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In May of 2019, New York City (NYC) lawmakers passed Local Law 97, otherwise known as the 2019 Climate Mobilization Act (CMA), limiting the effect of greenhouse emissions on new and existing real estate projects within the city. It was passed in conjunction with New York State Laws Climate Leadership and Protection Act.
The goal of this legislation is to reduce greenhouse gas emissions from New York City skyscrapers, multi-floor co-op and condominium residential, and commercial buildings by 40% by 2030 and 80% by 2050. Let’s explore who is affected by the law and some of the provisions it provides.
What individuals would be directly affected by the Climate Mobilization Act?
The CMA would directly affect New York City real estate participants such as real estate investors, owners of commercial buildings, as well as condominium and co-op owners and all other stakeholders who make a significant financial investment in NYC residential and commercial high end luxury buildings.
Who would be covered under the law?
Local Law 97 would cover real estate buildings and projects in NYC that exceed 25,000 square feet or two or more real estate buildings in the same lot that exceed 50,000 square feet. The law would also apply to two or more buildings that collectively exceed 50,000 square feet.
What would Local Law 97 effectively do to enforce environmental standards?
It would set up annual emissions standards based on each building’s square footage, requiring owners to make energy efficient improvements to lower energy usage in the building. This would then reduce greenhouse gas emissions to a safer environmental level.
How would annual emission limits for each building be calculated?
The law provides a formula through which a building’s annual emissions limit is calculated using emissions intensity factors. These factors depend on how the building obtains its energy, including electricity delivered through a grid, natural gas combusted on the premises or fuel oil conducted on the premises. In using these factors, the building’s intensity factor is multiplied by its square footage to calculate its emissions limit, otherwise measured in metric tons of carbon dioxide equivalents per year.
What would a typical emission limit evaluation look like in real life?
As referenced in an illustrative New York Law Journal article, the typical limit evaluation can get complicated. Using their example, for a building with 40,000 square feet of business space and 10,000 square feet of mercantile stores, the tons of carbon dioxide equivalent per square foot for the business occupancy group is 8.46 and the tons of carbon dioxide equivalent for the mercantile group is 11.81. This measurement would be abbreviated in code as TC02E/SF for both the office store and mercantile store calculations.
In using an 8.46 carbon dioxide equivalent multiplied by 40,000 square feet, we would compute a gross total carbon dioxide equivalent figure of 338,400 TCO2E for the office building space. Using an 11.81 carbon dioxide equivalent for the mercantile stores multiplied by their total square footage of 10,000 square feet, we would come up with a total carbon dioxide equivalent figure of 11,810,000 TCO2E.
Who would conduct the emission limit inspections?
These inspections will likely be done by certified energy auditors or inspectors in conjunction with other engineers and licensed contractors.
What does this new law mean in practical terms for building owners and their investors by requiring them to retrofit their units?
It means that in order to comply with Local law 97, building owners will have to engage in green retrofitting of their luxury buildings. Owners will have to make major renovations to their buildings’ ceilings, glass structures, boiler rooms and energy equipment systems to make the buildings more compliant with new energy efficiency requirements.
This could translate into significant additional construction costs totaling in excess of a million dollars for multimillion dollar commercial buildings, for upgrades such as securing indoor air quality sensors, HVAC air cooling systems, installing dual carbon-based and renewable energy conversion systems, low-flow water fixtures, high efficiency boilers and heat controls, as well as automated building and energy management systems and software.
Additionally, high rise buildings may be required to acquire roof solar panels or create (new) landscaping with planting trees and vegetable gardens on rooftops to further reduce the potential for extra carbon emissions. Not only will this require procuring higher building insurance and incurring higher construction costs, this could prove to be a costly venture.
What environmental, health and wellness certifications are building owners required to comply with under the new CMA law?
Building owners are required to adhere to various rating systems to show compliance with retrofitting operations and maintenance certifications. These include obtaining state or local certifications from LEED EBOM agencies and Green Business Certification Inc. rating systems.
