BOMA | Building Owners and Managers Association of San Francisco
Advocate: An Update on Legislative, Regulatory, and Political Issues Affecting Commercial Real Estate
July 19, 2018
BOMA California Advocacy Update
Mandatory Benchmarking Law; Two BOMA California Sponsored Bills Signed by the Governor


California Mandatory Benchmarking Law - AB 802


California’s mandatory commercial building benchmarking law is one of the topics we are contacted about the most and since the law finally went into place on June 1, of this year, the amount of questions we have received have spiked dramatically. 

Because of the increase in interest (and the fact that many of your buildings must comply with the law) we thought now might be a good time to re-present information on this topic to help our members understand the process and how to comply.

It all started in the year 2007 with AB 1103, a bill that passed the Legislature and was signed into law by then Governor Schwarzenegger, over our industry’s strenuous objections. We weren’t opposed to benchmarking, per se, but believed the way the bill was going to be difficult to implement in that it required every non-residential building in the State of California to be benchmarked. Period. No flexibility.

Our warnings that such a sweeping mandate would be an overwhelming regulation to implement came to fruition and after several years the complicated process was abandoned, and stakeholders were brought together to start over and write a statute – that retained the “mandate” but did so in a manner that could actually work in the Real World.

The result was that in 2015 the original statute placed on the books by AB 1103 was repealed and new, more flexible statutory language was signed into law by Governor Brown in the form of AB 802. That bill re-calibrated the regulatory process and addressed a number of complaints our industry has had with the original law:

  • AB 1103 mandated ALL buildings must be benchmarked regardless of size or use; AB 802 states that buildings 50K s.f. and above must be benchmarked and allows the Energy Commission some discretion to exempt certain building types and situations (i.e. the CEC could decide that long-term empty buildings or buildings scheduled for razing need not be benchmarked).
  • AB 1103 was a transaction based program – benchmarking was triggered by a sale/lease of whole building/refinance. The transaction based approach had many unintended consequences such as requiring actively managed buildings to be benchmarked more often than buildings that are not; put an unnecessary technical process in the middle of a real estate transaction; and required benchmarking be provided to parties that were not making management decisions (i.e. lenders); AB 802 allows the CEC to determine the best trigger for benchmarking – that could be transaction based or time certain (i.e. once every two years).
  • Under AB 1103 many building owners were unable to get tenant energy information from local utilities; AB 802 clarifies that utilities are required to provide information; in an aggregated format if there are privacy concerns in multi-tenant buildings. Although some building owners are currently having trouble accessing this information from some utilities the law is clear that owners do not need to get permission from tenants and/or utilities for these purposes.
  • AB 1103 treated income producing properties separately by only focusing on commercial; AB 802 – with the support of the Apartment industry - includes certain multi-family housing properties.

Our industry was also given two years to prepare for implementation as reporting did not begin until June 1, 2018. 

Now that the implementation phase is underway the rule of thumb is that, with some exceptions, if you have a building that is 50K s.f. or more you must benchmark it annually using Energy Star and report the numbers. See below for more info.


California Mandatory Benchmarking Law - Resources

With a few exceptions, if you have a building that is 50K s.f. or more you need to benchmark it annually using Energy Star and report numbers to the Energy Commission. Our industry has worked with policymakers and regulators all along the process to provide input that will hopefully make compliance for a vast majority of our members relatively simple. 

However, we know some situations may not go smoothly or may present unique questions that require more information. Below are links that we hope will help.

  • Detailed information about the Building Energy Benchmarking Program including fact sheets and frequently asked questions are on the CEC's benchmarking website.
  • Several webinars for different stakeholders have been held. Here are links to recordings of each webinar:
CEC AB 802 Building Owner & Representative Stakeholder Webinar

CEC AB 802 Public Agency Stakeholder Webinar

CEC AB 802 Utility Stakeholder Webinar

CEC AB 802 Energy Consultant Stakeholder Webinar 

We hope that one or all of these resources can help those companies that are having trouble implementing the law. For additional information or questions, please contact the Benchmarking Hotline at (855)279-6460 or Benchmarking@energy.ca.gov.

SPONSORED BILL SIGNED INTO LAW: AB 2173 – Abandoned Property

Sponsored by BOMA California and signed into law by Governor Brown in July, this bill updates the state’s commercial/retail abandoned property laws by increasing the threshold amount needed to trigger an official disposition (auction) process. The new threshold is now $2,500 or an amount equal to one month’s rent for the premises the tenant occupied, whichever is greater.

Under current law, a commercial property owner/manager is obligated to go through an expensive public notification and auction when a business moves out and leaves behind unwanted items, believed to be $750 or more in value or the equivalent of $1 per square foot of the rental for the property, whichever is less. 

