If you’re buying or selling a building, you know that due diligence is critical. It’s the moment where assumptions get tested, numbers get verified, and hidden liabilities are supposed to come to light before anyone signs on the dotted line.
The trouble is, many companies have not updated their due diligence processes to account for building performance policies. These laws fundamentally shift expectations for existing building energy use by setting standards for efficiency, and sometimes greenhouse gas emissions. Without factoring these requirements into the larger business decisions, you may have significantly more risk than your standard analysis shows.
Key Takeaways at a Glance
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Where it applies: 8 states, 50 cities, and 1 county already have a building performance policy on the books, with more on the way.
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What’s at risk: Steep noncompliance fees, unbudgeted capital investment, and reputational damage if a policy requirement is missed.
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Start with title: Confirm whether the asset sits in a BPS jurisdiction, and whether it needs an Alternative Compliance Path submission.
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Go beyond utility bills: Request read-only access to the ENERGY STAR Portfolio Manager account, and require its transfer at closing.
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Dig into the environmental picture: Bundle an energy audit into your inspection, and pull the property condition assessment, certifications, and a climate risk analysis.
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Bottom line: These steps are low cost, don’t need to slow down your process, and can save millions of dollars down the road.
A fast-growing regulatory landscape
Right now, there are 8 states, 50 cities, and 1 county with some form of building performance policy on the books—and many more jurisdictions have committed to introducing similar legislation in the near future.
If you don’t collect information related to these requirements—and don’t have a clear understanding of how the building actually performs against them—you could end up facing steep noncompliance fees, unbudgeted capital investment to avoid penalties, or reputational damage.
So, the question becomes: what do you need to know before you purchase an asset to reduce and mitigate this risk? Below are some key steps to build into your existing due diligence checklist categories and process.
Legal and title survey
Start with the basics: is the asset located in a jurisdiction that either has or is planning to implement a Building Performance Standard?
If the answer is yes, dig one level deeper; does the asset have a unique Alternative Compliance Path requirement that calls for a dedicated, asset-specific submission to the jurisdiction? Confirm this detail early to avoid scrambling to meet a compliance deadline you didn’t know existed.
Financial Review
Most teams already request copies of utility bills during financial due diligence. That’s a good start, but it isn’t enough on its own.
It’s equally important to request “Read Only” access to the ENERGY STAR Portfolio Manager (ESPM) account for the asset, if one exists. This gives you visibility into the ENERGY STAR score—a useful proxy for the asset’s efficiency—and lets you assess the accuracy of the data.
A note for closing: it’s critical that the seller transfers the ESPM account to the buyer as part of closing. Add this to your closing documents requirements now, so it doesn’t get missed later.
Environmental Assessment
Once you know whether the asset is subject to a performance policy, and whether an ESPM account and ENERGY STAR score already exist, you’re ready to gather the deeper information that really informs risk.
Conduct a comprehensive inspection and inventory of building systems, including a basic energy audit—especially if the asset has a low ENERGY STAR score. Many environmental inspection firms can bundle an energy audit into their scope, making this a cost-effective add-on rather than a separate engagement.
The bottom line
Incorporating these steps into your current process should not slow down the process, are low cost, and can save you millions of dollars down the road—and help ensure a property delivers the highest possible value for its new owner.
Updating your checklist to account for building performance policy isn’t extra red tape. It’s protection for the investment you’re about to make.
Additional resources from IMT to help you reduce risk
Track Building Performance Policies
Need more information on how to track building performance policies? Check out IMT’s Energy Policy Tracking solutions.
Explore Tracking
Optimize Your Lease
Want to learn how to optimize your lease to reduce risk of policy non-compliance? We have everything you need with the Green Lease Leaders program.
Visit Green Lease Leaders
Get Local Support
Need support in a specific jurisdiction to understand your requirements and/or find implementation resources? Our Building Performance Partnership is a national network of building resource centers ready to help you.
Find Your Center