On Thursday, October 8, 2015, Governor Jerry Brown signed into law Assembly Bill 802 (AB 802). AB 802 creates a new energy use disclosure program for the State of California, and replaces the existing law, Assembly Bill 1103 (AB 1103), which was codified in Public Resource Code Section 25402.10. The key implications of AB 802 on California real estate transactions are:
- AB 1103 will remain in effect until December 31, 2015, and until such time, the disclosure of building energy use shall continue to be required in connection with a sale, lease, finance, or refinance of an entire building.
- AB 1103 will be repealed effective January 1, 2016, meaning the statute and regulations will no longer be in effect after such date.
- There will be no statewide energy use disclosure requirement in 2016.
- In 2016, the California Energy Commission (CEC) will engage in a public process to develop regulations and establish a new reporting infrastructure for the new program under AB 802.
- The CEC anticipates that new regulations will be in effect by January 1, 2017.
The Existing Law – AB 1103
California's existing energy use disclosure program, AB 1103, has been plagued with implementation problems since the enactment of the law in 2007.
Under AB 1103, utilities are required to maintain records of the energy consumption of certain nonresidential buildings. Utilities are required to make the energy consumption data available upon request of a building owner or operator. An owner or operator in turn is required to disclose benchmarking data and ratings for a building for the most recent 12 months to a prospective buyer, lessee, or lender. (Public Resources Code §25402.10.)
In practice, however, it has been difficult for building owners and operators to obtain the data from the utilities due to, among other things, the demands made by utilities for authorization from tenants, which in many cases has been difficult or even impossible to obtain.
The New Law - AB 802
AB 802 was enacted in response to these and other concerns with AB 1103. The stated intent of the Legislature in enacting AB 802 is that the CEC create a benchmarking and disclosure program which will allow owners and operators of commercial and multifamily buildings containing 50,000 square feet and more to better understand their energy consumption through standardized energy use metrics.
Under the new program, a utility must maintain energy usage data for all buildings served by that utility for at least the most recent 12 complete calendar months. A utility would need to provide the benchmark data to a building owner or operator within four weeks of a request. In addition, AB 802 requires the CEC to develop regulations to govern the delivery of benchmark data to the CEC and the public disclosure of such data.
AB 802 eliminates the private disclosure made between parties to a transaction under AB 1103, and instead will require the public disclosure of certain operating performance data. AB 802 also applies to multifamily buildings, whereas AB 1103 did not.
Thus, while AB 802 does not impose any transactional burdens on building owners and operators – a welcome change from AB 1103 – it will require the disclosure of certain energy use data that was not previously available to the public.
Timing of Implementation
It is important to note that AB 1103 will remain in effect until December 31, 2015, which means that building energy use disclosure continues to be required for the sale, lease, finance, or refinance of certain non-residential buildings until the end of the year. AB 1103 will be repealed effective January 1, 2016, and there will be no statewide energy use disclosure requirement in 2016. The CEC anticipates that regulations for the new AB 802 program will be in effect by January 1, 2017.
Please contact Emily Murray (Los Angeles), Matthew Fogt (Irvine), or Heather Riley (San Diego) at Allen Matkins with any questions.