Local Law 97 is a New York City law that aims to reduce greenhouse gas emissions in New York by 40% by 2030 and 80% by 2050.
LL97 and other environmental Local Laws, such as LL92/94, are well-intentioned decarbonization efforts to mitigate climate change.
However, as tenants control roughly 60-80% of the energy and electricity consumption in NYC buildings, this makes it difficult for you as a landlord to impose reductions unilaterally.
As such, these mandates potentially threaten your profitability in two ways:
- Carbon Emissions Fines: If your building is over 25,000 square feet and exceeds carbon emissions limits (described below) you are exposed to fines…
- Worker Liability Exposure: If you hire construction workers to make your building more efficient, you have increased liability exposure due to NY Labor Law 240/241 AND this creates incremental administrative burden for you in the form of verifying contractor CGL insurance coverage.
If you are a landlord in NYC, before you move forward with plans for a green roof or solar panels1, you should conduct a insurance diagnostic to avoid additional risks if you want to comply with LL97.
How Does NYC Local Law 97 Work...?
Many people are aware of the NYC Climate Mobilization Act that was passed in May 2019.
The “Act” is an effort by New York City to mitigate climate change by imposing carbon emissions limits for buildings >25,000 square feet within the five boroughs.
Goals are to reduce emissions by 40% by 2030 and by 80% by 2050.
The Local Law 97 mandate affects carbon emissions limits for over 57,000 buildings in NYC.
- 2030 Goals: Starting in 2024, properties larger than 25,000 square feet2 must not emit more than 8.46 Kilograms of CO2 per square foot per year or face fines for non-compliance.
- 2050 Goals: To reach the 80% reduction goal, in 2030 the carbon emissions law becomes more restrictive, limiting buildings to 4.53 kilograms of CO2 per square foot per year.
Tenant and Landlord Mismatch
If tenants control as much as 60%-80% of energy and electricity consumption in buildings, how are landlords supposed to control this…?
A blanket approach to building carbon intensity presents multiple challenges for building owners and property managers in NYC.
To be in compliance, you must not only engage tenants to manage energy and electricity use, but also invest in green building strategies to make your buildings more efficient.
Office building owners are already under pressure from low occupancy rates as many office tenants are downsizing and/or relying more on AI, remote or virtual workers.
Example: NYC LL97 Carbon Emissions Fines
NYC is not the only city enacting carbon emissions laws…
Similar plans are under way in Washington D.C., Boston, San Francisco and St. Louis.
If your buildings are located in a city with carbon emissions restrictions, the financial cost of carbon emissions fines can be estimated by
calculating your baseline carbon production today, and estimating low,
medium and high severity scenarios if your building does not comply
starting in 2024.
You can use this local law 97 calculator to measure how your building may perform and whether you may be fined.
You can estimate the cost of carbon emissions fines by multiplying $268 for each metric ton that your building exceeds the 2024-2029 and 2030-2034 compliance periods.
The probability of this occurrence can be measured accurately by conducting an energy audit to establish a carbon emissions baseline. Once you know your carbon emissions level you can calculate the financial impact of potential fines using different severity levels and take steps to reduce carbon emissions.
LL97 Summary
Municipalities such as New York City are implementing strict building
energy efficiency laws to reduce greenhouse gas emissions.
Under New York’s Local Law 97, if your building emits more greenhouse gases than is allowable, you will incur fines starting in 2024. This could have unintended consequences, such as increased rents and other costs.
While this article is about LL97, your building may be exposed to action over claims because of New York Labor Laws 240 and 241 that impose strict liability on landlords doing any work in NYC where contractors are exposed to heights, even a ladder…!
Schedule an appointment with me today to evaluate your property and general liability insurance before you commence your real estate retrofit project.
A commercial insurance diagnostic is worth its weight in gold prior to engaging a contractor who will perform any work or building upgrades.
Footnotes
- Local Law 92/94 mandates that certain buildings, such as new buildings, must incorporate green roofs and/or solar panels on their roofs. This law is well-intentioned but can lead to unintended consequences if proper handling of both insurance and contractors are not taken into account.
- Two buildings of over 50,000 square feet on a single deeded parcel must comply even if one of the buildings is less than 25,000 square feet by itself.
