On December 1, 2025, the West Hollywood City Council unanimously adopted a new building performance ordinance that applies to rental properties with 20,000 square feet or more. The ordinance requires building owners to complete benchmarking, third-party data verification, and phased performance improvements.

The new rule takes effect December 31, 2025, and establishes compliance deadlines through 2036. For owners, the ordinance represents both a long-term planning consideration and a potential cost factor that should be incorporated into valuation, hold strategies, and disposition planning.

Why It Matters

The ordinance introduces tiered compliance milestones; each tied to specific performance upgrades. Costs vary depending on the building’s systems, age, and existing infrastructure.

Below is one example from city staff for a 20-unit multifamily property:

Estimated Upgrade Costs (Example Scenario)

2026–2028

• Lighting + exterior photosensors: $1,120
• Water heater insulation + fixture efficiency: $3,360

2028–2032

• Solar PV (leased) + heat pump water heater (at burnout): $51,880

2032–2036

• HVAC replacement (at burnout): $64,900
• R-49 attic insulation: $14,900

Penalties

Failure to meet performance deadlines may result in penalties up to $10 per square foot of gross floor area.

For a 20,000 SF property, this could mean:

Potential Penalty: $200,000

The City has indicated that penalties are intentionally high to make compliance the more cost-effective option.

Disclosure Requirement at Sale

If a covered property is sold, the Seller must include a mandatory disclosure informing the Buyer of West Hollywood’s benchmarking and performance requirements and referencing Municipal Code Chapter 15.100.

For owners of multifamily properties in West Hollywood, these new performance standards add important, long-range operational and capital planning considerations.

While the ordinance aims to improve efficiency and performance outcomes over time, it also introduces:

• Additional compliance steps
• New documentation requirements
• Potential capital expenditures
• Broader implications for valuations and sale timing

At Lucrum, we recommend that owners begin reviewing projected system lifecycles, utility performance, capex budgets, and long-term exit strategies now—well before the interim deadlines arrive. Understanding these requirements early helps owners plan proactively rather than reactively.

Next Steps for Owners & Investors

• Determine Whether Your Property Is Covered: Confirm if your building meets the 20,000 SF threshold and falls within West Hollywood’s jurisdiction.

• Review Current Systems and Plan for Lifecycle Timing: Some upgrades can be aligned with natural equipment burnout, easing the financial impact.

• Assess Long-Term Capital Planning: Integrate potential upgrade costs into reserve planning, refinancing strategy, or disposition models.

• Understand Disclosure Obligations Before Listing: If you intend to sell, ensure the required municipal disclosure is included.

• Request an Updated Valuation: Compliance obligations can influence future value, buyer underwriting, and the timing of a sale.

Discuss Your Long-Term Options

Whether you plan to hold, refinance, or sell in the coming years, proactive planning can create better outcomes. Our advisors can walk you through how these standards may factor into your timeline.

Schedule a consultation at Lucrumre.com.

FAQs About West Hollywood’s Building Performance Mandates

Which properties must comply?

Rental properties 20,000 square feet or larger within West Hollywood.

What is required?

Benchmarking, third-party data verification, and phased performance improvements.

Are the upgrade costs fixed?

No. Costs vary based on the building’s age, systems, efficiency levels, and contractor pricing.

When are the compliance deadlines?

Interim deadlines occur in 2028, 2032, and 2036.

What happens if owners do not comply?

Penalties may be assessed up to $10 per square foot of gross floor area.

Is disclosure required when selling the property?

Yes. Sellers must provide a specific disclosure referencing the municipal requirements.

Source: AGGLA