Green leases aim to reduce waste and improve energy efficiency in the commercial property sector. They can be applied to both new and existing buildings.
It is essential to get expert legal advice before entering into a green lease. This ensures you know exactly what your responsibilities are. If you fail to meet these, you could be penalised.
What is a green lease?
A green lease is a type of commercial lease entered into by a landlord and a tenant. It places obligations on each party to comply with environmentally sustainable objectives. More specifically, the London Climate Change Agency says green leases should compel commercial landlords and tenants to:
- Monitor and improve energy performance
- Achieve resource efficiency targets
- Minimise the environmental impact of an organisation’s estate
- Operate at an agreed level through regular monitoring
Why get a green lease?
Green leases have long been popular in Australia, where they have been mandatory for all Government-owned buildings since 2006. However, the uptake has been slow in other parts of the world. This is partly due to resistance over cost-sharing arrangements, along with a lack of knowledge or compulsion.
Yet green leases do have significant benefits, if drawn up properly. Of course, they help cut emissions. But there are financial incentives, too.
For a commercial landlord, having an environmentally friendly property is an attractive product. This will appeal to tenants who are becoming increasingly aware of their carbon footprint – and their need to reduce it. As such, commercial properties with green leases may attract a higher price and occupancy rates.
For a commercial tenant, it is an opportunity to occupy a ‘green’ working space. This is important to those businesses which are keen to promote employee well-being and fulfil Corporate Social Responsibility requirements. From a financial point-of-view, a more energy efficient premises also means a reduction in operating costs.
What to include in a green lease?
There is no ‘one size fits all’ approach when it comes to commercial property leases. The same is true of green leases. Some prefer a more collaborative approach, often known as ‘light green’ leases. Others opt for a target-led approach, typically referred to as ‘dark green’ leases. The latter may include clauses demanding:
- An Environmental Management Plan, with targets to reach a certain energy efficiency rating
- Digital meters to monitor energy consumption, including separate meters for electricity, gas and water
- Data sharing between landlord and tenant
- All works to meet energy efficient standards
- Consequences if either the landlord or tenants fails to meet their obligations
Landlord and tenant obligations under a green lease
Landlords and tenants must always abide by their contractual obligations; these will be all the more onerous under a green lease. If you fail to comply, you may be penalised. That is why you must get expert legal advice before committing to anything – regardless of whether you are a commercial landlord or a commercial tenant.
We can review the terms of a green lease and help you understand your rights and responsibilities. We can also highlight any clauses that may be a concern. This is particularly important in relation to green leases, which can place significant (and costly) demands on one party. If so, we can guide you through negotiations.
If you want to know more about your rights and obligations as either a landlord or a tenant, please contact us at Breen Solicitors.