Compliance Updates

Just in time. Days before Local Law 97 went into effect on Jan. 1, 2024, the Department of Buildings issued the final version of the second major rules package. These rules clarify how buildings can meet regulations during the first compliance period. “The original Local Law 97 had very few carrots in it. It was mostly sticks,” says William D. McCracken, an attorney at Moritt Hock & Hamroff. “These new rules create real incentives for buildings to pursue decarbonization retrofits.”

A good faith effort. For buildings struggling to comply with 2024-2029 emission limits, the rules package spells out what making a good faith effort is, how it can reduce penalties for noncompliance and what its requirements are. A good faith effort requires a decarbonization plan — which must be submitted by May 1, 2025 — and gives eligible buildings a two-year compliance cushion, until 2026. To avoid scenarios where buildings submit a decarbonization plan with no intention of following through, the rules state that the upgrades must be completed by May 1, 2027. Buildings must also have an approved application from the Department of Buildings by May 1, 2028, for the work needed to meet 2030 limits. “These requirements have real teeth,” McCracken says. If a building doesn’t follow through on its decarbonization plan, owners won’t be eligible for a penalty reduction and will face noncompliance fines going back to 2025.

Added incentive. Another important update is an emission credit for early adopters of electrification. “This incentivizes building owners to more aggressively decarbonize rather than wait until the last possible moment,” McCracken says. If a co-op or condo board replaces fossil fuel heating, cooling or hot water with electric heat pumps, it can bank the emission savings and apply them to future compliance periods. 

Marc Zuluaga, a co-founder of the climate technology firm Cadence OneFive, points out that buildings don’t need to convert entirely to heat pumps in order to realize these benefits. “Installation of heat pump equipment that offsets even a portion of domestic hot water energy use could be significantly rewarded under this framework,” he says.

Alan Burchell, the principal of the rooftop specialist firm Urbanstrong, notes that partial electrification — such as electrifying either the heat or hot water system — could result in compliance with emissions limits through 2035 without the need for additional credits. “The credits could still be relevant for buildings that require more time to fully electrify or have complex systems that make a complete transition challenging,” he explains.

Get out your tape measure. The new rules also clarify how gross floor area is measured, which is critical to calculating potential fines. Notably, the measurement now includes cellar space. The penalty for not filing a compliance report is set at 50 cents per square foot of the building’s gross floor area. Since LL97 applies to buildings of 25,000 square feet or more, the minimum penalty for failing to file a report would be $12,500 per month. This could stretch to a whopping $150,000 if a report is not filed for 12 months. Burchell points out that the fine is “significantly higher” than penalties for failing to file reports on lighting upgrades or electrical submeters, which are closer to $1,500 per year. The rules, however, do provide for a few special circumstances where filing extensions may be granted and penalties might be avoided if reports aren’t filed on time.

Prescriptive steps. For affordable housing and buildings where at least 35% of the apartments are rent regulated, the new guidelines provide clarity on how to comply with prescriptive energy measures by May 2025 or pursue alternative pathways to demonstrate compliance by 2030. “A 2030 pathway may prove beneficial to buildings that are seeking to better align upgrades with other planned work over a longer period of time,” Zuluaga says.