The Meter is Running
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Boards must grasp the importance of building maintenance and decisions, considering the overall property and market value. Management guides boards toward proactive measures, often involving raising maintenance.
AUTHORDaniel Wollman, CEO, Gumley Haft
When it comes to the Climate Mobilization Act, some buildings have decided that paying fines is more palatable than the high cost of retrofits to reduce their carbon emissions. What do you think about that strategy?It may work for the first couple of years, but it certainly can’t be a long-term approach, because the fines will escalate. At some point, boards do have to take the necessary steps to understand their building’s requirements and what will get them as close to zero fines as possible. To understand these costs a carbon study is needed. Then a board should consider the return on investment, including the inconvenience and physical work required in residents’ apartments.
If a building has not yet done a carbon study, are they late to the game?It depends. If you’re not facing a penalty in 2025, probably not. But if you’re facing fines in 2030—and it’s projected that 80% of buildings will be—you need to get ready. It’s very prudent to get all the information in your hands. If your building is facing a few million dollars’ worth of work and you could phase it in over the next seven years, that’s kind of a win, but you need to get the study done, get the vendors, get the financing and get the votes from residents that are needed.
If a board comes to me and says it’s ready to move forward, we start the process of getting the report and digesting the information. We’re going to explore other options and maybe get a peer review. And we see what the options are for financing and grants. Then everyone can sit down and have a discussion. One thing to consider is the possibility that the fines may be deferred for five to seven years, and there may be tax abatements. But that may be looking at the rainbow.
The ultimate goal is to electrify buildings. So as residents do apartment alterations, is there anything boards should require in preparation for the future?
I’ve been advising boards that if a resident is doing a kitchen rehab and you’re a gas building, why not proactively run a dedicated electrical line behind the stove? A board can require something like that as a condition of approval. You should also look at how many amps are in the building. So if you’re a pre-war building with 60-amp service, it’s certainly not enough for modern upgrades, like induction-top stoves, Sub-Zero appliances or central air. And if the walls are already being opened, it’s prudent to do all that now and avoid the cost and disruption of doing it later.
If a board has its head in the sand, would you say that they are not doing their fiduciary duty?A lot of this is subjective, and I would say that board members aren’t necessarily neglecting that duty. I mean, nobody wants to pay more, right? That being said, we need to embrace the fact that climate change isn’t going away and that we need to reduce carbon emissions. Ignoring the Climate Mobilization Act is definitely not the route that we recommend to our clients.