Local Law 97 Compliance With Affordable Units

New York City enacted Local Law 97 in 2019 to help reduce greenhouse gas emissions generated by buildings throughout the City.¹ The law is part of the City's Climate Mobilization Act, which aims to reduce building emissions by 40% by 2030 and 80% by 2050 from their 2005 levels.²It applies to buildings that are larger than 25,000 square feet on one tax lot, or multiple buildings on the same tax lot whose combined footprint exceeds 50,000 square feet.³ Covered buildings are required to meet annual emission reduction targets, and owners of non-compliant buildings will be subject to an annual penalty of $268 per ton of CO2 over the emissions limit for that given year.⁴ The emissions limits are phased in, but as the limits get more stringent in 2030, the penalties for non-compliant buildings could reach hundreds of thousands of dollars annually.⁵

As commercial real estate owners around the City prepare for compliance with Local Law 97, there are some key nuances via Article 320 and Article 321(a) of the law which apply to owners of buildings with affordable housing units that may make compliance less costly, which are summarized below. Owners of affordable buildings should note that some of the exceptions require registration this calendar year, which Goulston & Storrs attorneys can help with. The first compliance period began on January 1, 2024, with the first annual reports due on May 1, 2025, for the 2024 calendar year.

Buildings With Less Than 35% Affordability – Article 320

Article 320 of Local Law 97 applies to the following types of buildings:

1. Buildings with at least 1 unit but fewer than 35% of the total units in the building subject to rent regulations;
   
2. Buildings without rent-regulated units but with at least one income-restricted unit; and
   
3. Mitchell-Lama buildings with no units participating in a federal project-based housing program.⁶

For buildings in category 1, below the 35% rent-regulated threshold, owners can delay compliance until 2026, after which the building must meet all subsequent emissions limits, if they submit a Compliance Pathway Initial Report by May 1, 2027.⁷ Buildings in categories 2 and 3, including Mitchell-Lama buildings or those with an income-restricted unit, are eligible to delay compliance until 2035, at which time they must meet all subsequent emissions limits. To be eligible for this delay in compliance, the owners of these buildings must submit a Compliance Pathway Initial Report by May 1, 2036.⁸

Buildings that are seeking compliance under Article 320 can also mitigate any potential penalties by: 1) receiving an extension for filing their report, 2) demonstrating the building has experienced damage from an unforeseen disaster that has prevented compliance with the law, or 3) demonstrating good faith efforts to comply. To show good faith efforts, the building owner must submit a building emissions report for the previous calendar year, upload the building's bench-marking data from the previous calendar year, submit an attestation that both lighting upgrades and electrical sub-meters have been installed in compliance with Local Law 88, and do any one of the following:

• Submit a decarbonization plan with an energy audit, major equipment inventory, and list of alterations needed for compliance by May 1, 2025, that will bring the building into compliance with its 2024 emission limits by May 1, 2027, at the latest, and demonstrate work for 2030 compliance is underway by May 1, 2028;
  
• Demonstrate a DOB-approved application and timeline for the work to comply with emission limits;
  
• Demonstrate the building is actively undergoing work for electrification readiness;
  
• Demonstrate that the building was previously under the emissions limit for the previous reporting year;
  
• For owners of a critical facility (defined as "ones that are critical for human life and safety, such as hospitals or vaccine clinics."), demonstrate that paying the penalty fine will impact its operations; or
  
• Submit an attestation form that the building has applied for or received an approved adjustment by the DOB.⁹

More Than 35% Affordability - Article 321

Article 32 of Local Law 97 allows for the following types of buildings to achieve compliance under separate standards: 1) buildings in which more than 3% of the units are rent-regulated (regardless of whether they contain units with income restrictions), 2) HDFC cooperatives, and 3) NYCHA and Section 8 buildings.¹⁰ To be eligible for compliance under Article 321 of Local Law 97, the building must submit a report by a registered design professional by May 1, 2025, stating that either: 1) the building's annual emissions already do not exceed the 2030-2034 carbon level limits, or 2) the building has implemented applicable Prescriptive Energy Conservation Measures (PECMs) by December 31, 2024.¹¹ While there are thirteen total types of PECMs, which are listed on the City's Local Law 97 Compliance Pathways 101 Guide, they are largely broken into five different categories where buildings can install improved systems to reduce their emissions: 1) Heating & Hot Water, 2) Heating, 3) Lighting, 4), Envelope, and 5) Ventilation.¹²

