Major deals involving a whole non-residential building will soon require owners and agents to disclose energy use data to a prospective buyer, tenant, or lender before any sale, lease, financing or refinancing of the entire building.
How? By using the Environmental Protection Agency’s (EPA) online software, Energy Star Portfolio Manager, energy usage data is collected, calculated per square foot and given a percentile ranking according to the building’s size, location and operational characteristics. A score of 50 is average – above is better, below not as good.
Section 25402.10 of the Public Resources Code requires owners to start complying with the new requirements on a rolling basis, depending upon the square footage of the building:
Starting July 1, 2013, for buildings with a total gross floor area of more than 50,000 square feet;
Starting January 1, 2014, for buildings with a total gross floor area between 10,000 square feet and 50,000 square feet; and
Starting July 1, 2014, for buildings with a total gross floor area between 5,000 square feet 10,000 square feet.
To Obtain and Deliver Disclosures
First, the building owner opens an account on EPA’s Energy Star Portfolio Manager and creates a profile for the building. Using the Portfolio Manager account, the building owner requests local electrical and/or gas utilities to release the building’s energy use data for the last 12 months. The utilities will do this within 30 days of receiving the owner’s request. Then the building owner must log back on, complete a compliance report, and download the following:
- Disclosure Summary Sheet;
- Statement of Energy Performance;
- Data Checklist; and
- Facility Summary (collectively, the “Disclosure Data”).
These documents expire 30 days after they are generated. While current, the building owner is required to provide the Disclosure Data for the building to:
- a prospective buyer of the entire building, at least 24 hours before execution of the sales contract;
- a prospective lessee of the entire building (but not a space lease of just a portion) at least 24 hours before execution of the lease; or
- a prospective lender financing the entire building, no later than submittal of the loan application.
Penalties and Issues
There is no specific penalty for non-compliance, but there is an issue about whether this data is a material fact in a covered transaction. Also failure to plan for the disclosure process in a transaction could result in execution or closing delays. Building owners should consider including a statement in a purchase and sale agreement, loan agreement, or lease, acknowledging that disclosures have been made in accordance with Section 25402.10.
We invite you to contact us with questions or requests for assistance in drafting and modifying documents.