Since January 1, Berkeley has required nearly every home seller in the city to do something no other California municipality asks of them: prove their house meets a minimum energy standard before the keys change hands. The ordinance was built to push sellers toward heat pumps and solar panels at the exact moment they had the most reason to invest, when a buyer was already writing a check. The city's own numbers, tallied over the ordinance's first several months, tell a different story. Most sellers are not upgrading anything. They are writing a check to the city instead and handing the problem to the next owner.
That gap between what the rule was designed to do and what people are actually doing at the closing table is the thing worth understanding if you own a home here, whether you're listing this fall or watching from a few years out.
What the Ordinance Was Built to Do
The Building Emissions Saving Ordinance, known locally as BESO, has existed in some form for roughly a decade. Until this year it asked for disclosure and nothing more: get an energy assessment, hand the report to a buyer, done. Berkeley's own planning staff told the City Council that fewer than 3 percent of owners acted on those recommendations voluntarily. The council decided a report nobody reads doesn't change anything, so in April 2024 it passed a substantial rewrite, phased in starting January 1, 2026 for single-family homes and duplexes and extending to three and four unit buildings starting in 2028.
Under the new rule, a Berkeley seller of a one or two unit property has to get a Home Energy Score before listing and publish it in the MLS. Skip that step and the city assesses a $500 fee. Then comes the substantive part: the property needs six "emissions resiliency credits" before or at close of escrow. A heat pump water heater or heat pump HVAC system earns all six on its own. So does a solar and battery system, or replacing old knob and tube wiring. Smaller measures like insulation or duct sealing earn partial credit that can be combined. Work completed in the five years before the sale already counts, so a homeowner who replaced a water heater in 2022 may already be compliant without realizing it.
If a seller can't or won't do the work, the ordinance offers a second path: pay $110 to file for deferral, then both buyer and seller each deposit $2,500 with the city, for a $5,000 total. The buyer gets two years after closing to complete the upgrades and claim the refund.
The Numbers Escrow Actually Produced
Two paths. One built to encourage upgrading, one built as a fallback for sellers who genuinely can't. Trade coverage of the ordinance's first several months put real numbers behind those two categories, and the split is lopsided. Through late spring 2026, the city had processed 80 escrow deposits under the deferral option and 57 compliance certifications under the upgrade option. On its face that looks closer to balanced than you'd expect. Look closer and the compliance side thins out fast: of those 57 certifications, only 9 came from heat pumps installed specifically in anticipation of a sale that year. The other roughly 48 were sellers who happened to already qualify from work done years earlier, unrelated to the sale, thanks to that five-year lookback window.
Put differently, out of 137 documented actions in the ordinance's opening stretch, fewer than 1 in 15 represent a seller genuinely choosing to invest in a new upgrade in order to close a sale. Everyone else either deferred to the buyer or got lucky with timing on a renovation they'd already done. Berkeley's Planning Director, in written testimony to the council before the vote, had already flagged the underlying problem that made this rewrite necessary in the first place:
"only 2-3% of building owners are known to have completed upgrades under BESO's voluntary model."
Making the rule mandatory changed the paperwork. It has not, at least not yet, changed the behavior nearly as much as the ordinance's authors hoped.
The Escrow Deposit Is a Bet, Not a Toll
If you're the buyer inheriting a deferred obligation, the $5,000 figure looks worse than it is. It reads like a cost. It functions like a performance bond. A buyer who spends $3,000 on a qualifying heat pump water heater and documents the install with the city gets the full $5,000 back, not a reimbursement capped at what they spent. Do the work for less than the deposit and you come out ahead. Do nothing within two years and the deposit is forfeited to a city fund earmarked for emissions reduction in low-income housing.
That mechanic cuts the other way for sellers. Defaulting to a 50/50 split without negotiating it is effectively handing the buyer $2,500 that could have stayed in your proceeds or been used to complete the upgrade yourself before listing. Berkeley is one of the more competitive markets in the region for well-prepared homes, and a $2,500 line item is small enough to get waved through in the rush to close, which is exactly why it's worth putting on the table during offer negotiation rather than treating it as a fixed cost of doing business.