Buildings that are eligible under Article 321 and do not submit emissions reports or elect to utilize PECMs by the May 1, 2025, deadline are liable for a fine of up to $20,000.¹³ The fines can be mitigated, however, by any of the following:

1. Demonstrating an unexpected or unforeseen event, such as a hurricane or fire;
   
2. Demonstrating that the building is part of an Eligible Energy Conservation Project, which applies to buildings that received funding from a housing agency to complete an Energy Conservation Project as of November 15, 2019; or
   
3. Participating in a Mediated Resolution with the City, which requires the building owner to submit the following by May 1, 2025:
   
4. An attestation that the building is not in compliance;
   
5. The previous year's bench-marking of emissions; and
   
6. A "Compliance Plan" that either details how a building will meet 2030 carbon limits by 2030 or demonstrates that work is underway to implement the applicable PECMs and a date by which the remaining work will be complete.¹⁴

Conclusion

New York City's Local Law 97 is one of the most ambitious Climate Change legislations in the country, and building owners throughout the city will have to adjust their buildings to meet the new emissions requirements. While the law imposes strict emissions limits on all buildings, buildings with rent-regulated and affordable units have different paths to compliance via the law's Article 320 and 321 pathways. However, they should be prepared to submit reports to the City by May 1, 2025, to be eligible for the different pathways to compliance.

Goulston & Storrs attorneys can help building owners determine their eligibility and ensure their compliance with Local Law 97's different programs.

Footnotes

1 https://www.urbangreencouncil.org/what-we-do/driving-innovative-policy/ll97/#:~:text=In%202019%2C%20New%20York%20City,nearly%2050%2C000%20properties%20across%20NYC ("In 2019, New York City enacted Local Law 97 to drive deep emissions cuts from buildings, which are responsible for more than two-thirds of NYC's greenhouse gas emissions. The law places carbon caps on most buildings larger than 25,000 square feet—covering nearly 50,000 properties across NYC."

2 https://www.urbangreencouncil.org/wp-content/uploads/2023/02/LL97-Summary_2.8.2023.pdf ("Requires 40 percent citywide emissions reductions by 2030 from a 2005 baseline.")

3 https://www.nyc.gov/site/buildings/codes/ll97-greenhouse-gas-emissions-reductions.page ("The square footage of a building, as it appears in the records of the NYC Department of Finance (DOF), determines whether a building may be subject to LL97 compliance. LL97 covers: a building that exceeds 25,000 gross square feet, two or more buildings on the same tax lot that together exceed 50,000 square feet, two or more condominium buildings governed by the same board of managers and that together exceed 50,000 square feet.")

4https://accelerator.nyc/ll97#:~:text=Local%20Law%2097%20establishes%20carbon,2024%20energy%20usage%20and%20emissions. ("Covered buildings that exceed annual emissions limits will face an annual financial penalty of $268 per ton of CO2 equivalent over the limit based on 2024 energy usage and emissions.")

5 https://www.ny-engineers.com/blog/how-much-will-my-building-be-charged-for-emissions-under-local-law-97

6 Ibid

7 Ibid ("Article 320 2026 Compliance Pathway Initial Report due May 1st, 2027")

8 Ibid ("2035 Compliance Pathway Initial Report due May 1, 2036")

9 Ibid (from the "How can I mitigate the penalty fees if I am making progress towards complying, but will not be able to meet my deadline?" section)

10 https://www.herrick.com/publications/dept-of-buildings-adapts-second-set-of-regulations-for-administration-of-local-law-97/ ("Local Law 97 sets forth different rules for compliance with carbon emission reduction mandates for three separate categories of affected buildings than for the remainder of affected buildings")

11 https://accelerator.nyc/sites/default/files/2022-09/NYCA_LL97_Prescriptive_Pathways_Handout.pdf

12 https://be-exchange.org/wp-content/uploads/2024/01/beex_LL97_2pager_FINAL.pdf

13 https://be-exchange.org/wp-content/uploads/2024/01/beex_LL97_AH_FAQ_FINAL.pdf ("Failure to both submit a report and comply with either one-time compliance option is cause for a civil penalty of $20,000 per covered building")

14 https://www.nyc.gov/site/hpd/services-and-information/ll97-guidance-for-affordable-housing.page (Article 321 Penalties and Rules section)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.