and
- spur owners to make energy-efficient improvements.
Under the Nonresidential Building Energy Use Disclosure Program, nonresidential property owners are required to provide disclosures about a nonresidential property’s energy usage to:
- prospective buyers who have submitted a written offer to purchase the nonresidential building, at least 24 hours before entering into a purchase agreement [20 Calif. Code of Regulations §1681(k);
- prospective tenants who have submitted an offer to enter into or renew a lease for the entire nonresidential building, at least 24 hours before entering into a lease agreement [20 CCR §1681(l)]; and
- lenders who finance the purchase of the entire nonresidential building, no later than the date the loan application is submitted. [20 CCR §1681(m); 20 CCR §1683(a)]
Thus, the disclosures are not triggered by lease agreements with tenants who will occupy only a part of the nonresidential building.
Compliance roll-out and building types
The new disclosure requirements will be rolled out according to building size. The schedule of mandatory compliance is as follows:
- September 1, 2013* for buildings with a total gross floor area of more than 50,000 square feet;
- January 1, 2014 for buildings with a total gross floor area of 10,001-50,000 square feet; and
- July 1, 2014 for buildings with a total gross floor area of 5,000-10,000 square feet. [20 CCR §1682]
The total gross floor area is the floor area within the inside perimeter of the exterior walls of the building. This includes interior corridors, stairways, closets, the thickness of interior walls, columns or other features. Exterior areas of a building are included in the total gross floor area if they are under the horizontal projection of the roof or floor above. The gross floor area does not include shafts with no openings or interior courts. [24 CCR §1002.1]
Owners of nonresidential buildings of less than 5,000 square feet are exempt from the new disclosure requirements.
*Editor’s note – The actual compliance date for this size building was July 1, 2013. However, due to technical outages, the CEC suspended enforcement of compliance until September 1, 2013.
Nonresidential buildings subject to compliance include buildings of the following occupancy types:
- Assembly (A);
- Business (B);
- Education (E);
- Institutional – Assisted Living (I-1, R-1);
- Institutional – Nonambulatory (I-2);
- Mercantile (M);
- Residential – Transient (R-1) (for example, a hotel);
- Storage (S); and
- Utility – Parking Garage (U). [20 CCR §1681(i); 20 CCR §1682; 24 CCR §302.1]
The building type is located on the building occupancy permit.
The disclosure process
There are four disclosures required to be made to buyers, tenants and lenders under the Nonresidential Building Energy Use Disclosure Program:
- the Statement of Energy Performance;
- the Data Checklist;
- the Facility Summary; and
- the Disclosure Summary Sheet. [20 CCR §1681(b); 20 CCR §1681(d); 20 CCR APPENDIX A]
All these disclosures are available through the Energy Star Portfolio Manager website, //portfoliomanager.energystar.gov/pm/login.html. [20 CCR §1681(j)]
However, these disclosures aren’t simply completed by the nonresidential property owner. Utilities and other energy providers (e.g., solar energy providers) upload information about a nonresidential property’s energy use into a system called the Energy Star Portfolio Manager. The disclosures are then generated and made available through the Portfolio Manager.
To generate these disclosures, nonresidential property owners (or their brokers) must first sign up for a Portfolio Manager account at least 30 days prior to having to make a mandated disclosure. [20 CCR §1684(a)]
For example, if a nonresidential property owner and prospective buyer intend to enter into a purchase agreement and the owner has not yet created a Portfolio Manager account, the two parties must wait at least 31 days from the date the owner activates a Portfolio Manager account to execute the contract (i.e., the 30-day window period prior to the disclosure, plus the 24-hour notice period prior to the execution of the sale).
