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CALIFORNIA INSTITUTES NEW ENERGY USE DISCLOSURE REQUIREMENTS IN COMMERCIAL PROPERTIES

The California Energy Commission recently enacted new energy use disclosure requirements for commercial buildings.  Effective July 1, 2013, all non-residential buildings with a gross floor area of more than 50,000 sq. ft., must disclose the building’s past energy use data to prospective buyers, lessees or lenders of the building prior to the sale, lease, financing or refinancing of the property.  Public Resource Code §25402.10.  The disclosure must be made no later than 24 hours prior to the execution of a purchase and sale contract, lease, or submittal of a loan application.  To prepare the disclosure, an owner must upload the building’s energy usage data to the U.S. Environmental Protection Agency’s Energy Star Portfolio Manager website http://www.energystar.gov/index.cfm?c=evaluate_performance.bus_portfoliomanager.  The regulations require that the account be opened or updated at least 30 days before the disclosure is to be made.  Please note that building owners and operators who intend to sign a contract, lease or loan application between July 1, 2013 and July 9, 2013, must prepare their disclosures prior to June 26, 2013 because the website will be down between June 26, 2013 and July 9, 2013.

Beginning January 1, 2014, owners will be required to make these disclosures for buildings with a total gross floor area of more than 10,000 sq. ft. and beginning on July 1, 2014, owners and operators will be required to make these disclosures for buildings with a total gross floor of 5,000 sq. ft. or more.

These disclosures do not apply to residential buildings.  The failure to comply with the disclosure requirement does not lead to any mandatory penalties.  However, it can make a contract illegal. 

It is recommended that the disclosures be contained in a purchase and sale agreement, loan agreement or Lease in the form of an acknowledgment that the disclosures have been made prior to executing the agreement.

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