Local Law 97 (LL97), enacted as part of the 2019 Climate Mobilization Act, stands as one of the most impactful laws for New York City building owners. This legislation targets greenhouse gas (GHG) emissions from large buildings, which contribute over two-thirds of the city's total emissions, aiming for a 40% reduction by 2030 and net-zero by 2050. For NYC building owners and investors, understanding LL97 compliance is crucial to avoid hefty penalties and capitalize on energy efficiency incentives.
Local Law 97 establishes annual limits on greenhouse gas emissions for most buildings over 25,000 square feet and for certain combinations of multiple buildings on the same lot or under the same condo board. These limits are calculated by building type and gross square area. Buildings that exceed their limits may be subject to significant financial penalties.
Covered buildings include:
Single buildings exceeding 25,000 gross square feet. Building owners should verify square footage via NYC Department of Finance records.
Multiple buildings on the same tax lot (identified by borough-block-lot or BBL) totaling over 50,000 square feet.
Two or more condominium buildings under the same board of managers exceeding 50,000 square feet.
If a BBL meets the threshold, all buildings on it are subject to LL97, even if an individual qualifies for an exception – their footage still counts toward the total. Affected property types encompass residential (co-ops, condos, apartments), commercial (offices, retail, hotels), and mixed-use buildings.
Gross Square Feet (GSF) is the total square footage from Department of Finance (DOF) records. This metric determines if a building is a “covered building” under LL97.
Gross Floor Area (GFA) means all floors/spaces in a covered building. This metric is necessary for LL97 reporting and must be verified by Registered Design Professionals (RDPs).
Exemptions or modifications apply to certain types, including those with over 35% rent-regulated units, places of worship, city-owned or NYCHA properties, nonprofit hospitals, healthcare facilities, and historic buildings. These aren't always full exemptions; unique accommodations may include delayed reporting or retrofit flexibility.
Adjustments for external or financial constraints are available under NYC Administrative Code §28-320.7, though some applications closed on January 1, 2025. Common LL97 exemptions can save owners thousands, but applications require precise documentation – check the NYC DOB website for the latest forms and deadlines.
LL97 features three phased periods with escalating requirements:
1. 2024-2029: Initial, lenient NYC building emissions limits based on building type (e.g., multifamily, offices, hospitals). This phase allows time for planning retrofits.
2. 2030-2034: Stricter emissions caps, ramping up penalties for non-compliance.
3. 2035-2050: Net-zero emissions for all covered buildings, aligning with NYC's carbon-neutral goals.
1. Article 320: Standard annual emissions limits for most private buildings (sometimes called CP0).
2. Article 321: Lower-cost or alternative compliance for many rent-regulated and houses of worship buildings (CP3).
3. Rent-regulated Pathways:
4. City-owned portfolios (CP4): Separate portfolio-wide targets.
Steps to comply include the following:
Benchmark and Report: Track data using EPA's ENERGY STAR Portfolio Manager. Benchmarking is the recording of a building’s total energy and water use for the previous calendar year to an online database such as the US Environmental Protection Agency (“EPA”)’s Energy Star Portfolio Manager.
Implement Upgrades: Focus on energy-efficient HVAC, insulation, or renewables. Examples include installing LED lighting or solar panels to reduce GHG emissions.
Alternative Methods: Limited options like renewable energy credits (RECs), carbon offsets, or up to 10% deductions via the Affordable Housing Reinvestment Fund or distributed energy resources. Consider exploring NYSERDA incentives for cost-effective upgrades.
Annual reports, certified by a registered design professional, document prior-year emissions and compliance, due May 1 each year via the City’s BEAM portal.
For buildings subject to Article 320 (applicable to most free-market buildings):
Failure to file annual building emissions report: (Floor Area x $0.50) per month
Exceeding Limits: A covered building must meet the annual emissions limit for that building. Penalty for noncompliance is = ((Actual Emissions – Emissions Limit) x $268) per year. In other words, $268 per metric ton of CO2e over the cap.
