California continues progressing and preparing for a future of reliable energy for all of us living here today as well as for future generations of the golden state. Going forward, both building owners and tenants need to consider the effects that Title 24 has on leases. Effects that are both beneficial and have cost implications. An issue becoming more common begins when a tenant requests changes or improvements involving Title 24 compliant costs and benefits.
Who Pays the Costs and Who Receives the Benefits?
To some extent, this involves whether the owner or the tenant will reap the financial benefits. Today, it’s plainly clear that being Title 24 compliant will be required for all indoor spaces, whether these are being newly built, or renovated. Commercial leases come in many forms with some tenants paying the utilities while others have utility costs paid for by the building owner. There are also combinations where utility costs are shared with multiple tenants paying for space they occupy and the owner paying for common areas.
K2D Consulting Engineers are not property managers but our complete understanding of Title 24 compliant requirements provides insight about how benefit/cost sharing might work. Some owners have tried to simplify the issue by using “As Is” clauses. However, that probably won’t be enough to release owners from the responsibility of compliance costs. Rather, it is better to agree upon responsibilities and cost savings before it becomes an issue. This is only possible when you look at the dollars being saved, who is paying for improvements, and who is reaping the savings.
Situations are unique but for example, if an owner pays for Title 24 compliant renovations when the tenant is responsible for utility bills, the owner deserves fair compensation based on the tenants’ cost savings. Also, the tenant cannot overlook the public goodwill that comes by operating a business in a socially responsible space. Again, the owner deserves compensation for his or her role in providing the energy-efficient space.
Similarly, there are Title 24 rebates and incentives available from local utilities. Some of these benefit the owner rather than the tenant. These savings should at least be partially passed on to the paying tenant. Beyond offering Title 24 engineering services, K2D Consulting Engineers can help break down the costs and savings by square footage to be applied monthly over the expected time of energy savings and cost recovery. This can be a foundation for developing fair and equitable Title 24 complaint leases.
Title 24 Compliant
Improving energy efficiency, saving money, and improving air quality are the main purposes of Title 24. The 2019 requirements are more stringent but the basic benefits remain:
- Lower energy costs.
- Less energy consumption.
- Reliable delivery of services (infrastructure).
- Increased comfort.
- Environmental improvements.
Where do these benefits come from? Many of the 2019 changes to Title 24 involve interior lighting. Key changes include:
- Lighting Power Density (LPD) is completely based on using LED lighting.
- Solar photovoltaics (PV) are now mandatory on all new residential properties in California.
- Title 24 now covers more building types. Hospitals, assisted living facilities, and nursing homes must now be Title 24 compliant.
- Restrooms in commercial and similar buildings are required to have occupancy sensor controls installed.
- Automatic daylighting must have controls meeting specific settings, calibration, and accuracy.
- Changes to LPD requirements involve a tradeoff between the windows to insulated walls ratio or a more efficient HVAC system.
- Some walled-off spaces as small as 100 square feet must have adjustable controls enabling lighting levels to be increased and decreased.
California is a world leader in energy efficiency with decades of experience and progress. Because of this, we know that Title 24 compliance transforms today’s costs into tomorrow’s savings both for money and lower energy consumption. In fact, code changes can help reduce engineering and equipment costs as well as speed up payback and can reduce ROI time by 50% or more for a typical building. Energy retrofit projects are now less expensive, faster, and easier. With these changes, more are being completed. All of us are doing our part to help California lower its energy consumption to meet the net-zero energy initiative.