New ADA and Energy Use Disclosure Requirements for Commercial Property Owners

Beginning July 1, 2013, owners of commercial property in California will need to comply with new disclosure requirements when entering a new lease, amending a lease, or when owners sell or finance a commercial building.  The first disclosure requirement relates to disability access and the other requirement relates to a building’s energy use and consumption.

Certified Access Specialist Disclosure

Under California SB 1186, commercial property owners must include a disclosure in all commercial leases or lease amendments stating whether the property has been inspected by a certified access specialist and, if so, whether the property is in compliance with construction-related accessibility standards.   A certified access specialist (also known as a “CASp”) is a professional certified by the State of California to assess commercial properties and their compliance with federal and state disability-related laws and regulations.  After an inspection, the specialist issues a report which identifies areas of non-compliance with accessibility standards.  The report can be used by property owners to create a practical and financially reasonable plan for fixing problems in advance of litigation.

While the CASp disclosure in leases and lease amendments is mandatory, property owners are not required obtain such inspections.  The new law provides incentives, however, to having the building inspected.  Property owners who timely correct ADA violations identified in a CASp report or have had their property inspected by an approved inspector prior to being served with a complaint by an ADA plaintiff can be eligible for reduced statutory damages or a 90 day stay of proceedings in the event of a lawsuit.   The stay is granted to give the owner the opportunity to correct accessibility issues and dismiss the lawsuit.

Energy Use Reporting

Another California law, known as AB 1103, provides that prior to the leasing, sale or financing of an entire commercial building of more than 50,000 square feet (the requirement hits smaller buildings in 2014 – all the way down to 5,000 square feet on July 1, 2014!), the landlord, seller or borrower is required to disclose energy use data for the building for the prior 12 months, together with information regarding the building’s operating characteristics and ENERGY STAR Energy Performance Score.  To comply, building owners are required to open an account for the building at the ENERGY STAR Portfolio Manager Website, operated by the US EPA, no later than 30 days prior to the date the disclosure is required.  Under the law, once an account is opened, utility companies are required to provide energy data within 30 days of the date of the request.   Then, the owner must log back in to the account, complete a compliance report, and download certain Energy Use Materials for disclosure to the prospective tenant, purchaser or lender.   The disclosure requirement applies to virtually all commercial building use types.

The ENERGY STAR Portfolio Manager is a free online software tool that allows property owners to track and evaluate energy consumption in light of the occupancy of the building in specified land use categories.  A building is given a score on a scale of 1 to 100.  A rating of 50 means that the building performs at the midpoint when compared with similar buildings.  The Portfolio Manager uses national weather data to compare buildings in similar climates, so that buildings in locations that have snow in the winter and high humidity in the summer are not are scored against buildings in temperate climates. A building that scores 75 or above qualifies for an ENERGY STAR certification.  Because the consequences of having a poor score can have consequences in attracting tenants that have green building requirements, it is important for property owners to retain knowledgeable staff or consultants to handle the inputs into the ENERGY STAR database.  Even small mistakes can affect an overall score considerably in the wrong direction.

The new law will allow tenants, buyers and lenders to compare a building’s  performance with other similar buildings.  In addition, the disclosure requirement provides more information than a disclosure of monthly utility bills, as is typical when tenants evaluate utility pass through expenses, buyers estimate future operating costs in their pro formas, or when lenders evaluate which assets have a better ability to maintain profitability and support loan repayment.  On the other hand, the cost and expense of complying with the law’s new disclosure requirement is an added cost of doing business as a commercial property owner in California.

Is Your Hotel or Resort Ready for New ADA Requirements?

On March 15, 2012, new accessibility requirements for public accommodations, including hotels and resorts, will be in effect under the federal Americans with Disabilities Act (“ADA”).  Is your hotel or resort ready?

Hotel owners and operators will be required to identify accessible features in guest rooms (such as guest room door widths and availability of roll-in showers) and other hotel amenities in adequate detail so that an individual with a disability can make an independent assessment whether the hotel meets his or her accessibility needs.  To comply with this requirement, hotel owners and operators should coordinate with third parties providing reservation services to make sure that the required information is readily available.

In addition, the ADA requires improvements to the following new and existing facilities:

  • Swimming pools, wading pools, and spas
  • saunas and steam rooms
  • exercise machines and equipment
  • play areas
  • fishing piers and platforms
  • recreational boating facilities
  • golf facilities
  • residential facilities and dwelling units

The scope of required changes to existing facilities depends on a variety of factors. The factors include the type of facility and the scope of any alterations to an existing facility, among other things.

The pool requirement has been given the most significant attention among hotel owners and operators. Title III of the ADA requires that places of public accommodation (such as hotels, resorts, swim clubs, and sites of events open to the public) remove physical barriers in existing pools to the extent it is readily achievable to do so (i.e., easily accomplished and able to be carried out without much difficultly or expense). 

The Department of Justice acknowledges that determining what is readily achievable will vary from business to business and sometimes year to year.  Changing economic conditions can be taken into consideration in determining what is readibly achieveable. 

For an existing pool, “removing barriers” may involve installation of a fixed pool lift with independent operation by the user or other accessible means of entry that complies with the new standards to the extent it is “readily achieveable” to do so.  If installation of a fixed lift is not readily achieveable, the public accommodation may then consider alternatives such as use of a portable pool lift that complies with the new standards. When selecting the equipment, the public accommodation should factor in the staff and financial resources needed to keep the pool equipment available and in working condition at poolside.  To determine which pools must be made accessible, the Department of Justice says the public accommodation should consider the following factors:

(1) The nature and cost of the action;

(2) Overall resources of the site or sites involved;

(3) The geographic separateness and relationship of the site(s) to any parent corporation or entity;

(4) The overall resources of any parent corporation or entity, if applicable; and

(5) The type of operation or operations of any parent corporation or entity.

All newly constructed or altered pools must comply with the new standards.  An alteration is a physical change to a swimming pool which affects or could affect the usability of the pool.  Changes to mechanical and electrical systems are not alterations. 

Owners and operators of hotels and resorts should consult counsel to determine how to comply with the new ADA requirements.