For buildings subject to Article 321:
Failure to file annual building emissions report: $10,000.
Noncompliance: A covered building must demonstrate compliance with one of the two compliance pathways. Penalty for noncompliance = $10,000
These LL97 penalties can add up quickly: for a 100,000 sq ft building exceeding limits by 500 tons, fines could exceed $134,000 annually. Proactive compliance is essential.
As Local Law 97 increases the financial impact of building emissions limits, many landlords are revising their commercial leases to address how compliance costs are allocated between the parties. While many leases already require tenants to pay a proportionate share of operating expenses, those provisions often do not expressly address LL97 penalties, emissions credits, benchmarking obligations, consultant fees, or other building decarbonization costs.
A carefully drafted lease provision can eliminate uncertainty by specifying which LL97-related costs are recoverable from tenants, how those costs are calculated, and the procedures for invoicing, auditing, and resolving disputes. For a broader discussion of negotiating operating expenses, capital expenditures, and other important commercial leasing provisions, see NYC Commercial Lease Guide.
The following provision is an example of a "green lease" clause that allocates Local Law 97 emissions costs to commercial tenants based primarily on the tenant's proportionate contribution to the building's greenhouse gas emissions rather than solely on rentable square footage. Although every lease should be tailored to the particular property and transaction, this sample illustrates many of the concepts commonly found in modern commercial leases addressing Local Law 97 compliance.
(a) Tenant shall be responsible for Tenant’s Share of Emissions Costs (as hereinafter defined) for each applicable period, as calculated below. As used herein, “Emissions Costs” shall be equal to the sum of (x) all costs, expenses, fines, penalties and/or other similar charges payable by Landlord to applicable governmental authorities from time to time under the Emissions Law (as hereinafter defined) attributable to the Building (collectively, “Emissions Penalties”), and (y) any credits, offsets and the like purchased by Landlord to avoid such Emissions Penalties (collectively, “Emissions Credits”), provided, however, the costs and expenses of routine and ongoing compliance with the Emissions Law (such as annual compliance reports, inspections, consultant review, etc.), and the costs to contest the Emissions Law and/or Emissions Penalties, shall be included in Operating Expenses. As used herein, (1) “Emissions Law” means Local Law 97 of the Local Laws of the City of New York for the year 2019, and any amendment, modification, supplement or replacement thereof, and all rules and regulations promulgated pursuant thereto, and (2) “Emissions” means ‘building emissions’ as defined under the Emissions Law. Notwithstanding anything to the contrary, Emissions Costs shall not include any costs, expenses, fines, penalties and/or similar charges incurred under the Emissions Law which are incurred as the direct result of Landlord failing to comply with reporting requirements under the Emissions Law, provided such failure was not the result (in whole or in part) of (x) the negligence or willful misconduct of Tenant or any person or entity acting by, through or under Tenant and/or (y) the failure of Tenant or any person or entity acting by, through or under Tenant to provide to Landlord any information, documentation or other deliverable necessary to enable Landlord to so make a proper filing.
(b) For purposes hereof, “Tenant’s Share of Emissions Costs”, if any, for each applicable period, shall be an amount equal to (a) the Total Occupant Emissions Costs applicable to the period in question multiplied by a fraction, the numerator of which is an amount equal to (x) the Premises Emissions for the period in question, minus (y) the Tenant Specific Allocated Emissions, and the denominator of which is equal to (x) the Aggregate Occupant Emissions for the period in question, minus (y) the Total Occupant Allocated Emissions, plus (b) an amount equal to the lesser of (x) $XXX multiplied by the number of hours of after-hours heating, ventilation or air-conditioning requested by Tenant during the period in question, and (y) an amount equal to (1) the Emissions Costs applicable to the period in question less (2) the Total Occupant Emissions Costs (provided, in no event shall the amount calculated pursuant to this clause (b) be less than $0). Landlord and Tenant acknowledge and agree the $XXX figure in the preceding sentence shall be subject to increase based upon any changes to the Emissions Conversion and/or Emissions Costs applicable to the provision of after-hours heating, ventilation or air-conditioning.
