New law on energy usage is a headache for commercial real estate professional.

Posted by: encon commercial real estate services | July 15th, 2014

Assembly Bill 1103 requires documentation of a building’s energy usage anytime there’s a sale, lease, financing or other change involving the building itself.

By Ben van der MeerStaff Writer- Sacramento Business JournalEmail

A new state law affecting any transactions on most commercial properties is causing headaches and delays for brokers, property managers and others.

The law, Assembly Bill 1103, requires documentation of a building’s energy usage any time there’s a sale, lease, financing or other change involving the building itself. Passed in 2007, implementation of the bill was delayed several times because of problems with a state website where building data is entered.

But in the last year, the bill went into effect, including on Jan. 1 for non-residential buildings of at least 10,000 square feet, then on July 1 for buildings of at least 5,000 square feet.

Heather Johnston, an attorney specializing in commercial real estate transactions with Trainor Fairbrook in Sacramento, said the implementation portion is proving difficult. Not only are those entering the data often frustrated by the unwieldiness of the state’s website – for example, it doesn’t have a way to record information when a building’s tenants pay separate utility bills – utility companies are balking at providing confirmation data, citing privacy concerns.

Johnston said there are ways to estimate the information, but a full report of a building’s energy usage has to be disclosed to all parties before a transaction is complete.

“In every single situation, there’s a handful of difficulties,” she said, noting the legislation has created delays in deals being finalized, as well as added costs for property owners who pay to get a full measure of energy usage.

The idea behind the law was to increase market interest in more energy efficient buildings, similar to posting projecting mileage on cars for sale. Johnston said those are noble goals, but the execution needs work, and many commercial real estate industry professionals still aren’t aware it’s in place.

“When it had gotten around implementation, it had just fallen off the radar for most people,” she said. “If I had a recommendation for the state, it would be to fix the website.”

Encon Commercial Real Estate Services – Los Angeles