6.6.3 Existing Properties with No Prior HUD Recognized Green Building Certification

A. Any existing property lacking a prior HUD recognized green building certification (a certification named in Section 6.3.1 or Section 6.3.2 earned within 15 years of the date of application) may qualify by committing to obtain one of the certifications available for existing buildings (Section 6.3.2) or an unrecognized certification appropriate for renovations of existing buildings and selected consistent with Section 6.3.3. The owner must propose repairs and alterations consistent with and sufficient to achieve the selected certification. In addition, Borrowers must meet the following requirements:

1. Existing Properties-Selection and Achievement of Green Building Certification. The Project Architect must assure the Lender and HUD that the green building certification selected is appropriate for the building(s) composing the property and for the level of construction activity proposed and must certify that the Borrower’s proposed repairs and alterations when completed will reasonably achieve the requirements of the designated green building certification. The Borrower is responsible for achieving the selected certification and maintaining performance for the life of the mortgage.

2. Energy Due Diligence-Benchmarking. All owners of existing properties proposing repairs and alterations in order to obtain a green building certification must benchmark their property to establish the annual energy utility consumption against which the expected result of proposed improvements is measured. (Note that Section 6.4.5 specifies an annual benchmarking procedure to demonstrate continuing performance by green MIP properties during the mortgage term and that procedure does not permit sampling. By contrast, this paragraph requires a one-time benchmarking procedure required for candidate properties which procedure does contemplate sampling.) While sampling is permitted to benchmark energy use prior to certification, Lenders/Borrowers able to obtain and use 100% whole building data for establishing the benchmark must do so because this is a conclusive demonstration of the ability to meet the future, continuing performance requirement. Whole building, whole property data means 100% of all meters on the property or at the building and/or all fuels delivered to the property or the building.

The Borrower must retain a qualified, third-party, energy professional who must benchmark energy consumption for twelve whole, consecutive months, or consecutive utility billing periods consistent

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with a 12-month period, with the last month ending not more than six months prior to firm commitment application. Physical occupancy for each month must be at least 80%.

If 100% whole-building data is not available, a sampling regimen consistent with the requirements for ASHRAE Level II Energy Audits may be used, provided that tenant usage must be determined based on a sample of not less than 25% of units. If whole building data is available for some but not all buildings in a property, then the sampling requirements may be applied to the buildings lacking whole building data. Similarly, if some (but not all) utility providers serving the property provide whole building data, then sampling may be used to estimate usage for the utility where 100% whole building data is not available. For any sample, the applicant must demonstrate how the sample is representative and clearly identify sampled units and buildings. Actual usage must be documented with copies of source material, i.e., utility bills or statements from the utility provider. If sampling is used, the documentation must identify the unit and the time period for which usage is reported. If a utility provides whole building data, the utility’s documentation must show the name and address of the property and/or building and a count of tenant meters and owner meters by building or by site utility use as applicable.

The benchmarked results and documentation should be reported in the energy professional’s ASHRAE Energy Audit, which should summarize aggregate, annual consumption for each energy source and organize supporting documentation so that a Lender or HUD Underwriter can quickly verify the accuracy of the information. When a sample is used, the method of extrapolating the sample results to the whole must be shown. When the data collection and extrapolation of any sampled data is complete, the energy professional should enter monthly usage in the Borrower’s EPA Portfolio Manager account. A Statement of Energy Performance (not the HUD Custom SEP) representing the benchmarked results should be included in the ASHRAE Energy Audit. The ASHRAE Energy Audit should be attached to the CNA prepared in the CNA e-Tool.

