Point-of-Sale Efficiency Upgrades and Audit Requirements

 

Policy tools described in this section use the sale of a new or existing home as a “trigger” for a range of energy-efficiency-related requirements. Whether the goal is to catalyze upgrades in older homes or to promote greater consumer awareness of building performance (which may indirectly lead to more energy-efficiency upgrades), these tools are activated when affected properties change hands. It is important to note, however, that their success depends in large part on proper enforcement. As with many of the tools discussed in this section, simply having a policy on the books is not enough — communities must also have the administrative capacity to verify that upgrades have been completed.

Click on the links below to learn more about point-of-sale efficiency upgrades and audit and disclosure requirements:

  • Point-of-sale efficiency upgrades
  • Audit and disclosure requirements

Point-of-sale efficiency upgrades

Research shows that older homes tend to be much less energy efficient than newer structures, which may have been built to higher standards in order to comply with an energy code or may otherwise benefit from advances in building technology. Point-of-sale efficiency upgrades represent one tool for addressing this imbalance and bringing existing single-family homes or multifamily properties closer to compliance with state or local building energy codes, which typically apply only to new construction or substantial rehab projects. In brief, point-of-sale efficiency upgrade policies “[require] compliance with certain energy (and sometimes water) efficiency requirements before buildings can be sold, transferred from one proprietor to another, or renovated beyond a predetermined total permit value.” [1]

To mitigate the financial burden imposed on owners of eligible properties, many policies include a cost ceiling. With the ceiling in place, requirements may be satisfied once homeowners or property owners have completed upgrades that are valued up to a specified dollar-amount, or that are equivalent to a certain percentage of the building’s value. For example, Burlington, Vermont’s Residential Rental Housing Time of Sale Energy Efficiency Ordinance [PDF] limits the total cost of required improvements to the lesser of three percent of the sale price of the property or $1,300 per rental unit. After completion of the upgrades, an approved inspector typically conducts an audit to ensure that the improvements have been made. (Learn more about home energy audits.)

Realtors and other stakeholders have raised concerns about point-of-sale requirements, arguing that mandated upgrades and post-improvement audits may complicate and add to the cost of real estate transactions. Supporters counter that any costs associated with energy audits or upgrades would be recouped by savings on utility bills, and that point-of-sale upgrade requirements present one of the only opportunities for reaching the existing stock.

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Solutions in Action

Berkeley, California uses a Residential Energy Conservation Ordinance (RECO) to improve the energy efficiency of a spectrum of existing residential properties — including single-family homes, multifamily buildings (rental and owner), live-work spaces, and residential areas of mixed-use developments — as they come on the market. Improvements valued at or above $50,000 also trigger RECO requirements.
As currently written, sellers of properties that do not meet the standards described in the Ordinance must complete items from a list of energy conservation measures prior to the sale of the home or property, up to a maximum expenditure of 0.75 percent of the final sale price for properties with 1-2 units, or $0.50 per square foot for properties with 3 or more units. Alternatively, the buyer may agree to take responsibility for implementing the upgrades within one year of sale.

Proposed changes to Berkeley’s RECO would offer two paths to compliance: (1) by completing a basic improvement package, developed using a building sciences approach and linked to a set of incentive programs; or (2) by obtaining a HERS rating for the home. Although this second approach does not yield any direct energy-efficiency savings, it will enable the city to develop a baseline measure of energy performance in among affected properties. Click here to find Berkeley’s ordinance (navigate to Chapter 19.16).

Audit and disclosure requirements

Similar to point-of-sale upgrade ordinances, audit and disclosure requirements are triggered by real estate transactions. However, these policies fall short of calling for energy-efficiency upgrades, instead promoting increased efficiency by empowering prospective buyers to obtain more complete information about home operating costs. Audit and disclosure policies help buyers to make a more informed choice about their prospective purchase by requiring sellers to make available the results of a residential energy audit or other standardized information about home energy-efficiency performance.

In some communities, audit and disclosure requirements provide a compromise when proposals to enact point-of-sale upgrade ordinances meet with overwhelming resistance. For example, when efforts to adopt an upgrade requirement faced opposition in Austin, Texas, the city instead enacted an ordinance requiring the completion of a Residential Energy Audit. [2] According to the ordinance, audits must be undertaken by a city-certified building performance analyst for most 10+-year-old multifamily developments and prior to the sale of most 10+-year-old homes. Prospective buyers and renters must have the opportunity to review audit results prior to the time of sale or signing of a lease; a copy of the audit must also be submitted to the municipality. The disclosure form includes information on potential energy costs, as well as anticipated savings that would result from energy-efficiency measures, and remains valid for ten years. See Austin’s ordinance here. [PDF]

While energy audit and disclosure requirements do not impose any obligation on the buyer or seller to undertake energy-efficient improvements, they do help to elevate awareness of home energy consumption and enable families to choose homes fit within their budget over the long-term. To the extent that homeowners and renters begin to consider and prioritize efficiency when making housing choices, these policies can also help to create demand for energy-efficient homes. Learn more about efforts to integrate energy efficiency into the home-selling process by including home performance information in MLS listings.

Solutions in Action

In January 2010, Seattle passed an ordinance requiring the owners of nonresidential and multifamily buildings with five or more units to measure and report energy-efficiency performance data. Affected owners of buildings that will be occupied by January 1, 2011 have until April 1, 2012 to submit an initial assessment of the building’s energy performance to the City’s Planning and Development Department. (Buildings that will be occupied subsequent to January 1, 2011 have one year from the date of initial occupancy to submit the benchmarking report.)

Building owners are also responsible for maintaining records on energy consumption data for the previous 12 months, and must submit an updated benchmark report on an annual basis. The ordinance calls for tenants to provide necessary information in the event that it may not otherwise be obtained by the building owner. Both owners and tenants may be subject to penalties for failure to comply with the ordinance. Click here to leave this site and view the ordinance.

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Point-of-sale efficiency upgrades and audit requirements provide a mechanism for reducing energy use in existing homes when they are put up for sale

Other pages in this section:

Energy codes, similar to traditional building codes, establish minimum requirements and guidelines for the performance of new construction and existing homes undergoing substantial renovation

 

Energy rating systems and green building rating tools complement energy codes but encompass additional sustainability measures that may result in greater energy savings

 

Energy saving and emissions reduction laws create incentives for utility companies to implement energy-saving measures, including home retrofits

 

Other incentive-based programs, including density bonuses and rebates on the purchase and installation of energy-efficient products, reward developers and residents that take steps to reduce energy consumption

 

[1] Regulatory Tools for Green Building. Web Site. Playbook for Green Buildings + Neighborhoods.

[2] Austin Energy Efficiency Retrofit Resolution passed Nov 6, 2008. Localism.com.

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