An example calculation of Tenant’s Share of Emissions Costs for illustration purposes should be attached as Exhibit to the lease.
“Aggregate Occupant Emissions” shall mean the Emissions allocable to all Building occupants for the period in question (exclusive of after-hours heating, ventilation or air-conditioning to the tenants’ premises), which shall be determined by converting the following into an amount of Emissions pursuant to the applicable Emissions Conversion: (x) the kilowatt hours of electricity consumed within the leasable areas of the Building during the period in question by Building occupants (as measured by the submeters serving the space demised, licensed or used to or by such Building occupants (or, if no submeters (or any submeters are inoperable), then such equitable calculation reasonably determined by Landlord)) (excluding any of electricity consumed solely in connection with Landlord’s operation of a Building system for exclusive after-hours heating, ventilation or air-conditioning to a tenants’ premises); and (y) the kbtus of natural gas, #2 fuel oil and #4 fuel oil combusted and district steam consumed in the Building by Building occupants during the period in question (excluding any of the foregoing combusted or consumed solely in connection with Landlord’s operation of a Building system for the Building common areas).
“Emissions Conversion” shall mean the applicable conversion calculation under the Emissions Law for converting the item in question to an amount of Emissions (or if no such calculation, then an equitable calculation reasonably determined by Landlord).
“Aggregate Occupant Emissions” shall mean the Emissions allocable to all Building occupants for the period in question (exclusive of after-hours heating, ventilation or air-conditioning to the tenants’ premises), which shall be determined by converting the following into an amount of Emissions pursuant to the applicable Emissions Conversion: (x) the kilowatt hours of electricity consumed within the leasable areas of the Building during the period in question by Building occupants (as measured by the submeters serving the space demised, licensed or used to or by such Building occupants (or, if no submeters (or any submeters are inoperable), then such equitable calculation reasonably determined by Landlord)) (excluding any of electricity consumed solely in connection with Landlord’s operation of a Building system for exclusive after-hours heating, ventilation or air-conditioning to a tenants’ premises); and (y) the kbtus of natural gas, #2 fuel oil and #4 fuel oil combusted and district steam consumed in the Building by Building occupants during the period in question (excluding any of the foregoing combusted or consumed solely in connection with Landlord’s operation of a Building system for the Building common areas).
“Emissions Conversion” shall mean the applicable conversion calculation under the Emissions Law for converting the item in question to an amount of Emissions (or if no such calculation, then an equitable calculation reasonably determined by Landlord).
“Premises Emissions” shall mean the Emissions allocable to the Demised Premises for the period in question (exclusive of after-hours heating, ventilation or air-conditioning to the Demised Premises), which shall be determined by converting the following into an amount of Emissions pursuant to the applicable Emissions Conversion: (x) the kilowatt hours of electricity consumed within or applicable to the Demised Premises (or any other portion of the Building to which Tenant has exclusive use or to any systems of Tenant outside of the Demised Premises which consume electricity) during the period in question (as measured by the submeters serving the Demised Premises or areas/systems in question (or, if no submeters (or any submeters are inoperable), then such equitable calculation reasonably determined by Landlord); and (y) the kbtus of natural gas, #2 fuel oil and #4 fuel oil combusted and district steam consumed in the Demised Premises (or any other portion of the Building to which Tenant has exclusive use or to any systems of Tenant outside of the Demised Premises which combust or consume same) during the period in question (excluding any of the foregoing consumed solely in connection with Landlord’s operation of a Building system which serves the Demised Premises for the Building common areas).
