Facing NYC's "Perfect Storm" of Compliance Deadlines

It's coming: the convergence of multiple critical compliance deadlines that could devastate your building's finances. Hear how one 63-unit co-op is tackling the triple threat of Local Law 11, garage inspections, and Local Law 97 carbon emissions requirements — and how your building can learn from their mistakes. Peter Lehr, director of property management at Kaled, offers practical insights on bundling projects, working with the right consultants, and making the right decisions for your building, based on your potential fines. With 80% of NYC buildings expected to miss Local Law 97 compliance by 2030, knowing how to "buy time" with a realistic compliance schedule could save your building significant money and headaches. Habitat's Carol Ott conducts the interview.

How To Run Your Building: For Co-ops and Condos

Transcript

Carol Ott: Welcome to Inside Track, a conversation with New York's leading property management executives. I'm Carol Ott with Habitat Magazine, and my guest today is Peter Lehr, director of Property Management at Kaled. Complying with New York City regulations has become a complex and expensive journey. What's different today from years ago, however, is the emergence of the perfect storm where compliance due dates for several different laws all come together.

Peter, you are working with a 63 unit co-op that is facing a perfect storm. What's going on there and why are they approaching a perfect storm and what will it do to them? 

Peter Lehr: Good afternoon, Carol. What we're looking at is the convergence of three local laws that have taken effect. One is our old friend, FISP, Local Law 11, and there we're going into cycle [00:01:00] 10.

Sub cycle A is their compliance cycle, and that opens up in February of 2025. In August, they're gonna have to file their PIPS report, which is for the garage inspection, and they have deferred a lot of maintenance over the years, and right now are looking at a tremendous amount of work to correct before 2027, which is their real compliance year. They have to file the initial report in this year, but 27 is the year they have to have all their work done.

Similar to Local Law 11, they're gonna have either be filing unsafe, SWARMP, or safe. And they will probably most likely find themselves in a SWARMP condition, but it's gonna be a costly SWARMP condition. And then Local Law 97 kicks in for these guys in 2030 and their first penalty isn't all that bad for the first four years. They can budget [00:02:00] that item in and it won't hurt them much. But when they go into this second cycle, which is 2035, obviously. The city is going to look to compress or squeeze their emissions number and obviously that will elevate their penalty. So the idea for us working with them now is to get them as much information as they can so that they can start to plan and find the funds for it.

So we've already completed a garage report. The garage report lays out for us, at least, where they have to be and how much money they're gonna have to spend over the next four years. Our recommendation, once we have some numbers as far as Local Law 11 are concerned, are gonna be, let's just bundle it all together and attack it at the same time. With Local Law 97, obviously the long-term goal [00:03:00] is to reduce the carbon emissions to zero, and that might be a little bit too much for them to bite at this time. So what I'm gonna be recommending to this group is, let's try to do little things that we can, that maybe we take that $10,000 number, maybe we can chop it to 5,000 a year if we're lucky.

But let's try to do some things that improve our energy score. So obviously I'd be looking to put in a building management system where we can control the boiler. Maybe try to do some lighting upgrades, even though these guys have been proactive-- they've done lighting upgrades, but we're gonna probably have to do a little bit more.

And I think the real cherry on top of all of this is eventually, I think we're gonna have to look at doing windows, but that is something I don't wanna hit them with right now because that's another million bucks and you know that'll just drive the budget through the roof. 

Carol Ott: So I'm curious: for [00:04:00] funding.

 This is work maybe over the next five, eight years. Co-ops typically can fund by refinancing. 

Is that their option? 

Peter Lehr: Yeah. They're gonna have to do some assessments probably, but they're coming to the end of their term, so they're lucky actually that we're gonna be in a position where we can go to refinance them, if, we can get them a good term and a good rate. But they've got some time on that. 

Carol Ott: So for other buildings facing really a confluence of local laws that have to be complied with, how would a board figure out a timeline to do this stuff and which laws can be bundled together?

How do you even do that? 

Peter Lehr: Great question. The way that I would say is rely on your consultant. Just don't hire any guy. Don't hire a Local Law 11 guy to advise on Local Law. 97. There are Local Law 97 consultants [00:05:00] that are instrumental in guiding you through this process. Your Local Law 11 engineer can guide you through, if he's on the city list. He can guide you through the garage work. And if you are in a position where you know you're gonna have to be doing Local Law 11 work in the middle of the cycle and you have to do your garage work during the cycle, yes, you could bundle everything together.

