California Assembly Bill 1103 has been postponed again. It was recently announced that the first phase of implementation, which was originally to go into effect July 1, 2013, will now go into effect on September 1, 2013 with full implementation by September 1, 2014. The reason for the delay is cited as unresolved issues with utility reporting systems.
What does AB1103 Require?
AB1103 requires property owners to disclose energy consumption data to prospective purchasers and potential tenants. The data is interpreted and benchmarked using an Energy Star rating system called Portfolio Manager, which was developed by the Environmental Protection Agency. EPA Portfolio Manager is an energy management tool that tracks and benchmarks energy and water consumption in an online database. The Energy Star rating is mostly based on the specific property use.
What types of transactions does AB1103 cover?
AB1103 disclosure is required for any sale, lease, or refinancing of an entire commercial building that is 5,000 square feet in size or more. Manufacturing facilities are not required to perform AB1103 since they are not rated by Energy Star. After AB1103 is fully implemented, tenants will only have to disclose their energy and water use once, at the beginning of their lease.
What are the benefits of AB1103?
EPA’s Portfolio Manager is used to establish a benchmarking system to compare buildings of similar square footage and usage. The buildings are benchmarked on a scale of 0 – 100. For example, a building with a rating of 75 indicates that the building, from an energy consumption standpoint, performs better than 75% of all similar buildings nationwide. The higher the Energy Star rating, the more efficient the building is and, theoretically, may make the building more valuable and marketable due to lower energy and water costs. The Energy Star rating system is based on comparative benchmarking, meaning that the benchmarking is always changing (improving). For example, a building that achieves an Energy Star rating of 75 one year may drop to 69 the next year if all the other buildings in its category improve their energy consumption. It is a system designed to encourage buildings to continously improve their energy consumption.
Who is responsible for reporting the energy use information?
The property owner is ultimately responsible for the energy disclosure under AB1103.
How do brokers protect themselves from property owners who do not comply with disclosing their building’s energy use?
Brokers should at least modify their listing agreements to include a section that relegates responsibility for energy disclosure to the current property owner.
Are there any fees associated with AB1103 Compliance?
There are no upfront fees charged by government agencies at this time, however in order to attain an Energy Star rating there is a time commitment necessary to document and report energy metrics into the Portfolio Manager system.