The Department of Buildings (DOB) released the second phase of draft rules for NYC Local Law 97, and it includes key details for penalties, good faith efforts, early electrifiers, prescriptive measures, and more. DOB will accept public comments on the draft rules through October 24th and then will revise and finalize the new rules in January 2024.
We’ll break down the new rules below, but please note that because these rules are still in draft form, they are subject to change following the comments process.
Penalties and Mitigation Options Differ by Pathway
The draft rules include important information about what properties can do if they are not on track to comply with LL 97 on time. However, these options vary depending on your compliance pathway:
- Standard Pathway
- Prescriptive Pathway
- 2026 Pathway
- 2035 Pathway
Not sure where you fall? Check out our earlier blog post which breaks it down here. Today we’re talking specifically about Standard Pathway, 2026 Pathway, and 2035 Pathway. The Prescriptive Pathway for certain affordable housing and houses of worship will have different penalties and extensions, stay tuned for a forthcoming blog post on that.
Penalties, Good Faith Efforts, and Other Extensions for Standard Pathway, 2026 Pathway, and 2035 Pathway
LL 97 is the most complex and ambitious mandate many in the real estate industry have seen to date, and DOB understands that some buildings might not be ready to comply with the law on time. The draft Rulemaking #2 takes this into consideration and explains the applicable penalties, and also what special options are available if you can’t get there. However, despite what you may have heard in the press, none of the options will be easy and we strongly suggest owners and managers get started early!
There are numerous types of penalties (fines) that DOB can leverage if you don’t comply successfully with the law:
- If you don’t submit anything, you could face a penalty of $0.50/sq. ft. per month
- If you attempt to comply, but your emissions are over the target for your property, the penalty is $268 multiplied by the emissions over your limit
- If you make a false statement to DOB, you could face a $500,000 penalty
For buildings that need more time, there are two types of extensions allowed under the law. Both can be filed only one month ahead of the deadline, so that means April 2025 for buildings seeking extensions before the first filing deadline. Here are the available options:
- Your service provider needs more time: If your service provider needs more time to prepare your reports for DOB, this extension can give them more time to file. To be eligible, you must have a contract signed with your service provider (also called a Registered Design Professional under the law) by February 1, 2025. If your extension request is approved, your service provider will receive an extra four months to submit the required documentation.
- You believe your building is not “Covered”: This extension option is for buildings that are on the Covered Buildings List (CBL), but you believe there was a mistake with your square footage that would take your building off of the LL 97 CBL. If so, you must initiate this process with the Department of Finance, and the DOB will review the outcome.
The following options are for penalty mitigation, meaning that these are not exemptions! If you successfully meet the criteria for one of the three, DOB may reduce your penalty, and they will review each one case-by-case. There is currently no guarantee that DOB will eliminate your penalty entirely, even if you meet all the criteria, DOB may still decide to force you to pay a portion of the penalty you owe.
- Unforeseeable Events: This option is for properties that have had disasters like fire and flood at the building that prevented your ability to comply with the LL 97 requirements.
- Good Faith Efforts: Most properties looking for flexibility in their compliance planning will find options here under the Good Faith Effort section. To qualify, you must complete all of the items on the top and choose at least one item from the bottom.
- Mediated Resolution: The Mediated Resolution is a process by which the building owner and DOB can craft a custom compliance plan to avoid a penalty. This option will require the building to eventually get into compliance with the law, but with a customized pathway to do so. Owners and managers should note, however, that if they agree to Mediated Resolution and don’t comply with the requirements set out in their plan, DOB has the ability to fine them retroactively for all the years they were out of compliance.
Credits for Early Electrifiers
Most buildings subject to LL 97 will not face penalties until 2030, and probably won’t make upgrades until then. However, the DOB recognizes the benefits of electrification and wants to motivate owners to electrify buildings early, and also reward owners who have made the switch already. To do this, they devised a new Beneficial Electrification Credit. This credit offers qualifying properties a reduced electricity coefficient for the electricity consumed by heat pumps and other eligible equipment. So instead of having to use the coefficient for electricity produced by the grid, these properties would get a special negative coefficient that would result in lower emissions and penalties.
The full eligibility requirements are somewhat complex, but the key takeaway is that there are more benefits for properties that electrify by 2026, and limited benefits for properties that electrify from 2027-2029.
Have questions? Contact our team.
Our team is working hard to plan and assess possible services to assist you with your LL 97 penalty mitigation efforts, stay tuned for more information in the coming months. In addition, blog posts on Prescriptive Pathway for affordable housing and houses of worship, along with Local Law 88 for lighting and submetering, are coming soon!
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Disclaimer: All pathway and other guidance provided by Bright Power is based on the best available information from NYC Department of Buildings (DOB) Local Law 97 guidance and the housing classifications provided by the client. Bright Power is not responsible for any incorrect pathway and/or other determinations. Questions about pathway eligibility should be referred to DOB and/or the applicable affordable housing agency.