We are happy to share USL Technology’s involvement with the planning and coordination of the...
Local Law 97: Landlord and Tenant Engagement
Local Law 97 will hold building owners responsible for entire building emissions, not just for the common spaces enforced by LL87. Consequently, landlord and tenant relationships will face new pressures and opportunities for mutual benefit through sustainability and safety.
Despite LL97 compliance placing sole responsibility on building owners, meeting the law’s carbon caps will require landlords to effectively incorporate tenants in their strategies for improving the performance of the whole building.
This post will provide an all-encompassing rundown of how building decision makers can engage with their building’s inhabitants, and inversely how tenants can stay informed and engaged in the road to compliance.
Overview of Local Law 97
Local Law 97 establishes emissions restrictions for buildings greater than 25,000 square feet. This ordinance is expected to reduce carbon emissions in New York City by 6 million tons by 2030. This local law is outlined in a previous post and can be accessed here.
Landlord - Compliance Strategies and Engaging Tenants
By the swift nature of New York City, fast-paced transactions in leasing often omit energy efficiency from the conversation. It's common for landlords to assume tenants don't care for the sustainability of their dwelling. As a result, landlords neglect the opportunities to collaborate with architects and engineers to determine efficient practices based on tenant operational needs.
To address these common challenges for landlords:
- Open a dialogue on driving carbon emission awareness with both current and incoming tenants.
This will help establish responsibilities in meeting LL97 carbon reduction targets and aligning efforts towards compliance.
Where to start?
1. Obtain an energy audit for a better understanding of the building’s performance.
✔️ With a more detailed breakdown of energy data, you can comprehensively plan for energy efficiency improvements for short and long-term capital funding needs.
2. Obtain a study of the building’s carbon intensity and energy use intensity. Both can be generated via ENERGY STAR Portfolio Manager, for comprehending carbon emission and energy use per square foot.
✔️ With the understanding from both studies, you can effectively communicate how whole-building performance is directly influenced by tenant use per square foot.
3. Employ the information from the two recommended actions to open a dialogue on driving carbon emission awareness to tenants.
- Transform all leases to green leases.
Under green leases, or high-performance leases, energy efficiency can be soundly integrated into tenant and landlord relationships. Engaging this practice will optimize base building equipment through frequent check-ins that measure and improve building and tenant energy use.
Where to start?
1. Consult building operators to understand lease clause language that will outline pathways to optimal efficiency operations.
✔️ Through this consultation, establish roles, responsibilities, and expectations to improve a building’s energy use.
2. Consult legal specialists to aid in drafting efficiency, starting with the Letter of Intent.
✔️ Attorneys can offer key insights on how to incorporate thoughtful lease language to achieve mutual benefits throughout the long-term landlord-tenant relationship.
3. Integrate sub-metering or ongoing energy evaluations of tenant spaces.
✔️ To achieve the highest reductions in energy consumption, building managers need to understand how and why different types of occupancies behave differently. Understanding energy trends are necessary when developing a comprehensive energy management strategy at your multi-tenant building. Through individual monitoring, tenants will better understand their energy consumption and be encouraged to reduce energy use.
- Maintain communication of the building’s carbon emission reduction plan with tenants.
Sustaining communication on energy improvement plans as well as assisting tenants with ongoing energy reduction support is imperative to aligning efforts for LL97 compliance.
Where to start?
1. Designate key building operators to communicate whole building performance to tenants and to offer support for tenants.
✔️ Building operators who manage system maintenance, best understand the necessary actions to improve and uphold performances. They can help specify responsibilities and identify areas for opportunity.
2. For those managing many leases, create a tenant association.
✔️ Employing a tenant association will empower tenants to directly strategize amongst one another and distribute responsibilities.
For more information, read Overcoming Seven Key Landlord-Tenant Hurdles to Make Ambitious Carbon Reductions a Reality.
Tenants - Carbon Reduction Strategies and Engagement
While owners of covered buildings are responsible for complying with Local Law 97, renters are also expected to be aware of and carefully evaluate the law's potential effects while negotiating a lease, particularly in multi-tenant buildings in New York City. Tenants can have a significant impact on the carbon footprint of your building. It is not uncommon for tenant loads to account for more than 50% of the electricity used in a typical commercial building with no single-tenant spaces.
Tenants can take the following actions to get ready for Local Law 97 while negotiating leases:
- Be proactive and engage prospective landlords regarding Local Law 97 during term negotiations.
This includes asking whether they have performed any efficiency audits to assess existing building systems, what steps they plan to take to address Local Law 97, whether the cost of compliance has been factored into the rent or will be passed-through to occupants of the building, and what green lease provisions (if any) are included in the landlord’s form lease.
- Consider the financial impact of any steps that a prospective landlord may take (or fail to take) in furtherance of Local Law 97.
Specifically, tenants will want to pay close attention to the operating expense provisions.
- Verify any green lease provisions put forth by potential landlords.
Make sure they won't add to the tenant's expenses or interfere with their ability to conduct business. We will cover green leases in an upcoming blog post!
- Review efforts and how they contribute to the overall goal.
Consider the extent to which retrofits, upgrades and green lease principles coincide with their organizations’ own energy efficiency goals and negotiate lease terms that account for the mutual benefits of such goals.
- Inquire how your potential landlord would divide the cost of upgrades and retrofits among tenants in mixed-use buildings.
Mixed-use buildings may include restaurants, office spaces, or other significant energy consumers. Review how much of these costs should be passed on to the tenant. It might be fair to pass on a larger amount of the expenses of retrofits and upgrades to those occupants if some tenants contribute disproportionately to the overall consumption of a covered structure.
- Ensure safety first!
Be aware that occupying a building that is undergoing renovation or construction can also be difficult due to noise, dust, or entrance closures. However, conditions should never be dangerous or present hazards to occupants. The DOB works to help minimize the impact of construction on existing tenants through the office of the tenant advocate. The Department provides resources on their website outlining your rights and steps that need to be implemented for construction to keep you safe.
- Be informed and utilize city resources.
New York City Small Business Services provides basic guides on commercial leasing. Location selection, assessing space requirements, building of space, working with specialists, reviewing critical lease terms, and reducing business and personal risk are some of the topics covered. The guide can be accessed here.
Building owners in New York City are forced to assume all legal obligations and are under growing pressure to increase building efficiency once LL97 takes effect in 2024. However, this law's fundamental purpose is to safeguard both the health of New York City's building inhabitants and the environment by reducing greenhouse gas emissions. If landlords want to meet the carbon requirements of the legislation, they must actively incorporate tenants in their plans for improving the performance of the entire property.
For both the renter and the landlord, the best place to begin is to keep abreast of such local legislation and to have open discussions about strategies for compliance. The largest obstacle doesn't always have to be cost. The city offers a lot of resources and help to achieve these objectives. Have you heard of NYSERDA’s Commercial Tenant Program? This incentive program promises to cover some energy reduction costs for tenant spaces.
You can also Book a Consultation with USL Technology at no charge to get started for your building.