Can Co-Ops Survive New York’s Local Law 97?

In New York, Local Law 97 is reshaping how property owners and occupants think about energy use and sustainability. However, this legislation presents both challenges and opportunities for co-op buildings. As such, many people are asking, “Can co-ops survive under the constraints and requirements of Local Law 97?”

Keep reading and explore what Local Law 97 entails, how it specifically impacts cooperative housing (co-ops), and what steps co-op boards and shareholders should consider as they navigate the road ahead. Additionally, learn more about the importance of seeking knowledgeable legal guidance to help ensure compliance and protect co-op interests.

What Is Local Law 97?

New York City’s Local Law 97 (LL97) is a sweeping piece of legislation aimed at reducing carbon emissions in buildings across the city. Passed in 2019 as part of the city’s Climate Mobilization Act, the law targets one of the largest sources of greenhouse gas emissions in the city: its buildings, which account for nearly 70% of the city’s carbon footprint. Given the city’s dense urban environment and towering residential and commercial properties, the ambitious goal of reducing the city’s greenhouse gas emissions by 80% by 2050 is set.

LL97 applies to buildings over 25,000 square feet, including residential, commercial, and mixed-use properties. Measured in metric tons of carbon dioxide equivalent (CO2e) per square foot, the limits on greenhouse gas emissions are set to progressively tighten over time.

Buildings that fail to comply with the emissions caps will face significant fines, potentially as high as hundreds of thousands of dollars annually for larger properties.

The Impact of Local Law 97 on Co-Ops

Co-ops are uniquely structured in that the shareholders (residents) collectively own the building and are responsible for its management and maintenance through the co-op board. As such, the financial burden of complying with LL97 through energy-efficient upgrades will fall directly on the co-op and, by extension, its shareholders. While compliance with the law is mandatory, the path to achieving compliance is fraught with financial and operational challenges that co-op boards must carefully navigate.

Let’s examine these challenges a bit deeper:

Financial Implications

One of the most significant challenges for co-ops under New York’s Local Law 97 is the cost of compliance. Many older buildings were not designed with modern energy efficiency standards in mind, and retrofitting these buildings to meet the law’s emissions requirements can be expensive. Common upgrades that co-ops may need to consider include:

• Installing energy-efficient windows and insulation
• Upgrading HVAC systems to more energy-efficient models
• Switching to cleaner energy sources such as natural gas or renewable energy
• Implementing advanced energy management systems that monitor and optimize energy usage

While these upgrades can improve the building’s overall energy performance, they also come with substantial upfront costs. Co-ops may need to raise funds through increased maintenance fees or special assessments to finance the necessary improvements. This can be a point of contention among shareholders, particularly in co-ops with limited financial reserves or where shareholders may not have the financial flexibility to absorb additional costs.

Compliance Deadlines and Penalties

Local Law 97 has strict compliance deadlines, with the first major benchmark enacted for 2024-2029. Co-ops that do not meet the emissions caps by then will face penalties based on how much they exceed their emissions limits. These penalties could add a financial burden on top of the already costly upgrades. For example, a building that exceeds its emissions limit by 10 metric tons could face a fine of $50,000 or more per year.

Given the potentially severe financial penalties, co-ops must begin planning now to assess their building’s current energy performance and identify the most cost-effective upgrades. Waiting too long to address these issues could lead to rushed, inefficient decisions and higher costs down the line.

Concerns With Governance and Decision-Making

Another unique aspect of co-ops is the governance structure, where major decisions regarding building management and upgrades must be approved by the co-op board, often with input from shareholders. This can sometimes slow down the decision-making process, especially when there are differing opinions among shareholders about the best course of action.

For example, some shareholders may prioritize short-term cost savings and be reluctant to approve costly energy-efficient upgrades, while others may focus on the long-term benefits of compliance and reduced emissions. Co-op boards will need to strike a balance between these competing interests and find a solution that ensures compliance without causing undue financial strain on shareholders.

Effective communication between the board and shareholders is essential to gaining support for necessary upgrades. Co-op boards should provide clear information about the requirements of New York’s Local Law 97, the financial implications of compliance, and the potential penalties for non-compliance. In many cases, hiring an expert energy consultant to evaluate the building’s current emissions and recommend targeted improvements can help boards make informed decisions and build consensus among shareholders.

So, Can Co-Ops Survive Local Law 97?

The short answer is yes—co-ops can survive New York’s Local Law 97, but it will require proactive planning, financial investment, and strategic decision-making. While the challenges are significant, there are also opportunities for co-ops to not only comply with the law but also improve the energy efficiency and sustainability of their buildings. These improvements can lead to long-term cost savings in the form of reduced energy bills and potentially higher property values as buyers increasingly seek out energy-efficient homes.

To successfully navigate the requirements of Local Law 97, co-ops will need to:

• Assess Their Current Energy Usage and Emissions: The first step is understanding where the building currently stands in relation to the law’s emissions limits. This will involve conducting an energy audit or working with an energy consultant to identify the most cost-effective upgrades.
• Develop a Long-Term Compliance Plan: Co-ops should develop a clear plan that outlines the necessary upgrades, estimated costs, and a timeline for implementation. This plan should take into account the law’s future emissions limits to ensure the building remains in compliance beyond 2024.
• Secure Financing for Upgrades: Many co-ops may need to raise funds to pay for energy-efficient upgrades. Boards should explore all available financing options, including government incentives, loans, and grants aimed at helping buildings comply with LL97.
• Communicate Effectively With Shareholders: Ensuring transparency and providing clear, detailed information about the impact of LL97 will help garner shareholder support for necessary upgrades.

While the road ahead may be challenging, co-ops that take a proactive approach and invest in sustainable building practices will be well-positioned to not only survive but thrive under Local Law 97.

The Importance of Legal Guidance

Given the complexity of Local Law 97 and its far-reaching implications for co-ops, it’s essential for boards to seek the guidance of legal professionals who are familiar with the intricacies of New York property regulations and the evolving landscape of building emissions laws, like the attorneys at Belkin Burden Goldman, LLP. These legal experts can help co-op boards understand their responsibilities under LL97, navigate the compliance process, and avoid potential fines and penalties.

In addition to helping boards understand the law, legal professionals can provide valuable advice on structuring contracts with contractors, securing financing for building upgrades, and ensuring that the interests of all shareholders are protected throughout the process. BBG’s experienced team offers legal interpretation and comprehensive support throughout the entire compliance journey. This includes advising boards on how to structure contracts with contractors, finding financing options for necessary upgrades, and ensuring shareholder interests are fully safeguarded.

For co-ops dealing with the challenges of Local Law 97, having our seasoned legal experts by your side is an invaluable asset.

The Bottom Line

Local Law 97 presents a new frontier for co-ops in New York City, with significant financial and operational challenges. However, by taking a proactive approach to compliance, investing in energy-efficient upgrades, and seeking the guidance of legal professionals, co-ops can survive while contributing to the city’s broader goals of sustainability and carbon reduction. The path to compliance may be difficult, but the long-term benefits of a more energy-efficient and environmentally friendly building are well worth the effort.

Confidently Navigate Local Law 97 With Belkin Burden Goldman

Ensure your co-op’s future by partnering with BBG for expert legal guidance on Local Law 97 compliance. Contact us today!