How AB1103 Will Affect The Way You Do Commercial Real Estate

What is AB1103?

B1103 is a California assembly bill that was first enforced on July 1, 2013. It requires owners of a nonresidential building to provide an EPA Energy Benchmark Report, if the entire building is sold, leased or refinanced. Think of it as like an EnergyGuide report. But instead of appliances, the bill applies to buildings. Although first passed last year, AB1103 has been introduced in the following stages to accommodate smaller buildings:

Buildings between 5,000 and 10,000 sq. ft. do not need to comply with the law until July 1, 2016. Buildings in this category originally were required to comply with AB1103 beginning July 1, 2014. But on July 22, 2014, the California Energy Commission voted to postpone compliance for buildings in this size category for two years to avoid causing “market confusion and hardship to the public and the stakeholders affected…”

Why is commercial real estate the focus of AB1103?

Commercial properties contribute about 35% of electricity consumed in California and also account for a significant amount of greenhouse gas emissions. The assembly bill is not intended to regulate energy usage by a commercial property, but alerts prospective/property owners of the energy consumed in a nonresidential building.

How do I know if a particular building is required to perform a disclosure report?

There are three conditions:

 1. The entire nonresidential building must be offered for sale, lease, finance refinance.

2. The building is 10,000 or more square feet. (Buildings more than 5,000 square feet will need to perform a disclosure report beginning July 1, 2016.)

3. The building must be classified as one of the following occupancy types: A (Assembly), B (Business), E (Education), I-1, I-2 (Institutional/Assisted Living), M (Mercantile-Retail), R-1 (Residential-Transient, Hotel/Motel), S (Storage), or U (Utility-Parking Garage).

 Factory/industrial buildings (F occupancy type) are exempt from AB1103. So they are not subject to providing an energy disclosure report.

What needs to be collected for the energy disclosure report?

Twelve months of continuous energy usage needs to be collected for the report. Also, information about the building’s physical and operational condition must also be documented. These building characteristics will be compared to other buildings already entered in the system, and will be assessed a score, accordingly. 

When does the energy report need to be disclosed to the prospective buyer, lessee or lender of the ENTIRE building?

 Per AB1103 regulations, the report needs to be given to a…

 a. Prospective buyer: "No later than 24 hours prior to execution of the sales contract."

 b. Prospective lessee:“No later than 24 hours prior to the execution of the lease.”

 c. Prospective lender: “No later than submittal of the loan application.”

Where does the owner submit the energy disclosure report?

The disclosure report needs to be submitted to the California Energy Commission website within 30 days of the report being produced.