Home Sellers and Buyers: How Berkeley's New Energy Rules Could Affect You

For years, San Francisco home sellers have been required to perform upgrades to improve energy efficiency and reduce water usage. These requirements aim to gradually enhance the environmental impact of older homes. On March 25, the Berkeley City Council will vote on a similar ordinance. Unlike San Francisco’s law, which typically affects sellers, the Berkeley law would impact both parties in the sale.

Berkeley sellers are already required to complete a professional energy audit under the Building Emissions Savings Ordinance (BESO). However, since executing the recommendations is optional, few homeowners follow through. The proposed ordinance would make these upgrades mandatory, often shifting responsibilities to the new homeowner.

The new system would use energy "credits" earned by upgrading to an induction stove, replacing windows, adding insulation, or sealing heater ducts. The system would heavily incentivize the installation of heat pump water heaters and HVAC systems, part of a broader push to reduce reliance on natural gas appliances.

Under the new BESO guidelines, when a home is listed for sale, its credits would be determined and disclosed to the buyer. If the home complies, no further action would be needed, although the compliance certificate is valid for only five years.

If the home is non-compliant, the buyer may assume responsibility for making the upgrades within two years after escrow closes. In this case, the city would require a $5,000 deposit in escrow, with buyer and seller negotiating who pays it. Common practices would likely emerge around responsibility for the deposit. Once the buyer proves compliance within two years, the $5,000 deposit would be released.

In practice, the upgrades required to earn credits would likely exceed $5,000, leading some homeowners to strategically default on the deposit. However, additional incentives exist: when the buyer becomes a seller, they will need earned credits for the next sale. Many homeowners also prioritize lower emissions for health and environmental reasons, seeking ways to make energy-efficient upgrades alongside other improvements.