Elizabeth Watson

Commercial lease agreements executed on or after July 1, 2013 must include a provision disclosing whether the premises has been inspected by a Certified Access Specialist and, if so, whether the property has been determined to meet all applicable federal and state construction-related disability accessibility standards. The requirement, codified in Civil Code Section 1938, does not mandate the performance of an accessibility compliance inspection.  Rather, the legislation is a means of assuring that tenants are informed as to whether one has taken place and, if so, the results.  Not surprisingly, the disclosure could induce a tenant to request the performance of an inspection or to obtain one independently.  An obvious legislative objective is to increase the focus on accessibility and to incentivize compliance. The disclosure requirement is one piece of a larger legislative initiative under SB 1186, enacted on an urgency basis by nearly unanimous vote and signed into law in September 2012.  SB 1186 targeted the proliferation of predatory lawsuits claiming violations of disabled access standards to extort settlement payments from commercial building owners and occupants.  (It has been reported that 40 percent of such cases nationally were filed in California due, in part, to the high statutory damages.)  The provisions that went into effect earlier this year are designed to curb abusive practices by imposing tightened procedures and reducing minimum liability amounts for violations under certain circumstances.  In particular, the performance of an inspection by a Certified Access Specialist prior to a claimed denial of access can provide eligibility for a stay of litigation and reduced minimum liability amounts. In view of the lease disclosure requirements, property owners may want to evaluate whether an accessibility inspection is beneficial under their particular circumstances.  Factors to consider include: The age of the building (those constructed after January 2008 likely comply due to building code requirements) Vulnerability to litigation claims (public accommodations such as retail, restaurant and service businesses are more commonly targeted) Eligibility for the preferential litigation procedures with an inspection The means to identify the extent of accessibility deficiencies and the costs of corrective work and the opportunity to budget for and perform corrective work over time based on inspection results Disclosure obligations and the discoverability of adverse information revealed by an inspection The identity of the party responsible for disabled access compliance under the lease The likelihood that prospective tenants may insist upon being provided with accessibility compliance information in evaluating a lease opportunity In addition to adding a lease provision meeting the requirements of Civil Code Section 1938, it would be advisable to review related lease provisions, including compliance with law, indemnity and others allocating responsibility for meeting accessibility standards.

In a classic case of “the devil’s in the details,” Assembly Bill 1103 (“AB 1103”), which mandated the disclosure of energy-usage data of commercial buildings in certain transactions, has yet to be implemented nearly four years after it was first enacted. The legislation set a deadline of January 1, 2010 for building owners selling, leasing or financing an entire non-residential building to deliver energy consumption information utilizing the U.S. Environmental Protection Agency’s Energy Star Portfolio Manager program (EPA Portfolio Manager). The 2010 deadline was extended indefinitely in 2009 by Assembly Bill 531 to allow the California Energy Commission (CEC) to complete the rule-making process for the adoption of implementing regulations. So the unanswered question is: When will AB 1103 finally take effect? The answer, for the moment, is that implementation is at least nearly a year away. The earliest possible kick-off date is July 1st of next year. In order to make this schedule, the revised draft regulations issued for public comment in August (Revised Draft Regulations) would need to complete the public comment process followed by adoption of the final regulations by the CEC by late spring 2012. A CEC staff workshop to solicit comments on the Revised Draft Regulations has been set for September 12, 2011 in Sacramento. If adopted as proposed, implementation would roll out in stages beginning on July 1, 2012. At that time, the AB 1103 disclosure requirements would take effect for non-residential buildings of 50,000 square feet or more or those solely occupied by the owner. The second phase would cover buildings of 10,000 to 50,000 square feet as of January 1, 2013, while remaining buildings would be required to comply as of July 1, 2013. Buildings under 5,000 square feet not solely owner-occupied would be exempt. The Revised Draft Regulations released in August incorporate changes to the May 2010 version to reflect the first round of public input and the recommendations of a working group formed in 2009 to provide advice to CEC staff. The provisions call for building owners to disclose information in the form of a Disclosure Summary Sheet, Statement of Energy Performance, Data Checklist and a Facility Summary to prospective buyers, lessees or lenders of an entire building. The information is to be provided as soon as practicable before execution of a sales contract, a lease or a loan application. At least thirty days before a required disclosure, the building owner must open an account at the EPA Portfolio Manager website and request that all utility companies serving the building release energy-use data for the most recent twelve months to the owner’s EPA Portfolio Manager account. After all utility companies have uploaded the building’s energy use data, the CEC’s AB 1103 compliance website will generate the Disclosure Summary Sheet, allowing the building owner to complete the Compliance Verification Report and to download the building’s Statement of Energy Performance, Data Checklist and Facility Summary from the EPA Portfolio Manager data. To address those cases where information is not timely available through this process through no fault of the owner, an approximation based on the best information available to the owner may be used, provided that the approximation is clearly identified in the disclosure materials. The public comment period on the Revised Draft Regulations is scheduled to close on September 16, 2011. Thereafter, the CEC will begin formal rule-making proceedings.