The Rule Sitting Right Next to This One
BESO doesn't operate in isolation. Berkeley has required a Private Sewer Lateral certificate before transfer of title for years, and it uses a nearly identical deposit mechanism with different numbers and a much shorter clock.
| BESO (energy) | Private Sewer Lateral | |
|---|---|---|
| Deposit if deferred | $5,000, split $2,500 buyer / $2,500 seller | $4,500, allocation negotiated |
| Who completes the work | Buyer, within 2 years | Buyer or seller, within 6 months |
| Filing fee | $150 compliance / $110 deferral | Varies by permit |
| What happens if missed | Deposit forfeited to city emissions fund | Deposit forfeited, city completes repair and bills or liens the owner |
A Berkeley property that hasn't resolved both obligations before listing can route as much as $9,500 into two separate city-held accounts at one closing, on two different clocks. The sewer lateral money is at risk in six months. The energy money has two years of runway. A closing statement that shows two seemingly similar deposit line items is actually describing two very different post-close timelines, and conflating them is an easy way to misjudge how much financial exposure survives past the sale.
Why Fewer Sellers Are Installing Anything Right Now
Part of why the upgrade path has stayed so thin has nothing to do with the ordinance itself and everything to do with what happened to the rebates that used to make it cheap. The federal Section 25C tax credit for qualifying heat pump installs expired December 31, 2025, its runway cut short by the One Big Beautiful Bill Act signed into law that July. The federally funded HEEHRA rebate program went fully reserved statewide on February 24, 2026. TECH Clean California's single-family HVAC incentives were fully subscribed even earlier, in November 2025. A seller weighing a pre-listing upgrade today is doing that math against a much thinner incentive stack than someone who moved a year ago.
California Energy Smart Homes, the state's whole-building electrification rebate that offered a base incentive around $4,250, followed the same pattern: its 2026 funding was fully subscribed by April, according to BayREN's own incentive tracker. What's left standing is BayREN's Home+ program, which is still writing checks in the range of a few hundred to a few thousand dollars depending on the measure, a narrower stack than a Berkeley seller would have found a year ago. Installed cost for a plug-in heat pump water heater that avoids a panel upgrade typically runs $2,500 to $4,500. A home that needs a full electrical panel upgrade to support the work can run $12,000 to $18,000 before any rebate is applied. Against that math, deferring to the buyer with a $2,500 deposit starts to look like the more common choice for a reason, not a shortcut.
Berkeley's decision is also happening against a regional deadline. The Bay Area Air Quality Management District adopted rules in March 2023 that phase out new gas water heaters across the Bay Area starting in 2027, with furnaces following in 2029. That deadline doesn't force anything at point of sale the way BESO does, but it's already shaping how buyers value an aging gas system in a disclosure package. An older water heater today reads as a near-term replacement cost, not a distant maintenance item.
What This Means If You're Listing This Fall
- Schedule your Home Energy Score early. Registered assessors in Berkeley have been booking one to three weeks out during busy stretches, and the assessment has to happen before you list, not during escrow.
- Decide your credit path before you set a price. Check whether any permitted work from the past five years already gets you partway to six credits. Many owners are closer to compliant than they assume.
- Get your sewer lateral status checked at the same time, not as an afterthought. It's a separate city program with its own certificate and its own six-month clock, and it can surface late in escrow if nobody looked at it early.
- Negotiate the deposit split rather than defaulting to it. The 50/50 BESO split is the ordinance's default, not a rule you're locked into during offer negotiations.
- Frame an older gas water heater or furnace honestly in your disclosures. With the 2027 zero-NOx deadline approaching, an informed buyer is already pricing that replacement into their offer whether you address it or not.
FAQ
Does BESO apply if I'm selling a condo or an ADU? No. Condominiums and accessory dwelling units are currently exempt, along with very small structures and certain historic buildings.
What happens if I skip the Home Energy Score entirely? The city assesses a $500 non-compliance fee to the seller. The score itself is a separate requirement from the six-credit resilience standard, and missing it doesn't excuse the upgrade or deferral obligation.
Do upgrades I made years ago still count? Yes. Permitted work completed in the five years before your sale date counts toward the six credits, provided it meets current code and was properly permitted.
Berkeley's point-of-sale rules are layered enough that reading the ordinance text answers fewer questions than it raises. If you're weighing whether to upgrade before listing, defer to a buyer, or figure out where your sewer lateral certificate actually stands, the Anthony Riggins Team can walk through the specific numbers for your property before you're negotiating them blind in escrow. Work With Us to build a closing timeline that accounts for both city obligations from the start, not after they show up on the settlement statement.