3. Energy Due Diligence-Energy Audits. The Borrower’s energy professional must conduct an energy audit for the property in accordance with the standard of work for an ASHRAE Level II Energy Audit. Key features of Level II audits include: a) benchmarking existing use; b) identifying specific components, assemblies, appliances, equipment or systems that use, move or transmit energy; c) allocating benchmarked usage to these same items; d) recommending specific repairs, replacements and alterations to these items likely to reduce energy consumption; e) estimating per item and total cost of such items together with the per item and total reduction in energy use and cost resulting from the recommendation. In addition, a Level II Energy Audit should calculate the number of years required for the estimated annual energy savings to equal or exceed the cost of the recommendation for each item (the payback period). Level III audits provide an investment grade report that adds the following: a) whole building computer simulation (modeling) calibrated with field data; b) modeling of conservation measures and corresponding changes in energy consumption; and c) bid-level construction cost estimating. Accordingly, for Section 223(f) applications where a General Contractor is retained to estimate total costs and complete construction, an ASHRAE Level II Energy Audit is required, but if no General Contractor is retained, a Level III audit is required to provide bid-level construction cost estimating for energy conservation measures.

4. Energy Due Diligence-Capital Needs Assessment. The Capital Needs Assessment prepared in the CNA e-Tool for a green MIP application for an existing building must indicate that an ASHRAE Energy Audit has been prepared and must identify the energy professional as a participant. (Note that many due diligence providers may qualify as both needs assessors and energy professionals.) In addition,

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energy usage for each item or component named in the Energy Audit should be entered for each component and alternative. If a component (e.g., windows) does not use, but rather transmits, energy then the usage entered for the existing component is “0” and the usage entered for each alternative for that component is either a negative number (indicating expected energy saved relative to the existing component) or a positive number (indicating additional expected energy use). The CNA e- Tool will calculate the Total Cost of Operation (TCO) per item for each component and alternative. Also, it will compare the TCO of a component to each of its alternatives, allowing the user to see and demonstrate the relative life cycle cost. At a future date, the CNA e-Tool will also calculate and display net energy dollar savings for each recommended action (e.g., recommended replacement of 52 existing refrigerators with new ENERGY STAR® refrigerators saves $XX in energy costs per year.) In the meantime, such dollar savings (increases) should be provided in the ASHRAE Energy Audit.

5. Demonstrating Ability to Achieve and Maintain Minimum ENERGY STAR® Score. In addition to obtaining green building certification, a green MIP property must achieve and maintain an ENERGY STAR® Score of 75 or better. To demonstrate a high probability that this score will be achieved, the energy professional must calculate the estimated, annual, whole building, whole property energy use expected upon completion of all proposed repairs and alterations. If the selected green building certification allows a performance-based method for compliance, and the performance option is used for purposes of certification, then modeling or simulated results should be reported (See Section 6.4.9). The energy professional must then enter these estimated results in EPA’s Portfolio Manager to obtain a Statement of Energy Design Intent (SEDI) displaying an ENERGY STAR® Score that must equal or exceed the required minimum score of 75. The energy professional must download a HUD Custom SEDI, an excel spreadsheet, which should be attached to the CNA in the CNA e-Tool. This attachment records the expected ENERGY STAR® Score. It also records the expected Energy Use Intensity (i.e., BTUs per square foot) against which continuing performance will be measured in the event that EPA at a future time recalibrates or revises its multifamily ENERGY STAR® Score.

6. Project Architect Required. Borrowers applying for green MIP under Section 223(f) with a proposed (not already earned) green building certification must retain a Project Architect (or Professional Engineer) whose green MIP responsibilities include the same responsibilities as described for construction at Section 6.7.2. In addition, the Project Architect must certify the acceptability of any national or multi-state green building certification selected by the Borrower but not recognized by HUD (See Section 6.3.3). An Architect may not serve as both Project Architect representing the Borrower, and green building certification verifier or validator representing the standard-keeper of the green building certification.

7. Green MIP - HUD Repair Escrow Administration. For green MIP applications, HUD will not delegate repair escrow administration to Lenders. HUD will administer the repair escrow, approve any and all changes to the scope of work, and conduct periodic inspections of the work in progress.

8. Delivery of Green Building Certification - Extension of Repair Escrow. HUD may approve, if necessary to achieve the designated green building certification, an extended completion period of up to fifteen months. The green building certification must be earned and delivered prior to the release of the Borrower’s assurance of completion and any hold-back of surplus loan proceeds.

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