Data Sharing is Key to Building Performance Compliance
Sustainability has officially moved into the realm of data, and leases are a key aspect of good data Governance.
Photo by Markus Winkler on Unsplash
Here at Climate Aligned Law, we are all for Building Performance and Emissions Standards (BPS); they are critical tools to mitigate the existing building stock’s significant climate impacts.
That said, these new regulatory tools require landlords and tenants to rethink their relationship, including how they collect, manage and exchange data.
Data access is critical not only for BPS compliance, but also for owners and tenants with Environmental, Social and Governance (ESG) goals or reporting requirements. And because most Building Performance Standards have real, financial penalties associated with non-compliance, owners and tenants are incentivized to work together to manage data access and reporting.
Why owners and tenants want and need data
Building Performance Standards, ESG reporting frameworks and climate disclosure laws (such as SB 253) are all grounded in data: we can’t manage the climate impacts that we don’t measure.
Particularly with respect to multi-tenant buildings (including multi-family residential), landlords need tenant data to demonstrate and report compliance with BPS standards and to ensure accurate ESG reporting.
And tenants will need access to their own data (if not sub-metered), and may also want insights into building level and common area usage, to defend against claims that their usage tipped the building out of compliance.
What do you need to know?
Some Building Performance Standards specifically provide for data access; some are silent, leaving the parties to manage data sharing issues through private contracts (like leases); and many fall somewhere in the middle.
Given the central role that data plays in climate-driven legislation, some states with Building Performance Standards have also implemented laws requiring utilities to provide owners with certain data, and organizations like the Institute for Market Transformation have drafted Model Laws and related guidance for data sharing (for energy and water).
Let’s walk through a few examples of how different jurisdictions are handling data access and related issues (these are obviously demonstrative examples, not an exhaustive list).
Washington State
In 2019, Washington State implemented a performance standard known locally as the Clean Buildings Act.
Within the Clean Buildings Act, RCW 19.27A.170(8) provides certain rights to access and share data:
(8) For any covered commercial building with three or more tenants, an electric or gas utility must, upon request of the building owner, provide the building owner with aggregated monthly energy consumption data without requiring prior consent from tenants.
Tacoma Power, a utility within the state of Washington, describes the implementation of this section from a practical standpoint:
The Clean Buildings Law requires buildings to report their energy performance using Energy Star Portfolio Manager. Benchmarking will also help determine which compliance path building owners may pursue. Tacoma Power must provide aggregated, building level electric consumption data to the building owner or a duly authorized building owner representative. If a building has three or fewer occupants, building owners must secure permission from account holders to authorize release of data. If a building owner elects to appoint a representative, a release form authorizing the representative must be completed.
For buildings with three or fewer tenants, including a release in a lease could reduce the risks and administrative burden associated with tracking down and updating releases, and can account for other energy sources that fall outside of the utility. And for buildings with more than three occupants, owners will still need access to these and other data points, which could be clarified and managed through a lease, in addition to the regulatory pathway.
City of Seattle
The City of Seattle recently adopted an emissions standard for existing buildings (CB 120718). One key revision was made shortly before the legislation was passed and holds tenants accountable for penalties if they fail to provide data or access to data:
https://seattle.legistar.com/View.ashx?M=F&ID=12487749&GUID=AEC8D4AA-A0FF-4300-9066-1A6E76BCA877
Many Building Performance Standards are clear that penalties only run to the owner, which makes Seattle’s legislation slightly unique. Again, one way to avoid getting to the point of asking a municipality to apply a penalty to a tenant is to address data sharing rights and obligations in a lease.
State of Maryland
The State of Maryland is an interesting example, because Maryland’s proposed regulations specifically call out lease agreements as one way owners can access the emissions data required for compliance
(see Section 7(a)):
For buildings with fewer than five tenants, the necessary “electronic or written consent” could be included directly in the lease to streamline the process and reduce friction.
There are lots of interesting aspects to Maryland’s handling of utility data, we will explore those in later posts.
This example also demonstrates that different jurisdictions have adopted different thresholds for the number of tenants necessary to trigger action by the utility company. Regardless, these thresholds probably originate from this guidance document.
Boulder, Colorado
Boulder, Colorado takes a no-nonsense approach and requires that:
“Any tenant of an owner subject to the provisions of this chapter shall, within 30 days of a request, provide the owner with any information required for compliance that cannot otherwise be acquired by the owner.”
This is one of the more simplified and straightforward approaches - nice work, Boulder. That said, lease language could clarify issues like data format, qualify assurance, use of data, and related issues.
Multiple jurisdictions
If the regulations are unclear regarding access to data, or if you own a portfolio or lease space in multiple jurisdictions, it likely makes sense to manage the risks of those nuances contractually, through leases, and by updating your lease templates.
The importance of good Data Governance:
Until performance standards become standardized (if they ever do), there is a patchwork of regulatory requirements that need to be followed, and inconsistent rights and obligations with respect to data sharing.
One way to manage this complicated framework and the associated risks: clarify data governance through leases, as the private contracts that govern the relationship between owners and tenants.
In this evolving regulatory landscape, owners and tenants can take some degree of control by agreeing to necessary specifics that increase transparency and trust, and decrease opportunities for friction.
While most of this post is framed with respect to building performance or emissions standards, Environmental, Social and Governance (ESG) frameworks, and forthcoming climate disclosure requirements are also key drivers for good data governance.
While this space is still evolving, there are several key considerations and industry-generated resources that can provide guidance. As highlighted by REvolve, the Digital Real Estate Innovation Council, and their recent report, “Digital Real Estate and its impact on Governance:”
“Clarity about who has the rights to use data and for what purpose must be made clear in all situations and ideally should be written into lease agreements and technology supplier contracts.”
Questions and considerations
Buildings are collecting an ever-increasing volume of data. Managing this data is an important part of good Governance.
Because the laws vary widely with respect to data sharing and rights to data access, one way to control for these unknowns: lease language that governs the contractual relationship between owners and tenants with respect to data.
A few specific points of consideration:
Collect only data that is necessary, avoid collecting data just because it is available, particularly for personal data; excess data creates additional storage and security obligations, which increases overall risk.
Generally speaking, data sharing requirements should be reciprocal.
Understand, and if necessary, reasonably limit, how data can be used (i.e. “to comply with XYZ Law…”).
Try to agree on the format that data will be shared, in advance, to avoid administrative headaches later.
Data assurance is an increasing topic of scrutiny. As questions arise regarding the potential liability for data quality, consider what standard should be applied in the lease (i.e. “commercially reasonable efforts” is generally a good starting point).
If data collection and sharing requirements are onerous, consider if a reasonable fee for administration and overhead is fair, particularly if a tenant is a small or a disadvantaged business. “Reasonable” being the key word, here.
Consider if other points, in addition to energy usage, are necessary (such as water, more info. on water benchmarking, at this link).
Data, data, everywhere…
Data is the new sustainability currency. When considering updates to a lease or your standard template, think about the above questions and considerations. And if you need support or are considering your lease templates in the context of your portfolio and overall ESG goals, email us.
Disclaimer / Warning: This is common sense, but bears repeating: this blog is intended for informational purposes and does not contain or convey legal advice. The law is inherently fact specific. General information, including this blog, should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.