Editor’s note —For simplicity, we will only refer to establishing new Portfolio Manager accounts. However, if a nonresidential property owner already has a Portfolio Manager account, it must be updated at least 30 days prior to the date the required disclosures are to be made. [20 CCR §1684(a)]
Once the nonresidential property owner has created a Portfolio Manager account, to generate the mandated disclosures they are to:
- provide their name and email address;
- provide the property name, street address, city and ZIP Code and year of construction;
- identify all sources of energy use data for the entire building from at least the most recent 12 months;
- provide space use characteristics as specified by Portfolio Manager for all space types in the entire building; and
- authorize utilities and energy providers to release the past 12 months’ energy use data for the nonresidential property. [20 CCR §1684(a)]
Utilities and energy providers then have 30 days to supply energy use data for the most recent 12 months in the appropriate Portfolio Manager categories. If the owner listed on the Portfolio Manager account is not the same as the customer the utility has on record, the utility may take steps to verify the request before providing the energy logs. [20 CCR §1684(b)]
After the energy providers have complied, the nonresidential property owner logs into their Portfolio Manager account to download the appropriate disclosure forms to be provided to the prospective buyer, tenant or lender. Additionally, the nonresidential property owner is to complete and electronically submit to the CEC a Compliance Report. The Compliance Report will be available on the CEC’s Nonresidential Building Energy Use Disclosure Program website, www.energy.ca.gov/ab1103/index.html, prior to the September 1, 2013 initial compliance date. [20 CCR §1684(c)]
The Statement of Energy Performance, Data Checklist and Facility Summary expire 30 days after they are generated. [20 CCR §1684(c)]
Editor’s note — If you represent a nonresidential property owner who is looking to sell, lease or finance their entire nonresidential property within the next 30 days, make sure they create a Portfolio Manager account to avoid delays!
Additional Portfolio Manager training videos and information can be found at //www.energystar.gov/buildings/training.
While generating the disclosures, the building owner has access to privileged tenant energy use data. The regulations, however, do not permit the owner to use the data for anything other than compliance with the Nonresidential Building Energy Use Disclosure Program. [20 CCR §1683(b)]
Statement of Energy Performance
The Statement of Energy Performance supplies information about a building’s energy performance and, if available, the building’s ENERGY STAR® Energy Performance Score. An ENERGY STAR® Energy Performance Score is an energy efficiency measurement generated by Portfolio Manager, represented on a scale of 1 to 100 and normalized for a building’s characteristics, operations and regional weather. Not all buildings will receive an ENERGY STAR® Energy Performance Score. Buildings that do not receive a score are not necessarily more or less efficient than those that do.
The building’s eligibility for an ENERGY STAR® Energy Performance Score does not affect the owner’s responsibility to disclose the Statement of Energy Performance. The score serves as a benchmarking tool to assist the owner in understanding their building’s energy performance whereas the Statement of Energy Performance in totality serves as a disclosure for buyers, lenders and lessees.
The Statement of Energy Performance is structured to be easily comprehensible and functional for business transactions. All of the following building information is included on the document:
- rating, if any;
- summaries of energy use; and
- greenhouse gas emissions.
A section of the form provides space for a licensed architect or engineer to certify the accuracy of the data, however, the third-party evaluation is not necessary. [20 CCR §1681(f)(n); 20 CCR APPENDIX A; see a sample Statement of Energy Performance]
The Data Checklist describes the property’s physical and operating characteristics, including:
- how the space is being used;
- hours of occupancy; and
- conventional and renewable energy used in the building, by fuel type. [20 CCR §1681(c), 20 CCR APPENDIX A; see a sample Data Checklist]
The Facility Summary compares the commercial property’s space and energy usage to national medians. If the building has been evaluated previously, the document will list a comparison between current and past performance. A small section covers the cost and greenhouse gas emissions associated with energy use. [20 CCR §1681(h), 20 CCR APPENDIX A; see a sample Facility Summary]
Disclosure Summary Sheet
The Disclosure Summary Sheet describes the above three disclosures and details the relevance of their content to California buildings. [See a sample Disclosure Summary Sheet]
Penalties for noncompliance
The CEC has the authority to enforce these regulations. Noncompliant owners may be subject to civil penalties of up to $2,000. [CEC Nonresidential Building Energy Use Disclosure Program FAQ; Calif. Public Resources Code §25321]