“Tenant Specific Allocated Emissions” means the Total Occupant Allocated Emissions for the period in question multiplied by XXX% (which shall be equitably adjusted if the rentable square foot area during the Term is increased or decreased as a result of the leasing by Tenant of more space in the Building or a termination of the leasing of a portion of the Demised Premises).
“Total Building Allocated Emissions” means the total maximum Emissions limit applicable to the Building for the period in question pursuant to, and as calculated under, the Emissions Law.
“Total Occupant Allocated Emissions” means XXX% of the Total Building Allocated Emissions.
“Total Occupant Emissions Costs” means an amount equal to the Emissions Costs applicable to the period in question multiplied by a fraction, the numerator of which is an amount equal to (x) the Aggregate Occupant Emissions for the period in question, minus (y) the Total Occupant Allocated Emissions, and the denominator of which is equal to (x) all Emissions from the Building for the period in question, minus (y) the Total Building Allocated Emissions.
(c) For each calendar year during the term of this lease, Tenant shall pay to Landlord, within thirty (30) days after written demand (each such demand, an “Emissions Invoice”), Tenant’s Share of Emissions Costs for such calendar year as calculated in accordance with the terms and provisions of this Section. Landlord will, from time to time upon Tenant’s request, provide reasonably detailed backup calculations of energy usage and amounts payable under this Section and reasonable documentation supporting the determination and/or calculation. Each Emissions Invoice shall be conclusive and binding upon Tenant unless within one hundred and twenty (120) days after receipt of such Emissions Invoice Tenant notifies Landlord that it disputes the correctness of such Emissions Invoice. Tenant recognizes and agrees that Landlord's books and records, and those of Landlord's agents with respect to Emissions Costs, Emissions Penalties and Emissions Credits are confidential, that, except as specifically provided herein, Tenant shall have no right to inspect the same and that any disclosure or dissemination of such confidential information, in breach of this lease, shall be a default under this lease. Landlord shall make available to Tenant and Tenant's authorized representatives (which shall not be permitted to calculate their fee on a contingency basis) for inspection or audit Landlord's books and records relating to the Emissions, Emissions Penalties, Emissions Credits, and Emissions Costs for a period of ninety (90) days after the delivery by Tenant of its dispute notice, to the extent necessary to verify the applicable Emissions Costs, Emissions Penalties and Emissions Credits and Tenant’s Share of Emissions Costs. Such books and records shall be made available for inspection or audit by Tenant and such authorized representatives or firms, which may be via access to electronic records. If Tenant shall dispute the correctness of any Emissions Invoice as aforesaid, and the parties shall not be able to resolve such dispute within ninety (90) days after the completion of Tenant's inspection or audit, then either party may submit the dispute to arbitration in accordance with the commercial arbitration rules of the American Arbitration Association within sixty (60) days after the expiration of such ninety (90) day period. The decision of the arbitrators shall be final and binding on Landlord and Tenant and judgment thereon may be entered in any court of competent jurisdiction, except that the fees and expenses of the arbitrators in determining such matter or matters shall be borne by the unsuccessful party (and if both parties are partially unsuccessful, the arbitrators shall apportion the fees and disbursements between the parties based upon the degree of success of each party). Notwithstanding the giving of such notice by Tenant and pending the resolution of any such dispute, Tenant shall pay to Landlord when due the amount shown on any such Emissions Invoice as provided in this Section, but such payment shall be without prejudice to Tenant’s rights hereunder.
* The Lease should define certain terms mentioned in the sample clause, such as Tenant's Share
* The sample clause assumes that electricity usage for other tenants is measured by submeters
In an effort to comply with LL97, owners of covered buildings should take the following steps:
1. Conduct an energy audit to pinpoint inefficiencies. Hire certified auditors to identify quick wins like sealing leaks or upgrading boilers.
2. Pursue incentives like NYSERDA funding for retrofits.
3. Collaborate with engineers, architects, and legal experts.