Many commercial real estate professionals and investors believe that San Francisco's recently adopted San Francisco Green Building Code ("Ordinance"), which is considered the most comprehensive regulation of its kind in the United States, will lead to similarly strict laws and regulations throughout the country. The effort toward creating environmentally-friendly buildings and work places has now evolved from a wish list item on a company's mission statement to a legitimate element of traditional cost-benefit analysis and the underlying value of real estate. This evolution has prompted local jurisdictions to take appropriate legislative action.
The Ordinance, which is Chapter 13C of the San Francisco Building Inspection Commission Codes, requires new buildings constructed in the City to meet green building standards developed by the City's Green Building Task Force. The Ordinance focuses on water and energy conservation, recycling and reduction of carbon emissions. The Ordinance applies to most buildings in the City, including residential projects of all sizes, new commercial buildings over a certain size, and renovations of large commercial spaces. The City will phase in the Ordinance requirements through 2012, becoming increasingly stringent over that time. Projects will be evaluated on a point system, with credit given for materials used in the building, the location of the building site and water and energy efficiencies.
Since 2004, the City has required all new construction or major remodels (over 5,000 square feet) to achieve a U.S. Green Building Council Leadership in Energy and Environmental Design ("LEED") Silver rating, and since 2006, the City has been creating incentives by expediting the permitting process for private projects meeting LEED Gold rating criteria. LEED certification for a building is achieved by obtaining a certain number of credits or points based on reaching certain defined green building milestones in the areas of energy consumption reduction, water use reduction, water efficiency and similar conservation goals; the higher the points, the higher the rating. For new construction, the LEED rating system is as follows: Certified (26-32 points), Silver (33-38 points), Gold (39-51 points), and Platinum (52-69 points).
The LEED rating system will continue to play a major role under the Ordinance. Specifically, the City will continue to evaluate "large commercial buildings" (i.e., a commercial building that is 25,000 gross square feet or more, or is a high-rise building) residential and commercial buildings under the LEED rating system, while "mid-size residential buildings" (i.e., a residential building that has five or more dwelling units and is not a high-rise building) and "small residential buildings" (i.e., a residential building that has four or fewer dwelling units and is not a high-rise building) will use the GreenPoint rating system, which is less stringent.
Generally, the Ordinance applies to commercial development over 5,000 square feet, residential buildings 75 feet in height or taller, and renovations over 25,000 square feet. For example, while new large commercial buildings will need to demonstrate compliance with a LEED Silver rating starting in 2009, the requisite rating level will become Gold in 2012. The Ordinance will ultimately require the equivalent achievement of a LEED Gold rating for all new construction in the City.
Smaller residential developments will be required to demonstrate compliance with certain GreenPoint Rated levels, but will not be subject to the more stringent requirements applicable to commercial projects. Beyond conformity with the existing LEED and GreenPoint rating systems, the Ordinance makes unique requirements on developers in the City. Specifically, where a project involves demolition of an existing historical structure and construction of a new building in its place, the various requirements for the new construction become more stringent than they would had the new project not involved demolition. The Ordinance requires developers of commercial development and high-rise residential projects to meet specified reductions in potable water used for landscaping, construction debris diversion and overall water use, whereas mid-size and large commercial buildings, beginning in 2012, must submit documentation to verify on-site renewable energy generation or purchase of green energy credits.
Finally, the Ordinance requires a project applicant to demonstrate compliance with its requirements before the City issues a building permit. The failure to build in accordance with approved plans will result in City action to abate noncompliant structures pursuant to §1308C, the Ordinance's enforcement provision, and §102A of the San Francisco Building Inspection Commission Codes. The Ordinance's enforcement provision also authorizes the Director of Building Inspection to require other reasonable measures to mitigate the failure to fully comply with the requirements. Notably, the Director has authority to grant exemptions for hardship or infeasibility.
If you have any questions regarding any real estate legal matter, in San Diego please contact Brian Frasch (litigation) at bfrasch@gordonrees.com or Eric Young (transactions) at eyoung@gordonrees.com or call us at (619) 696-6700. This Real Estate Update was written by Aristotle Evia, LEED® AP and David Heckadon, LEED® AP of the firm's San Francisco Office.They can be reached at aevia@gordonrees.com or dheckadon@gordonrees.com and at (415) 986-5900.
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