The first year of Local Law 97 reporting went better than almost anyone expected. About 95% of the roughly 29,000 buildings required to file came in within their 2024 limits, compared with the 80% that had been expected, and co-ops and condos were among the buildings with high filing and compliance rates.¹ But the city was deliberately lenient in year one, and as Habitat put it, “it’s clear 2030 will be a different test.”¹ Limits tighten sharply that year, and more buildings will need to do real work.

For many co-op and condo boards, a big part of that challenge sits on the ground floor. Restaurants, retail stores, medical offices, and garages can drive a large share of a building’s energy use. Commercial tenants, as a group, can account for 60% or more of a building’s energy use and emissions.² Yet the building, not the tenant, gets the bill. The commercial lease is where boards can fix that mismatch.

LL97 in a Nutshell

Local Law 97 sets an annual greenhouse gas emissions cap for most buildings over 25,000 square feet, measured for the building as a whole.³ A building over its cap pays a penalty equal to its actual emissions minus its limit, multiplied by $268 per metric ton, each year.⁴ Owners must file an emissions report by May 1 for the prior year, certified by a registered design professional; failing to file carries a penalty of $0.50 per gross square foot per month.⁵ Stricter limits begin in 2030.³

Why Co-ops and Condos Are Especially Exposed

LL97 obligations fall on owners, not tenants.⁵ In a co-op or condo, that means the board and, ultimately, the shareholders or unit owners. Several features of residential buildings make the exposure worse:

• Old leases never saw it coming. Many buildings have long-term commercial leases, sometimes decades-old “sweetheart” leases at below-market rents, drafted long before LL97 existed.⁶
• Standard exclusions work against the building. Most standard New York City commercial leases exclude fines, penalties and interest from operating expense pass-throughs. Without a rider that overrides that exclusion, passing LL97 penalties to a tenant is far from guaranteed.⁷ And “future laws” carve-outs may exclude LL97 costs altogether.⁵
• Insurance won’t help. Standard property insurance typically does not cover these fines.⁷
• Mixed-use condos have split incentives. LL97 limits apply at the building level, not by unit or use group. A commercial unit owner that can shift fines to its own tenants may not be motivated to fund capital work and, in one practitioner’s words, “would rather wait for the fines and push those off on their tenants.”⁸
   

Nine Lease Provisions Every Board Should Consider

The sample language below is illustrative only. It is a starting point for discussion and must be adapted by counsel to the specific building, lease, and tenant.

1. An express LL97 definition that overrides the exclusions. Define “LL97 Costs” to include penalties and compliance costs, and say expressly that they are recoverable notwithstanding any fines-and-penalties, capital-improvement or “future laws” exclusion elsewhere in the lease.
   Illustrative language (adapt with counsel): “LL97 Costs” means all penalties, fees, compliance costs and related expenses incurred by Landlord under Local Law 97 of 2019, as amended, and any successor law. Notwithstanding any exclusion in this Lease for fines, penalties, capital improvements, or laws enacted after the date hereof, Tenant shall pay Tenant’s share of LL97 Costs as provided in this Rider.
2. Penalty share based on measured emissions. Allocate the tenant’s share of any penalty according to its actual measured emissions, using submeters. Submeters are crucial here, but compliance with the city’s existing submetering requirements has been reported as problematically low, so confirm the meters exist.² If the board prefers, set the tenant’s pro rata share as a floor.
   Illustrative language (adapt with counsel): Tenant’s share of any LL97 penalty shall equal the penalty multiplied by a fraction, the numerator of which is the emissions attributable to the Premises as measured by submeters, and the denominator of which is total Building emissions; provided that such share shall not be less than Tenant’s Proportionate Share.
3. An emissions allowance, or “carbon budget.” Give the tenant an annual emissions allowance and charge it for any excess. This is especially useful for high-energy users such as restaurants with commercial kitchens.⁷
   Illustrative language (adapt with counsel): Tenant’s annual Emissions Allowance is [__] metric tons CO₂e. If emissions attributable to the Premises exceed the Emissions Allowance in any year, Tenant shall pay, as Additional Rent, the portion of any Building penalty attributable to such excess.
4. Energy data sharing and utility authorization. Require the tenant to deliver consumption data and sign utility authorizations early enough for the May 1 filing, so the building is never exposed to the $0.50 per square foot monthly non-filing penalty.
   Illustrative language (adapt with counsel): By February 1 of each year, Tenant shall deliver to Landlord all energy consumption data for the Premises for the prior calendar year and shall execute any authorization reasonably required for Landlord to obtain such data directly from utility providers.
5. Cooperation and access for retrofits. Require the tenant to give access and cooperate with energy audits, retrofits, and electrification work.
   Illustrative language (adapt with counsel): Tenant shall afford Landlord and its consultants reasonable access to the Premises, on reasonable prior notice, to conduct energy audits and to perform work Landlord deems necessary or advisable to comply with LL97, including electrification of building systems.
6. Alteration and equipment controls. Allow the board to consider emissions impact when reviewing alterations, including new gas-fired equipment.⁵
   Illustrative language (adapt with counsel): In reviewing any proposed alteration or installation of equipment, Landlord may consider its effect on Building emissions, and Landlord may withhold consent in its sole discretion to any alteration that would adversely affect the Building’s ability to meet its LL97 emissions limits, including the installation of new fossil-fuel equipment.
7. Indemnity for tenant-caused penalties. Make the tenant responsible for penalties caused by its use, its equipment, or its failure to report.⁹
   Illustrative language (adapt with counsel): Tenant shall indemnify Landlord against all LL97 penalties and related costs to the extent arising from Tenant’s use of the Premises, Tenant’s breach of this Rider, or Tenant’s failure to timely provide required data.
8. Amortized recovery of LL97 capital work. LL97 improvements will likely be capitalized. State expressly that their cost may be passed through, amortized over the improvement’s useful life.⁵
   Illustrative language (adapt with counsel): The cost of any capital improvement made to comply with or reduce penalties under LL97 shall be included in Operating Expenses, amortized annually over its useful life, as reasonably determined by Landlord, together with interest at [__]%.
9. Renewal, assignment and change-of-use triggers. Make the LL97 rider apply automatically at every future touchpoint.
   Illustrative language (adapt with counsel): The LL97 Rider shall apply to, and be incorporated into, any renewal, extension, amendment, assignment or sublease of this Lease, and any change in the permitted use of the Premises shall be conditioned on Tenant’s acceptance of any updated Emissions Allowance.

