Peter Lehr
Director of Property Management
Kaled Management

Paying the price. We manage a seven-story, 100-unit prewar building that needs a lot of work on its infrastructure to comply with the Climate Mobilization Act. Unless it makes substantial energy-saving investments, it’s looking at annual fines of about $31,000 starting in 2024, and then from 2030 through 2034, fines of $97,000. 

Cost analysis. We’re taking a hard look at how their boiler plant is operating. We’re also investigating running the building on gas. But I think their biggest challenge is that they’ve never done a window upgrade. They still have single-pane windows, and no matter how much tape or window film you put on them, you still get a lot of air leakage, which causes the boiler to run nonstop to heat the building. Replacing the windows is going to cost somewhere north of $1.5 million. So the question the board is grappling with is: Does it keep paying the penalties, or does it invest the money to improve the building’s energy efficiency? Through 2034 the penalties will cost this co-op $512,000. That’s a lot cheaper than the energy investments it needs to make to meet its carbon-emission goal.

Ripple effect. The question is really what’s the board’s fiduciary responsibility? Does it invest the money for the environment, or pay the penalties because it’s a cheaper alternative? But the board has to consider that at some point it will run out of runway, and the fines will become more costly. Even if the board does nothing and just pays the fines, it should be raising maintenance every year just to stay even. But it’s a minefield, because you have to ask how having these fines on the record will affect the market value of the apartments. Every board has to look at information that’s presented to it by its management company and make a decision. But I believe that regardless of your financial position, boards should be considering doing their best to reduce their consumption because it will save wear and tear on equipment, like the boilers, and keep them going for as long as they possibly can.