Ostensibly it's gonna be the same type of work: painting steel if you need to, exposing cracks, caulking them. So you have the same guys working in the building, why not just give them the work as well? Local Law 97, there are, as I said, compliance consultants out there.

Some of these guys are dual, where they'll be able to build a timeline for you for compliance with the law. Some are doing the engineering work. I am skeptical of that at times because it's like creating your own you [00:06:00] gotta do this. And so it might be better to go to a mechanical engineering firm and asking them for spec to send out for whatever you need to do, whether it be for, heat pumps or maybe an electrical upgrade and whatnot. 

Carol Ott: But this sounds like you've already now consulted with a couple of different consultants. 

Peter Lehr: Yes, I have. I've been working with several different Local Law 97 or an energy compliance consultants.

The first step you really have to do is have them do a report on the property. And they'll help you break down why your letter grade is what it is, and then they'll tell you, this is what you can do to do your good faith estimate, which is the report that you would have to put in between now and 2027 with the city, and that will lay out to the city your path to Local Law 97 compliance.

Carol Ott: Is there a type of company out [00:07:00] there that isn't somebody who's going to spec the job, but there is somebody who's gonna say, these are the compliance things you're gonna have to deal with. And give you, almost like a financial spreadsheet. 

Peter Lehr: It'll be a timeline of what you'll be looking at and what the cost will be along the way.

Obviously 2030 is the big year because 80% of the properties in the city are not going to be in compliance with the law. 

Carol Ott: Now that's with the Climate Mobilization. 

But some of what you do maybe for climate mobilization also can interface with what you do in Local Law 11. In terms of staging, for instance. Who helps you with that? 

What if you needed to do roof work? And at the same time, for your Local Law 97, you decided, you wanted to explore heat pumps on the roof. Or solar. And so there's a a spillover.

Peter Lehr: Yeah, exactly. Obviously if you do [00:08:00] something like that, you're gonna have the specification for, where you're gonna locate the equipment. The big trick there is then you'd absolutely have to bring in your your engineer your Local Law 11 engineer, because he's gonna be able to work with your roofing manufacturer to make sure that you don't violate any warranty you have left on the roof, if you have any at all. You might be able to do something and maybe do some repairs and upgrades and tie that in and buy additional time on the warranty and working in that, Hey, listen, we're gonna have a pad here where we're gonna have heat pumps up on the roof or a heat pump farm.

That's actually, you can do that. 

Carol Ott: But for the board, then they're actually gonna have to consult with an engineer who understands Local Law 11, let's say. 

Peter Lehr: Correct. 

Carol Ott: Maybe the same person, or a different person? 

Peter Lehr: If the firm that they tap into can do all those specialties?

Yes, there are firms out there that we're coming across that can [00:09:00] do that sort of stuff. But I'm always hesitant to just hand work out. I have a client, I have to make sure that I'm protecting that client.

So I'm very, I don't wanna use the word skeptical or hesitant , but I take a hard look at somebody, if we're gonna give them carte blanche to both a Local Law 11 project and a Local Law 97 project. I wanna make sure that they're doing the right thing. 

Carol Ott: Does it make any sense at all for a board to look at all these projects with an eye to what the fines are? So you can say if I don't do this, this is my fine. If I don't do that, and have some sense of which should come first, or which is the biggest penalty? 

Peter Lehr: That's another great question. Obviously, Local Law 11, we deal with that, all the time.

So if you don't do anything with that, and the DOB finds that the building is unsafe, then you're not only gonna have the fine for having an unsafe property, but now you're gonna have to have that shed up and now you're [00:10:00] scrambling to get your report, do the specification, and then give out the job.

In my mind, Local law 11 always takes precedence because every five years, you gotta do something. Maybe not, but most of the time we're doing something. So I know those penalties can be expensive. 90, I don't know yet, and I haven't run across a penalty fines for non-compliance with the garage, but, through the Accelerator that the city has put together for Local Law 97, you can see what your fines are gonna be.

And if I had to spend 50,000 to save 1500. I'd tell, no, don't do it. Wait a little bit. But if I have to spend 50,000 to save 150, to save 70, 80,000 per year. Yeah. I would say, you know what? That's an investment that's well worth it. 

I think you can control your board's future if you [00:11:00] just try to minimize the damage in fines so that you can buy them some time, get them a little closer and get through some of the projects that the city requires you to do, and then this one, which will be a requirement, but you can buy some time. 

Carol Ott: And that may be what we're all gonna try and do is buy some time. 

Peter Lehr: Yes. 

Carol Ott: Okay. Thank you very much, Peter Lehr. 

Peter Lehr: You're welcome, Carol. Thank you.