Owners of commercial buildings located in Philadelphia in excess of 50,000 square feet are now required to measure energy and water usage and report the results into the EPA’s Energy Star Portfolio Manager annually. Bill No. 120428A titled “Energy Conservation” went into effect last month on June 13.

Under this new ordinance, the owner of a “covered building” must report the required information no later than June 30 of each year for the previous calendar year. For 2013 only, information must be entered into the EPA’s system by October 31, 2013.

Required information will include the building’s energy and water usage as well as the building’s “characteristics”. A building’s characteristics are defined to include not only the street address and year the building was built, but also specific items such as the percent of the building heated or air conditioned and the number of computers and refrigeration/freezer units in the building. The ordinance requires that each building’s characteristics must be updated annually. Failure to comply will result in the City assessing fines against the building owner.

What does this mean from a landlord and tenant perspective going forward? From the landlord’s point of view, it means that you are going to have to immediately notify tenants of the new reporting requirements and the associated deadlines. Going forward landlords should consider default and penalty provision language as possible additions to new leases.

From the tenant perspective, a tenant should consider what impact this new legislation will have on a landlord. Will public access to the results contained in the Energy Star Manager force landlords to update their mechanical systems? If so, will such improvements be passed onto the tenant? Can carefully crafted representations and warranties in the lease protect the tenant from these types of improvements being passed onto the tenant?

Danziger Shapiro & Leavitt has frequently assisted their commercial real estate clients by drafting and reviewing commercial leases from both the owner and tenant’s perspective. If you have any questions regarding how to comply with this new Philadelphia commercial real estate requirement, please feel free to contact Douglas Leavitt at Danziger Shapiro & Leavitt.

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