Existing Leases and Mixed-Use Condos

Most boards cannot rewrite an existing lease on their own. But every renewal, amendment, assignment consent and estoppel request is an opportunity to add an LL97 rider. A tenant asking the board for something is the tenant most likely to agree.  

Be careful about default notices. When served with a notice of default, many commercial tenants with valuable long-term leases start a Yellowstone action to protect the lease. And if the lease has a prevailing-party attorney-fee clause, a defective notice can leave the co-op paying the tenant’s fees. Notices must follow the lease’s notice provisions and clearly state the default, the provision violated, and the cure deadline.⁶

Mixed-use condo boards have an extra tool: their governing documents. A generic requirement that all unit owners comply with the law may not compel anyone to spend money. Boards should plan jointly with commercial owners, record decisions in board resolutions, and consider bylaw amendments that address use-group benchmarks and allocate fines to the use group or unit owner that causes them. An assessment to start a “green fund” for retrofits, energy credits or fines is also worth considering.⁸

Expect Pushback

Tenants will ask for caps, for exclusion of penalties caused by the landlord or other occupants, and to pay only for their own emissions.⁹ Reasonable concessions can help get the rider signed. There is also a practical point for boards: passing every dollar of penalties to tenants can remove the building’s own incentive to invest in upgrades. In one consultant’s illustration, a building that passed everything through made no upgrades and tenant costs rose, while a building that shared the allowance and invested lowered tenant costs.¹⁰ Sharing the burden sensibly can serve both sides.

Board Checklist

• Confirm the building’s LL97 status, limits, and 2030 projections.
• Inventory commercial leases and identify fines, capital, and “future laws” exclusions.
• Verify commercial submeters are installed and working.
• Adopt a standard LL97 rider for all new leases.
• Use renewals, amendments, assignments, and estoppels to add the rider to existing leases.
• Build the May 1 data-collection calendar into tenant obligations.
• Have counsel review any default notice before it is sent.
• Mixed-use condos: adopt resolutions or bylaw amendments on fine allocation and consider a green reserve fund.

Endnotes

1. Habitat Magazine, “Local Law 97 Compliance Beats Expectations — For Now” (Sept. 16, 2026), https://www.habitatmag.com/Publication-Content/Bricks-Bucks/2026/September-2026/nyc-ll97-emissions-compliance
2. Urban Green Council, “Aligned for Action” (July 2024), https://www.urbangreencouncil.org/aligned-for-action-ll97-commercial-landlord-tenant-forum
3. NYC Department of Buildings, “LL97 Greenhouse Gas Emissions Reductions,” https://www.nyc.gov/site/buildings/codes/ll97-greenhouse-gas-emissions-reductions.page
4. NYC Department of Buildings, “Greenhouse Gas Emissions Reductions Violations,” https://www.nyc.gov/site/buildings/codes/greenhouse-gas-emissions-reductions-violations.page
5. Phillips Lytle LLP, “As Local Law 97 Requirements Ramp Up, Consider These Key Leasing Considerations” (NYLJ, Aug. 7, 2025), https://phillipslytle.com/as-local-law-97-requirements-ramp-up-consider-these-key-leasing-considerations
6. Habitat Magazine, interview with Drew Pakett (Braverman Greenspun), “Yellowstone Injunction,” https://www.habitatmag.com/Publication-Content/Legal-Navigators/yellowstone-injunction-commercial-leases
7. Korsinsky & Klein, “LL97 Compliance Costs: Who Is Liable in a New York City Lease?” (Apr. 20, 2026), https://www.kklawfirm.com/blog/2026/04/ll97-compliance-costs-who-is-liable-in-a-new-york-city-lease/
8. CooperatorNews, “Residential vs Commercial Condo Owners” (July 2025) (Leni Morrison Cummins, Cozen O’Connor), https://cooperatornews.com/article/residential-vs-commercial-condo-owners
9. Wiggin and Dana, “How Will Local Law 97 Affect New York City Real Estate?” (Apr. 5, 2023), https://www.wiggin.com/publication/how-will-local-law-97-affect-new-york-city-real-estate
10. Derector, “Local Law 97: What Building Owners Need to Consider,” https://derector.com/local-law-97-what-building-owners-need-to-consider/

This article provides general information, not legal advice; all sample language is illustrative and must be tailored by counsel to the specific building and lease.

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