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E-Alert: Commercial Real Estate Law and Business |
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Silver Law Offices Inc.
1925 Century Park East · Suite 2300 Los Angeles, California 90067 310.684.3611 fax 310.464.6961 Bio | vCard | Website
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Assembly Bill 1103: Nonresidential Whole Building Energy Use Disclosure Requirements
If you own any California nonresidential property of 5,000 sq. ft. or more, we advise that you create an account at ENERGY STAR Portfolio Manager®, https://portfoliomanager.energystar.gov/pm/signup, and start reporting electricity and natural gas use for the building. Because if you plan to lease, sell or finance the entire property, you are now required by law to generate and deliver a Data Verification Checklist to provide disclosure of energy use to a prospective buyer, lessee, or lender at least 24 hours before execution of the relevant agreement (sales/lease agreement or loan application). The disclosure isn't required with regard to the leasing, sale or financing of less than all of a property.The Data Verification Checklist, which expires thirty (30) days after it is generated, discloses (among other items) the building's ENERGY STAR® score, and is generated based upon the energy use data provided by the utilities and other building matrices, all reported by the owner for each building on the Portfolio Manager. Sign up now because the your ENERGY STAR Portfolio Manager® account must be established 30 days before a Data Verification Checklist can be generated.
There is "phase in" for this law. The disclosure is mandatory for nonresidential buildings of 10,000 sq. ft. or larger as of January 1, 2014 and buildings of 5,000 sq. ft. or larger as of July 1, 2014. If your building permit shows CA Building Code occupancy type A, B, E, I-1, R-1, I-2, M, R-1 (that's hotel/motel), S or U, it's subject to AB 1103 reporting. Residential (R-2, R-2.1, R-3, R-3.1, R-4), Factory and Industrial (F-1, F-2), High Hazard (H-1, H-2, H-3, H-4, H-5), Institutional (I-3, I-4), and Laboratory (L) uses are not subject to the disclosure requirements. If part of a mixed use building is residential such as condominiums or apartments, the owner does not have to disclose. However, AB 1103 does apply to residential building type R-1 (hotels, motels) and to a nonresidential building that contains an R-1 use.
Thinking about not complying? Although enforcement of non-compliance would appear to involve, at its worst, the California Energy Commission investigating and obtaining a court order for enforcement, the real motivations to comply are (1) a lessor/seller could be establishing a "bad material fact" that could come back and work against them in related or even unrelated litigation regarding the transaction, (2) lenders who tend to dot every "i" and cross every "t" may delay or even pass on financing transactions where pre-agreement disclosure was not undertaken, and (3) engaging in socially responsible "green" business.
CA Civil Code Section 1938: Lease Disclosure Requirement
re ADA Accessibility Inspection
California Civil Code Section 1938 provides that "[a] commercial property owner or lessor shall state on every lease form or rental agreement executed on or after July 1, 2013, whether the property being leased or rented has undergone inspection by a Certified Access Specialist (CASp), and, if it has, whether the property has or has not been determined to meet all applicable construction-related accessibility standards pursuant to [Civil Code] Section 55.53." Does this law apply to lease amendments? The California Commission on Disability Access ("CCDA") position is that the disclosure is required with respect to a lease amendment/renewal of a lease entered into prior to July 1, 2013 and amended/renewed after July 1, 2013.
Civ. Code Section 1938 does not require that a CASp inspection be undertaken; it only requires disclosure as to whether or not a CASp inspection has been completed and, if it one has been undertaken, whether the property being leased meets applicable accessibility standards. Civil Code Section 55.53(f) provides protection against a plaintiff using the disclosure as evidence against you if you decide to not undertake a CASp inspection by stating that having not done so "shall not be admissible to prove that person's lack of intent to comply with the law." And there are no express penalties or consequences provided by Civ. Code Section 1938. So why do it? Because it's easy - just add one sentence to the ADA section of your lease - and thereby eliminate the opportunity of a tenant to cite your failure to disclose as a "material non-disclosure" in a dispute over who pays the costs of making ADA repairs triggered by a third party ADA suit.
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© 2014 Silver Law Offices Inc. All rights reserved. This email and its content is intended for general information purposes only and should not be construed as legal advice or legal opinions on any specific facts or circumstances.
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