Sustainability | Local Law 97 Resource Center

Overview

In early 2023, NYC Mayor Eric Adams introduced “PlaNYC: Getting Sustainability Done” (the “Plan”), which defined New York City’s focus on several critical issues concerning climate and energy infrastructure. The Plan―along with Local Law 97, which intends to improve energy efficiency and reduce greenhouse gas emissions for buildings―significantly impacts building owners and real estate developers, and indirectly, their tenants, in connection with existing properties and new projects across the City. The Plan includes specific actions items directed at building owners in order to aid buildings in meeting Local law 97 mandates, including financial incentives, an expanded “accelerator” advisory program, establishing standards for lowering carbon emissions related to construction activities and trucking/transportation, moving forward zoning changes to support carbon neutrality and renewable energy deployment in 2023, and many other stated goals will have indirect, yet significant, impacts on building owners and tenants.

Tannenbaum Helpern’s Sustainability Team works alongside real estate and construction industry organizations focused on Local Law 97, which was enacted in April 2019 as part of the NYC City Council’s Climate Mobilization Act. Our attorneys work closely with industry peers to monitor rapidly evolving developments so we can effectively advise clients about the best practices in response the law and new regulations as they emerge.

Representative Experience

Tannenbaum’s Sustainability Team provides our clients with guidance on Local Law 97 issues, including:

• Legal and Regulatory Compliance;
• Construction and design contract terms;
• Construction, design and consulting contract negotiations with general contractors, architects, energy consultants and engineers;
• Capital building improvements;
• NYSERDA Incentives and Funding;
• Con Edison’s Sustainable Initiatives;
• Landlord strategies and related lease provisions for passing compliance obligations, improvement costs and emissions penalties on to tenants, as well as for incentivizing tenants to operate in a more energy efficient manner;
• Tenant lease negotiation strategies to minimize exposure to landlord improvement costs and emission penalties;
• Available financing options to cover the cost of Local Law 97 required improvements;
• Local Law 97 due diligence for prospective purchasers of commercial buildings, including determining a building’s compliance status and evaluating possible penalty exposure;
• Access issues

About Local Law 97

Professionals across the construction and real estate industries are focused on the obligations of building owners and tenants of buildings in New York City under New York City Local Law 97 of 2019 (“LL97”). But, understanding and complying with this recent climate legislation can be difficult. Tannenbaum Helpern’s Sustainability Team is focused on supporting building owners and tenants as they comply with LL97 requirements. We assist developers, owners, commercial tenants and other real estate organizations in drafting and negotiating construction contracts and real estate leases in order to best comply with LL97 requirements, in performing due diligence on a LL97 compliance status and evaluating financing options, taking into account their business needs and strategic goals and interests.

Importance of Local Law 97 to Owners, Developers and Tenants

LL97 was enacted to set carbon emissions limits (starting in 2024) for energy consumption by buildings larger than 25,000 gross square feet, with some exemptions for city-owned buildings, affordable housing, hospitals and houses of worship if these property types perform a list of specific energy-efficient capital improvements, with an overall goal of 40% reduction in greenhouse gas (GHG) emissions by 2030 and 80% by 2050. This legislation appears to impact about 50,000 buildings. Post-2050, NYC has a goal of 100% carbon neutrality (zero GHG) and ensuring energy efficient buildings. Fines for non-compliance will be assessed at $268 per metric ton CO2 of the amount that exceeds the annual carbon emissions limit. Non-compliant buildings may also be subject to DOB violations.

Unfortunately, the consensus in the real estate industry is that the requirements of LL97 on building owners are unclear and financially burdensome, which makes compliance difficult. Nevertheless, the lack of clarity does not mean that building owners and tenants, along with their design professionals and other stakeholders, should not start thinking about the steps that can be taken to reduce building carbon emissions. Building owners should start monitoring base building system performance and tenant energy usage and come up with a building maintenance and operations plan to curb emissions. Building owners should engage consultants to review innovative changes available to retrofit and/or retro-commission their buildings such as electrification. Building owners should apply for currently proposed New York State and New York City financial incentive programs that can help finance sustainable capital improvements or offset the cost of implementing sustainability measures. Building Owners should update their form leases to best shift the compliance obligation, and the cost burden of compliance, onto their tenants. Importantly, the innovative changes that LL97 has sparked can also result in long-term financial gain and improved health and efficiency of real estate buildings throughout the City.

Our team can help you understand the complexities of NYC’s climate legislation and its New York State counterparts, the requirements and potential penalties on building owners and tenants, the proposed incentive and tax abatement programs, the innovative and sustainable capital improvement opportunities available to building owners and tenants to achieve compliance and be leaders in this ever-important sustainability movement throughout NYC and the nation.