Green Lease Provisions – the future for Landlords and Tenants?

January 24, 2022

By Shawnee Evans

Following the conclusion of the COP26 summit, climate change is at the forefront of individuals and business’ minds. With a growing number of start-up businesses placing environmental considerations at the core of their business models, is it time landlords and tenants adopted sustainable green lease provisions?

What is a Sustainable or Green Lease?

A green lease incorporates a number of provisions within a lease that encourage both the landlord and tenant to reduce the environmental impact of the property being let. This will enable the property to be occupied and managed in a more environmentally friendly manner with the hope of reducing the property’s environmental footprint. These provisions can be included within a lease or in a separate tenant handbook.

If a lease is already in place but the parties want to ‘go green’ with their obligations, the landlord and tenant can agree to enter into a separate agreement which will set out steps to improve the environmental performance of a property.

What do Green Leases include?

The main focus is to improve a building’s energy efficiency; however, you can incorporate other changes such as:

• Waste management: the landlord and tenant agree to implement measures to minimise waste and utilise recycling facilities;

• Energy: taking steps to reduce electricity usage, e.g., installing separate metering, using timing schedules during the tenants’ working hours, switching to energy efficient bulbs;

• Water management: improving water consumption or discharge efficiency and installing fittings that may help make the use of these more environmentally friendly;

• Air conditioning and Heating: agreeing to limit the hours of use, not using it in areas that aren’t occupied at all times such as corridors;

• Transport: setting up car-share schemes for a building or cycle racks to encourage greener transport to/from the building;

• EPC: not to make alterations which could prejudice the EPC rating;

• Sustainable materials: agreeing to use energy efficient, recycled or local materials for any repair or alteration works required during the term of the lease.

This list is not exhaustive and there is not a ‘one fits all’ approach for the types of clauses that could be included.

Will a Green Lease work for an existing building?

Yes, in fact these clauses may be more suited to existing buildings that may be operating at a low environmental standard. With the introduction of legislation such as the Minimum Energy Efficiency Standards (MEES), now is the time for landlord and tenants to work together to preserve the lifetime of existing commercial property buildings.

Benefits of Green Leases

• Achieve greater energy efficiency to reduce costs;

• Future-proof the property against further legislation that may be implemented during the lifetime of the lease;

• Comply with Corporate Social Responsibility policies;

• Achieve an overall reduction in outgoings in utilities for both the landlord and tenant;

• Reduce the depreciation value in a property.

Traditionally, landlords and tenants have had differing objectives when it comes to making the building environmentally sustainable. Implementing these clauses in leases has been overlooked with leases left silent when it comes to environmental considerations. However, with climate change and various legislation being passed to reduce our carbon footprint, now may be the time to implement these provisions.

Please get in touch with Shawnee Evans on 029 2082 9127 or sevans@darwingray.com for a free, no-obligation chat about how we can help you with the above.