Alert June 28, 2013

New Accessibility and Energy Use Disclosure Requirements for California Commercial Landlords Effective July 1, 2013

Summary

Beginning July 1, 2013, two new disclosures will be required in certain commercial real estate leasing, sale or finance transactions in California. Under Senate Bill (SB) 1186, property owners will need to include a disclosure in all commercial lease forms or rental agreements stating whether the property has been inspected by a Certified Access Specialist (“CASp”) and, if so, whether the property is in compliance with construction-related accessibility standards. Under Assembly Bill (AB) 1103, prior to the leasing, sale or finance of an entire commercial building, the building owner is required to disclose certain energy use information.

Accessibility Inspection Disclosure (SB 1186)

As part of an effort to curb frivolous lawsuits filed under the guise of the Americans With Disabilities Act, California Gov. Jerry Brown signed Senate Bill 1186 (“SB 1186”) into law on September 19, 2012. The new law places certain restraints on pre-lawsuit demand letters sent from lawyers to commercial properties. These letters can no longer contain demands for money, must identify the alleged violation in sufficient detail, and copies of demand letters must also be sent to the California State Bar and the California Commission on Disabilities.

Additionally, commercial property owners will be required to state on every lease form or rental agreement executed on or after July 1, 2013, whether the property being leased or rented has been inspected by a Certified Access Specialist (“CASp”), and, if so, whether the property has been determined to meet all applicable construction-related accessibility standards under California law. While not required, a CASp inspection may reduce the statutory damages that can be recovered by a plaintiff in a disability access case and may entitle the property owner to a 90-day stay of proceedings relating to any purported accessibility claims.

Energy Use Disclosure (AB 1103 / AB 531)

The Nonresidential Building Energy Use Disclosure Program (the “Disclosure Program”) will require an owner (or an agent authorized to act on behalf of an owner) of a nonresidential building within California to benchmark the building’s energy use via the U.S. Environmental Protection Agency (“EPA”) ENERGY STAR® Portfolio Manager system and to disclose documents regarding the building’s energy usage to the following parties:

  • A prospective buyer of the building, no later than 24 hours prior to execution of the sales contract.
  • A prospective lessee of the entire building, no later than 24 hours prior to execution of the lease.
  • A prospective lender financing the entire building, no later than submittal of the loan application.

Effective Date

The building owner must comply with the Disclosure Program according to the following schedule:

  • Beginning July 1, 2013, for a building with total gross floor area measuring more than 50,000 square feet.
  • Beginning January 1, 2014, for a building with a total gross floor area measuring more than 10,000 square feet and up to 50,000 square feet.
  • Beginning July 1, 2014, for a building with a total gross floor area measuring at least 5,000 square feet and up to 10,000 square feet.

How to Comply

To comply with the Disclosure Program, the building owner must open an account (a “Portfolio Manager Account”) on the EPA’s ENERGY STAR® program Portfolio Manager website and provide certain information at least 30 days before a disclosure is required. Information that must be provided includes owner and building information, all sources of energy use data for the entire building for at least the most recent 12 months, and space use characteristics.

The building owner must also do one of two things: 1) request all utilities and energy providers serving the building to release energy use data for the entire building for at least the most recent 12 months for specified meters or accounts to the owner’s Portfolio Manager Account; or, 2) manually enter all energy use data for the entire building for at least the most recent 12 months to the owner’s Portfolio Manager Account.

After all utilities and energy providers serving a building have released the requested energy use data, which they are required to do within 30 days, the building owner must download the Disclosure Summary Sheet from the Energy Commission’s AB 1103 website, complete and submit the compliance report through the owner’s Portfolio Manager Account, and download the following disclosure documents:

  • Statement of Energy Performance
  • Data Checklist
  • Facility Summary

These disclosures are standardized documents designed to provide insight into the energy use of a building, under the space utilization and operational characteristics of the building during the previous 12 months. The disclosures include metrics for overall building energy use, as well as a detailed description of the conditions the building owner inputs to Portfolio Manager Account to generate the metrics.

While the Energy Commission may access the data submitted under the compliance report, the Energy Commission must treat the data as confidential consistent with state and federal laws.

If there is information missing from a disclosure, and if the owner has made a reasonable effort to ascertain the missing information, the owner may then use an approximation of the information, provided that the approximation is identified as such, is reasonable, is based on the best information available to the owner, and is not used for the purpose of circumventing or evading the Disclosure Program.

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If you have any questions regarding either of the disclosure programs, their disclosure requirements or any language that may need to be updated in your legal documents, please contact your usual Goodwin Procter attorney.