Fines And Penalties For Noncompliant Buildings: How To Avoid The Mess

The landscape of building performance standards, energy efficiency and carbon reduction regulations is evolving fast. As new city and state laws emerge, it can be hard for a property owner to know which regulations apply to their business. But if they don’t keep up, they could face hefty fines.

Bisnow spoke to building intelligence and technology company InSite’s director of sustainability, Kylie Ford, and Energy Analyst Kerren Segal to understand how regulations are evolving and what property owners must consider to stay ahead of the game.

Bisnow: What are the main energy efficiency and carbon reduction regulations a business needs to comply with today?

Segal: The main regulations are benchmarking compliance and building performance standards. Benchmarking varies within jurisdictions; it can be at the state level, city level or county level. They require owners of buildings of certain sizes to report their energy data and sometimes water data as well.

Deadlines vary quite a lot between jurisdictions as well in terms of when a business has had to start reporting data. This can make it confusing for property owners. 

Ford: A lot of building owners reach out to us because they get a letter from the city, county or state saying that they have to handle this reporting that they've never heard of and they have no idea how to do it.

There's especially confusion around the performance standards laws. What's the time frame? Which utilities are impacted? What are the penalties for noncompliance? There's a lot more to this legislation than to benchmarking laws, which are a simple disclosure.

Bisnow: How do regulations vary across jurisdictions?

Segal: Almost every day we seem to get a news alert that a jurisdiction has a new benchmarking rule or building performance standard. We update our technology regularly to ensure our clients’ affected buildings are flagged and that our team works to get, or keep, them each in compliance.

Some states have introduced benchmarks in the hope that cities would develop their own laws, which is what we’ve been seeing in California. Cities such as San Francisco, San Diego and San Jose have all started bringing in stricter laws. A business that complies with the city will also be compliant to the state.

Ford: Penalties also tend to be harsher on a city level. In general, the state is often just trying to get everyone on board and understand what they need to do. 

Bisnow: What are the main risks posed by noncompliance?

Segal: Financial penalties vary. Sometimes, it can be a charge per SF, other times it’s one fixed charge if you missed a deadline. Some will send warnings and then charge for each passing week that a business continues to be out of compliance. 

Often, people don’t notice they’re noncompliant until they get a letter in the mail three months after the deadline. Then it can be a real scramble. If you don’t comply with both city and state laws, you could be looking at significant penalties — sometimes millions of dollars if you’re out of compliance for a long time.

There is also a risk of brand damage if you don’t comply. In New York City, a business has to display the energy rating of a building at its entrance. If a building has a low rating, that bad rating is very visible. 

Bisnow: What resources are there to help a business keep on top of regulations?

Ford: Many businesses don’t know where to start and can’t afford a full-time engineer to analyze operational building data, let alone constantly research regulatory laws. Your buildings’ utility and energy usage data can be easily and automatically accessed by experts like InSite. Our platform uniquely offers compliance status tracking abilities to alert you as your buildings come in or out of compliance with any applicable laws. 

InSite is also an Energy Star Service Provider Partner. We sync directly with Energy Star Portfolio Manager, which is the reporting platform states and cities use to capture data. We can see how complete your data is and, if you need help, assist you with data retrieval.

Bisnow: How does compliance fit in with a business’s environmental, social and governance policy roadmap?

Ford: One of the first things you need to do to create an ESG roadmap is get your arms around data, understand what you’re consuming. The process of collecting this data to get into compliance and understanding the requirements of the law can often fill in ESG knowledge gaps. This is doubly true for any laws that are carbon emissions-focused rather than energy. 

Bisnow: What are the key takeaways for a business that needs to get on top of compliance?

Segal: Give yourself plenty of time to meet the goals of your jurisdictions. If you know that you need to hit a certain deadline in five years, don’t wait four years to start thinking about it. Looking at everything holistically, bringing data in from engineers, property managers and everyone else can be time-consuming, but it will certainly help you work more effectively to meet objectives. 

Ford: It comes down to having not just data for your building’s consumption, but data about what options are available to improve the performance of your building and, of course, what this looks like in terms of carbon as well. What investments might you need to make to be compliant not just in five years but 10 years down the road? 

Also, when considering energy monitoring technologies or automation systems to support compliance tracking, make sure they’re backed and staffed by experienced building professionals. Investing in software or consulting on its own will likely leave you without efficient returns on your investments.

This article was produced in collaboration between InSite and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.