If a company moves out of a leased space and purposefully abandons property (i.e. old shelving, a few desks and chairs, or obsolete computer equipment) that low threshold is very easily met and triggers an expensive auction process for a relatively small amount of money on items that were unwanted to begin with.

Due to AB 2173, state law now better reflects the practical realities in the commercial real estate industry by setting a new commercial threshold. This proposed new threshold amount more appropriately aligns with the actual costs of storage and disposal of abandoned property in commercial real estate.

AB 2173 (Santiago; D-Los Angeles) Governor’s Signature Press Release and Click here to read the text of the new law.


SPONSORED BILL SIGNED INTO LAW: AB 2847 (Rubio; D-Baldwin Park) – Separating Residential and Commercial Leasing Language

Sponsored by BOMA California and signed into law by Governor Brown in July, this bill continues the effort to separate commercial from residential sections in statute where it does not make sense to have them intermingled. 

AB 2847 clarifies that current Civil Code §1951.3 pertains to residential real estate only and creates a new section mirroring it to deal with commercial/retail. This fix was needed as the statute provided certain obligations/protections for residential owners/tenants without parallel in commercial context. 

The current section requires that when property is deemed “abandoned” the property owner must wait until the fifteenth of the following month to start the Notice of Abandonment. This waiting period does not make sense on the commercial side as there are strict contractual obligations guiding property leases. This bill clarifies that the residential and commercial sections are not comingled which may lead to further reform in the future.

AB 2847 (Rubio; D-Baldwin Park) Governor’s Signature Press Release and click here to read the text of the new law.

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In This Issue
RESULTS: BOMA SF-PAC Voter Guide for the June 5, 2018 Election
•  BOMA San Francisco's Member Interests Were Well-Represented
CONGRATULATIONS SAN FRANCISCO MAYOR LONDON BREED
•  Thank You to BOMA San Francisco Members For Your Support!
How San Francisco’s New Commercial Rent Tax will Impact Property Owners and Tenants
•  By Manuel Fishman, Partner at Buchalter
San Francisco's Tall Buildings Study - Seismic Effects and Geotechnical Considerations
•  Forthcoming Report on Seismic Effects on Tall Buildings in San Francisco
BOMA International's Political Action Committee (BOMAPAC) Needs Your Support
•  Jim Collins with Shorenstein is leading the effort for BOMA San Francisco
San Francisco Accessible Business Entrance Program
•  Changes to the Measure Effective as of June 1, 2018
BOMA California Advocacy Update
•  Mandatory Benchmarking Law; Two BOMA California Sponsored Bills Signed by the Governor
BOMA International Advocacy Update
•  ENERGY STAR® Preserved in Appropriations Bills
ABOUT BUCHALTER

 
About Buchalter.  Buchalter is a full-service law firm that provides counsel to clients at all stages, and helps them navigate any legal challenges and decisions they may face. Our clients are engaged in a diverse global economy governed by complex laws and regulations, and trust us as advisers and business partners with in depth knowledge of the relevant business issues and market standards in over 30 diverse practice and industry groups. 

Real Estate:  Lawyers in the firm’s Real Estate Practice Group represent lenders, investors, and owners in  all types of real estate projects—office, hotel, shopping centers and urban retail, multifamily and industrial. The firm represents both purchasers and sellers in connection with real estate acquisitions and dispositions, including entitlements and land use/zoning matters, and landlords and tenants in connection with commercial leases. The firm has an active state and local tax practice relating to real estate, and is recognized as a leader in representing banks, opportunity funds and others in real estate financings, construction loans and equity investments.  Real Estate Practice Group clients include national and regional institutions as well as entrepreneurial and middle market clients who rely on the quality and cost-effectiveness of the firm’s legal services.

Premier Law Firm. In addition to being recognized as one of the largest regional firms, we are also consistently ranked among the leading law firms in Arizona and California by Chambers USA, The Legal 500 US, Who’s Who Legal, Best Lawyers, The Daily Journal, and the Orange County, Los Angeles, and Phoenix Business Journals.

Geographic Platform. The firm focuses primarily on the West Coast, with offices in Northern and Southern California, Seattle, Washington, and Scottsdale, Arizona.  Our attorneys are licensed to practice in more than 20 states across the U.S., and we have a national and international reach, servicing clients around the world.

Contact:  Manuel Fishman at 415-227-3504 or mfishman@buchalter.com

 

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ADVOCACY EVENTS
•  Energy & Environment Committee 
August 7, 2018
11:30 a.m. to 1:00 p.m.
Ferry Building, Port Commission Hearing Room, San Francisco, CA
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•  Government Affairs Policy Advisory Committee (GAPAC) Meeting
August 8, 2018
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August 14, 2018
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Codes and Regulations Committee 
August 29, 2018
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