
Jesse M. Dimitro
Senior Associate
212-390-1641 jdimitro@sh-law.comFirm Insights
Author: Jesse M. Dimitro
Date: February 7, 2025
Senior Associate
212-390-1641 jdimitro@sh-law.comPursuant to Local Law 97 (LL97), most New York City buildings over 25,000 square feet are now required to meet new greenhouse gas (GHG) emissions limits, with stricter limits coming into effect in 2030. The new law is designed to foster deep emissions cuts from the city’s largest buildings. For building owners, understanding your compliance obligations is a multi-step process and will require the assistance of qualified professionals. Building owners not only need to track and report their greenhouse gas emissions, but may also be required to make significant improvements, including upgrades to heating, cooling, lighting systems, and building envelopes to boost energy efficiency and reduce emissions.
Not surprisingly, LL97 is predicted to significantly impact the New York City real estate market as a whole. It is expected to not only influence property values, but also affect bargaining power in the rental market.
Studies have found that residential and commercial buildings over 25,000 sq. ft. account for approximately two-thirds of New York City’s greenhouse gas emissions. To reduce these emissions, New York City enacted Local Law 97 (LL97) in 2019 as part of the Climate Mobilization Act. The goal is to reduce the emissions produced by the city’s largest buildings 40 percent by 2030 and to net zero by 2050. While the law has been amended several times since it was enacted, it is still referred to as Local Law 97 or LL97.
The square footage of a building, as it appears in the records of the NYC Department of Finance (DOF), determines whether a building is subject to LL97 compliance. Local Law 97 covers the following:
The LL97 covered buildings list (CBL), compiled using DOF data, is available here. Please note that the CBL is intended as a preliminary reference only and the absence of your building on the list does not mean you are relieved of LL97 compliance. Additionally, because the CBL is compiled at tax lot level, the entire lot is included even if individual buildings within it may be excepted or follow alternative compliance pathways.
Beginning this year, most buildings exceeding 25,000 gross square feet are required to submit their annual greenhouse gas (GHG) emissions to the New York City Department of Buildings (DOB) by May 1 each year. These reports will reflect the building’s energy usage from the year prior, meaning that reports submitted in May 2025 will reflect 2024 usage.
Reports must be submitted certified by a registered design professional, such as a licensed engineer (PE) or a registered architect (RA). They are submitted through the DOB’s online portal.
Because noncompliance with LL97 can be costly, all impacted NYC building owners should have a comprehensive compliance plan in place. Failing to submit required emissions reports will result in monetary penalties of $0.50 per building square foot, per month. In addition, buildings that exceed their emissions limits can be fined based on the excess emissions, calculated at a rate of $268 per ton of CO2e (carbon dioxide equivalent) over the limit.
Local Law 97 does not establish any specific means of compliance with its strict GHG emissions caps, although options may include upgrading HVAC systems, improving insulation, converting to LED lighting, or installing solar panels. There are also different requirements depending on certain characteristics of a building. For example, affordable housing, houses of worship, and nonprofit hospitals have alternative compliance pathways.
Local Law 97 also provides alternatives to full compliance. For instance, LL97 allows building owners to purchase renewable energy certificates (RECs) to offset GHG emissions related to the building’s electrical use. The law also authorizes building owners to purchase GHG offsets, which may be used offset up to 10 percent of the building’s total energy use. New York City has also established several programs aimed to provide financial assistance, technical support, and other resources to help building owners implement energy efficiency measures and reduce their GHG emissions.
Despite these programs, full compliance will be challenging for even the most motivated building owners. As a result, many building owners may need to rely on “good faith efforts” penalty mitigation, which can help avoid or reduce fines for non-compliance through 2029.
To qualify for the “Good Faith” compliance pathway, building owners must demonstrate that they are genuinely working towards compliance with the law. This includes filing required emissions reports, complying with any Local Law 97 adjustments that have been granted, and upgrading lighting under Local Law 88. Building owners must also submit a decarbonization plan by May 1, 2025, or provide evidence that work necessary to achieve compliance 2024-2029 emissions limits is currently underway.
Building owners are not the only ones that will be impacted by New York City’s ambitious GHG emissions caps. Local Law 97 has the potential to reshape the entire New York City real estate market. Most broadly, high-performing buildings with lower emissions will be more attractive to investors, lenders, and tenants. Meanwhile, building with high emissions and significant compliance costs could see decreased valuations.
Due to the shift in market dynamics, there will likely be increased competition for energy-efficient properties. Meanwhile, property owners of less efficient buildings may need to discount prices to cover or mitigate emissions fines or plan to upgrade their buildings prior to selling.
The leasing market will also likely be impacted by Local Law 97. Landlords must decide whether to absorb compliance costs or pass them to along to tenants. Tenants may also seek to leverage the new law to negotiate favorable lease terms with landlords that are working to meet their compliance obligations, such as rent discounts based on energy efficiency.
In many cases, becoming Local Law 97 compliant will actually reduce property owners’ long term operating costs. However, getting to this point will require careful planning and execution.
Whether you are a New York City building owner, developer, tenant, or real estate investor, Scarinci Hollenbeck can help you navigate the impact of Local Law 97. We encourage you to contact a member of our Commercial Real Estate Group for personalized legal guidance.
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