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Recent Development in Climate Change Legislation

The Climate Mobilization Act (CMA) codified New York City’s goal of reducing carbon emissions in its buildings sector by 30% by 2030 and 80% by 2050.  Under the CMA’s Local Law 97, most buildings above 25,000 square feet will be required to comply with new greenhouse gas emissions limits beginning in 2024, with stricter limits introduced in 2030.  Covered buildings face potentially significant annual fines if they do not meet these emissions targets.  Since the CMA’s passage in 2019, our co-op and condo clients have grappled with the daunting changes that many of their buildings will need to make – and pay for – in order to comply.

The CMA has now received its first significant legal challenge.  A coalition of building owners and residents has filed a lawsuit, Glen Oaks Village Owners, Inc. et al. v. City of New York, Index No. 154327/2022 (Sup. Ct. N.Y. Co.), seeking to invalidate Local Law 97 on constitutional grounds.  The plaintiffs argue, among other things, that New York City’s CMA is preempted by New York State’s climate legislation (known as the Climate Leadership and Community Protection Act).  The plaintiffs also assert that the CMA’s penalty fine scheme violates property owners’ due-process rights and that the fines constitute an unauthorized tax.  The City has moved to dismiss the lawsuit.  The parties will complete briefing the motion by October 2022, after which the court will issue a decision, which will then undoubtedly be subject to appeals. We will be monitoring litigation developments concerning the CMA.

We are also monitoring proposals that have been made to modify or delay some CMA requirements.  At the present time, it is unknown what changes if any, will be adopted, so co-ops and condominiums should be proceeding on the basis that they will need to comply with the requirements as they currently stand.

Separate from the emissions-reductions requirements, the CMA also instituted an energy “letter grade” program for buildings.  This is the source of the colored placards bearing a letter “A” through “D” that are now displayed in building lobbies throughout the City.  The goal of this legislation was to increase awareness of buildings’ energy practices and to spur building owners to adopt more energy efficiency measures.  For this purpose, the law has been an undoubted success.  Our co-op and condominium clients have frequently cited a desire to improve their buildings’ letter grade as one reason to pursue new energy efficiency projects.

However, the letter grades have also been the source of confusion, because a good or bad letter grade may not be correlated with a building’s energy usage or what the owner must do to comply with Local Law 97 and avoid fines.  As noted above, monetary fines for noncompliance with Local Law 97 are assessed based on the amount of a covered building’s carbon emissions, calculated from a formula based on the building’s energy usage and fuel source.  On the other hand, a building’s letter grade is derived from its “ENERGY STAR” score, which attempts to assess the building’s overall energy characteristics derived from, among other things, the building’s size, location, number of occupants, and nationwide peers.  The upshot is that a building’s letter grade is not predictive of the same building’s potential Local Law 97 fines.  A building with an “A” grade could still face significant fines, and a building with a “D” grade may actually be fully compliant with Local Law 97.  Rather than relying on these letter grades, co-op and condo boards concerned about potential fines should consult with their professionals.