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Local Law 97: Refining New York City’s Landmark Climate Rules

Overview of Local Law 97

Local Law 97 is a regulation established by the New York City Council as part of the Climate Mobilization Act. It came into effect in November 2019 and is a citywide law placing carbon emission caps on all buildings above a specified size. The law is part of an aggressive plan to dramatically reduce the city’s carbon emissions and is believed to be the most ambitious carbon emissions building law in place globally. The law states that beginning in 2024, buildings subject to the law will be required to comply with the carbon emission caps or face a fine, which is calculated annually at $268 per ton of emissions over the limit. The law affects the following types of buildings:

  • Any building over 25,000 square feet in size
  • Two or more buildings on the same tax lot that have a combined size exceeding 50,000 square feet
  • Two or more buildings owned by the same condo association and governed by the same board that have a combined size exceeding 50,000 square feet

According to Urban Green Council, Local Law 97 applies to approximately 50,000 buildings and nearly 60% of the square footage in New York City. Under the law, buildings are assigned an emissions cap that will go into effect January 1, 2024, and be tied to their primary energy use and square footage. The cap will decrease over time to achieve the city’s goal of an overall carbon emissions reduction of 40% by 2030 and 80% by 2050. Covered buildings will need to submit a report annually to the city that is prepared by a registered professional and shows their carbon emissions for the prior calendar year. The initial report for the 2024 calendar year is due May 1, 2025.

From the outset of the program, the city has provided landlords with assistance in adhering to the law, including support through NYC Accelerator, which helps landlords with energy efficiency and renewable energy upgrades, as well as the commercial property assessed clean energy (C-PACE) financing program. C-PACE financing allows property owners to obtain funding in exchange for certain energy-efficient building improvements with the potential to fund up to 100% of energy upgrade costs with no cash upfront at long-term, low-cost, and fixed-rate financing. C-PACE loans are secured through a benefit assessment lien that is subordinate to municipal taxes, but senior to all other liens.

Recent Developments Impacting Local Law 97

While C-PACE financing has thrived in other areas of the country, including New York State, its launch in New York City has been plagued by issues since its introduction in 2019. Observers have been critical of the inability to utilize C-PACE financing in new construction and the rigorous guidelines associated with the program, such as 100% electrification with no fossil fuels permitted. Furthermore, requirements to obtain consent from existing mortgage holders is often problematic given the nature of the lien associated with C-PACE financing. While revised C-PACE guidelines were issued in the last few months of 2022, they did not eliminate these and other controversial elements of the program. However, there is hope that the current challenges in the traditional capital markets will make C-PACE more attractive to New York City property owners in the coming months.

In September 2023, New York City Mayor Eric Adams released proposed guidelines for Local Law 97. Importantly, his recommendations provide an option that would allow buildings to apply for a two-year, fee-free extension if they will not be in compliance by time the law goes into effect on January 1, 2024. To qualify for the two-year extension, applicants must show “good faith efforts” to reduce emissions and obtain permits, approved by the city, that outline decarbonization and energy-saving plans. The proposed guidelines also allow the option of purchasing renewable energy credits (REC’s) which can offset emissions starting in 2026. The public comment period, which concluded on October 24, 2023, sparked a heated debate amongst stakeholders, including environmental activists who argue that the proposed law does not go far enough, citing the proposed two-year extension and use of REC’s as damaging loopholes that will blunt the positive impacts of the law. The Department of Buildings is reviewing all comments and plans to finalize and publish the rules around the law by the end of the year.

The professionals in Citrin Cooperman’s Real Estate Industry Practice are here to help navigate Local Law 97 and keep you informed of changes in guidance that may impact your compliance. For more information, reach out to a professional in our Real Estate Industry Practice or William Saya at wsaya@citrincooperman.com.

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