What happens if owners fail to meet their greenhouse compliance requirements under the act?
The results could be costly, as the owners could not only be liable for millions of dollars in fines but would still need to pay out millions of dollars in construction costs to remedy issues of non-compliance. In addition to the potential legal fees, owners would have to get an energy auditor to prepare an energy audit report and then hire a commercial attorney to prepare an Energy Consulting Agreement to cover the owners from future liability.
This could result in continued litigation for property owners fighting to comply with Local Law 97, including the potential for very high civil fines and even criminal exposure for false documentation of construction and environmental reports.
What contractual protections are generally available to building owners?
Building owners and real estate investors would be wise to draft energy consulting agreements to address green retrofitting requirements with which they have complied. Such consulting agreements are directed to address the projected cost savings or shared revenue to be derived by the building owners.
The agreement should also address the retrofitting measures that the owners have utilized and refer to the remedies that the owner could use to protect their interests from a software breach in the unauthorized use of computer utility data and software systems used to ensure CMA compliance.
The agreement should be prepared to afford the building owner the opportunity to maximize the effect of environmental tax credits, investment opportunities and to obtain the benefit of tax depreciation or accounting amortization from the use of certified retrofitting equipment.
What are some common projects where Local Law 97 is being applied?
Several real estate projects started luxury development of green energy systems after CMA was passed into law. These projects included a 20-story, 67-unit apartment complex in Gramercy at 200 East 21st street started by developer Alpha Developers with Michael Namer. The building contains high-performance glass to reduce heat transfer, landscaped green roof areas, a rainwater collection system, and LED lighting with motor sensors, double paned windows, and an electrical system based on an off-site wind farm.
Another recent project by Mr. Namer features a 42-story building at 77 Greenwich in New York’s financial district. This green site development also contains less glass and more of an opaque structure, with traditional windows in a stone façade and refrigerants for a heating and cooling system. In 2019, the complex charged $1.78 million for a one-bedroom apartment overlooking the Hudson.
Another complex in Hudson Yards from developer Related Company features storm water collection systems, computer programs to provide proper air access, on-site power generating plants, and high-performance glass.
These projects may be contrasted with Affordable Housing Projects such as the Beach Green Dunes Project in Rockaway Queens by Blue Stone Developers, which features a passive house indoor-outdoor air system supported by German engineer design with sealed envelope tight insulation, more opaque surfaces and less glass. Unlike the rents in 77 Greenwich, tenants of this complex were paying a monthly rent of $653 for a one-bedroom apartment or $1,597 for a three-bedroom apartment.
How does the future look for co-op and condo owners and other real estate developers under NYC’s Climate Mobilization Act?
It remains unclear how many buildings will be able to effectively operate under the new carbon emission standards set forth in this law. Covered building owners still have two years to prepare, as the law takes effect in the spring of 2024. However, the anticipated engineering, environmental and other associated costs associated with compliance may result in a lot of abandoned luxury buildings in affluent parts of NYC. However, only time will tell.
Taso Pardalis is a founding partner of the Law Offices of Pardalis & Nohavicka, a leading full- service NYC law firm with offices in Manhattan, Queens and WeWork. Taso may be a well-known attorney with many cases making headlines in major media outlets, but at heart, he is a true entrepreneur that believes in supporting the small business community. His areas of concentration are: Intellectual Property, Trademarks, Corporate, Business Law and Real Estate Law.
Jacqueline Weiss, a graduate of Union College, received her Juris Doctor from Albany Law School and is admitted to practice in the States of New York and New Jersey. She has completed NYS Basic Mediation Training for Community Mediation and interned with Justice Pineda-Kirwan in the NYS Supreme Court of Queens County and is now a full time attorney at Pardalis & Nohavicka. Ms. Weiss has experience in healthcare and the defense of professional liability claims involving physicians, hospitals and nursing homes.