Commercial Leasing and NYC’s Climate Mobilization Act

WrightLawFirmNYC

In mid-2019, the New York City Council passed what was called the Climate Mobilization Act (“CMA”). It was actually six distinct pieces of legislation. But the key initiative is related to cutting carbon emissions from large buildings. The first set of deadlines is quickly approaching. To begin ensuring that your commercial leases address requirements, allocate responsibilities, and identify which party will pay for the upgrades and compliance. Your real estate attorney must be familiar with leases AND NYC’s Climate Mobilization Act.

For example, starting in January 2024, buildings from 25,000 to 50,000 square feet will be required to meet greenhouse gas emissions caps that will decrease again in 2030 and repeatedly decrease so that carbon emissions are lowered by 80 percent by 2050.

As another example, starting on May 1, 2025, building owners will need to file with the NYC building department an annual report, certified by a registered design professional, stating that such building is either in compliance with the applicable building emissions caps established for that year or not. Penalties are assessed against buildings that are not in compliance.

What corrections are the City looking for?

As a further example — see §28-321.2.2 — certain “prescriptive energy conservation measures” are required for “covered buildings” by the end of 2024. Examples include:

  • Repairing all heating system leaks;
  • Installing individual temperature controls or insulated radiator enclosures with temperature controls on all radiators
  • Insulating all pipes for heating and/or hot water
  • Insulating the steam system condensate tank or water tank
  • Installing indoor and outdoor heating system sensors and boiler controls to allow for proper set-points;
  • Replacing or repairing all steam traps such that all are in working order
  • Upgrading lighting to comply with the standards for new systems outlined in the NYC energy conservation code

These are just a few examples of what the CMA will begin requiring. Further, as time passes, the requirements will apply to smaller buildings.

How do these requirements affect leasing and NYC’s Climate Mobilization Act. in its practical application?

Given that commercial leases tend to have multi-year time periods, now is the time to ensure that your commercial lease is allocating the responsibilities for compliance. Due diligence will now need to focus on both leasing and NYC’s Climate Mobilization Act. A few examples of the issues that the Landlord and Tenant should address include:

  • Which party — the lessor or lessee — is responsible for compliance?
  • Which party pays for upgrades required for compliance? Since the requirements increase over time, lease provisions must address ongoing responsibilities.
  • Does the lease regulate a lessee’s operations concerning carbon emissions?
  • Can the lease be terminated if the lessee’s business or operations increase carbon emissions?
  • Does the lease give the lessor authority to interfere with the lessee’s operations that increase carbon emissions?
  • Insurance coverage for non-compliance?
  • What are a lessee’s obligations and remedies if the lessor/owner fails to meet CMA requirements? It does not appear that the NYC building department can shutter a non-compliant building, but that might change.
  • Does the CMA require the lessee to “cure” emissions failures? Can the lessee cure emissions failures, and what are the lessee’s remedies?
  • When considering the CMA, what representations and warranties are required of the lessor and lessee in the age of leasing and NYC’s Climate Mobilization Act?

Contact Wright Law Firm NYC Today

Call the experienced New York commercial lease and real estate attorneys at Wright Law Firm NYC for more information. We provide top-tier commercial real estate legal services and legal services for the NYC business community. To schedule a consultation, contact our office by e-mail or call us at (212) 619-1500.