Navigating State and Local Building Efficiency Mandates

Local mandates, such as New York City's Local Law 97, demonstrate the location-specific nature of real estate efficiency laws coming into effect in the U.S. Local Law 97 is part of a broader trend of city-specific laws and regulations aimed at reducing building emissions. Its recent May 1, 2025, deadline marks a critical milestone for building owners under the law which targets carbon emissions reduction in buildings over 25,000 square feet, including condominiums and cooperatives, with penalties looming for non-compliance. Designed to advance the city’s climate goals, Local Law 97 requires annual compliance reporting, beginning with the submission of emissions data by May 1st deadline. However, delayed building owners should be aware of a 60-day grace period extending through June 30, 2025, to file without penalty. Furthermore, extensions to the deadline, if necessary and if certain conditions are met, may be requested through the reporting portal, with the option to push submissions to as late as August 29, 2025.

In Washington, D.C., where 74% of emissions are from buildings, the city has implemented the Clean Energy DC Omnibus Act which hopes to halve greenhouse gas emissions by 2032. Boston has enacted the Building Energy Reporting and Disclosure Ordinance which requires large buildings to reach zero emissions by 2050.

Similar initiatives also exist in Maryland such as Maryland’s Building Energy Performance Standards (BEPS) which has plans to reach net zero greenhouse gas emissions by 2040 and California’s Senate Bill 253 and Senate Bill 261, amended by Senate Bill 219, and Assembly Bill 1305, which implement environmental disclosure requirements for companies doing business in California. Similar bills have been introduced in New York State such as Senate Bills 3456 and 3697, which if approved, would mandate certain disclosures from large companies operating in the state as early as 2027.

Local Law 97: What Real Estate Investors Need to Know 

In 2019, New York City enacted Local Law 97, a groundbreaking law designed to combat the significant emissions from city buildings, which account for two-thirds of the total emissions in the city. This law sets limits on greenhouse gas emissions and applies to buildings larger than 25,000 square feet, affecting approximately 50,000 buildings in the city. It sets forth an incremental stringency plan to reduce greenhouse gas emissions to achieve a 40% citywide emissions reduction by 2030, aiming for zero emissions by 2050.

Compliance and Reporting

Compliance with Local Law 97 is overseen by the Office of Building Energy and Emissions Performance (OBEEP), which is a new office within the NYC Department of Buildings. The law contains a series of compliance periods that commenced in 2024 (i.e., 2024-29, 2030-34, 2035-39, 2040-49, and 2050 onwards). By January 2030, new carbon caps will be imposed on covered buildings, with further reductions scheduled for 2035, 2040, and the zero-emission target in 2050. Building owners are required to submit compliance reports by May 1 each year, detailing emissions data from the previous year. These reports consider carbon emissions per square foot, with variations depending on building types such as multi-family or office spaces, and account for different fuel types like fossil fuels versus electricity. 

The law provides flexibility to comply through renewable energy credits and/or emissions offsets. In addition, it includes alternative low-cost energy-savings requirements for rent-regulated units, houses of worship, and some subsidized housing.

Currently, over 12% of buildings are already exceeding 2024 caps and 65% are projected to exceed 2030 caps.

Penalties and Mitigation Strategies

Exceeding the greenhouse gas emissions limit results in a penalty of $268 for every metric ton of CO2 over the cap. To aid compliance, buildings can undertake several strategies, such as: repairing and optimizing heating systems, adjusting temperature set points, insulating and weatherizing, installing boiler controls, upgrading lighting, and using radiant barriers.

The NYC Accelerator, a city- sponsored organization, offers free technical assistance and guidance to help buildings meet these requirements, and certain deductions are available for clean on-site energy initiatives. Further support is provided by the Property Assessed Clean Energy (PACE) program which offers low-interest loans to building owners to help them meet emissions targets. The Urban Green Council also has a certification program, called GPRO, which provides online training on developing green buildings.

If you have any questions or would like to learn more, please reach out to Yelena Nersesyan or Lauren Bachtel. 

About Our U.S. Real Estate Practice 

With extensive experience in all aspects of commercial real estate law, we advise clients on the full array of complex issues throughout the industry in the United States. We represent a wide variety of clients, including developers, lenders, investment banks, pension funds, sovereign wealth funds, real estate investment trusts (REITs), private equity funds, investors, major corporations, high-net-worth individuals and family offices. We handle transactions such as acquisitions, dispositions, leasing, and financing of all asset classes.