New ASTM Standard for Commercial Building Energy Efficiency

June 2011Newsletters In the Zone

ASTM has recently adopted a Standard Practice for Building Energy Performance Assessment for a Building Involved in a Real Estate Transaction. This standard, E-2797-11, was developed over a two-year period and is designed to identify energy efficiency of buildings for prospective sellers and buyers of commercial property. The standard is a way of determining the energy efficiency of buildings to review if operating costs create more value in the marketplace.

The standard sets out criteria for collecting reliable building energy use data and ways to develop consistent standards. The appendices include sample commercial building survey checklists and listings of building characteristics that have impacts on energy use.

The standard is being used in a number of ways. In asset management, the standard helps evaluate the properties in the real estate portfolio, generally in combination with an energy audit. Prospective purchasers can also review the operations costs of owning buildings by using calculations from the standard.

The standard has significant legal implications as well. Many cities are beginning to enact green building requirements. As more requirements are enacted, we expect the ASTM standard to provide the framework for evaluating the energy performance of buildings.

For example, New York City, in 2010, passed several laws designed to improve energy and water efficiency of existing building stock in the city. One of the ordinances is the Energy Audits and Retro-Commissioning Law, which requires “each covered building” to perform an energy audit at least once every 10 years. The law requires the identification of retro-commissioning measures that would reduce energy use and operations costs and, if implemented, ways to calculate annual energy savings for each identified measure and to benchmark the results of improvements.

This past February, San Francisco enacted the Existing Commercial Buildings Energy Performance Ordinance, which requires companies to conduct annual benchmarking using EPA’s Energy Star Portfolio Manager to calculate energy use of commercial space in excess of 10,000 square feet. In addition to the annual benchmarking, energy audits will be required every five years. The results must be shared with the public through the City’s Department of Environment.

The State of California enacted Assembly Bill 1103, which also mandates energy benchmarking and disclosure for nonresidential buildings involved in sales transactions. The statute mandates disclosure of energy data to prospective buyers and lessees of the entire building or disclosure to lenders financing an entire billing. The California Energy Commission is in the process of devising a disclosure schedule for this information. Expect benchmarking to soon become a cost factor in the marketing of commercial properties.

Given the political and economic environment, energy efficiency will continue to be a favorite area for lawmakers addressing energy issues. The ASTM Standard will provide a reliable starting point for disclosure-related issues and potential liabilities. Good legal advice from knowledgeable attorneys could be critical in future real estate transactions.

For more information, please contact Philip L. Hinerman at 215.299.2066 or [email protected].

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