Green leases for commerical property

Reducing the environmental impact of commercial buildings is a credible aim - the Paris Olympics aim was to to halve the carbon footprint of previous years and so similarly with commercial green leases landlords and tenants can begin to make an impact.

What is a Green Lease?

Green leases are one way both landlords and tenants can reduce the environmental bearing of property as they contain provisions imposing an obligation to manage and reduce the impact of a property by way of improvements.

At the  Paris Olympics this summer renewable energy from wind and solar, recycled plastic seating, the use of existing venues when possible and new ones built with low-carbon concrete and recycled materials, are helping reduce the environmental impact of the games, and so building owners and tenants can make similar eco-friendly switches.

“Green leases tend to only relate to commercial properties rather than residential and contain a series of provisions imposing an obligation on the landlord and tenant to manage and reduce the environmental impact of the property by way of improvements, or how the business is run,” said Commercial Property Solicitor, Gary Jones.

“Green lease drafting ensures both landlord and the tenant undertake these specific responsibilities and obligations to minimise carbon emissions arising from the sustainable development, operation and occupation of a property,” he added.

Greater energy efficiency to reduce costs is attractive to both parties, but in addition, with the emergence of Government legislation on sustainability and an increasing public awareness of carbon neutrality wherever possible green buildings are desirable and more lettable.

“We are finding that businesses are re-evaluating the way they operate from properties they either own or occupy.  A green lease between landlord and tenant is a way of perpetuating the environmental principles of both parties.” added Gary Jones.

Green Lease Clauses

Some green lease clauses which can be included are:

• energy efficiency measures, including obtaining and/or maintaining an Energy Performance Certificate (EPC)
• data sharing – including, for example, utilities consumption
• waste reduction and management and recycling
• using sustainable materials for repairs and alterations
• water efficiency
• measures to comply with statutory environmental standards and/or achieve target certifications such as MEES and Building Research Establishment Environmental Assessment Method (BREEAM)
• consideration of wider adverse climate impacts

Green Lease Requirements

Data from the Government states that about a fifth of the UK’s commercial property could become unfit to lease due to poor environmental performance, however a green lease could help mitigate this.

There are some quick wins and easy changes that can be made, a landlord may simply require that their tenant turns off the lights at the end of the day, use energy efficient lighting and try to operate a paperless workplace (if this is possible).

For new builds, environmental concerns are now addressed at the point of construction and can often form part of the planning approval process.

“There is currently no requirement in the UK to enter into a green lease, however energy efficient requirements do form part of legislation, such as the Minimum Energy Efficiency Standards (MEES) regime which prohibits the letting of a building if its EPC rating is below an E,” advised Gary.

Having a green lease is also a badge of honour for both landlord and tenant, it can form part of a commitment to social responsibility and enhance an organisation’s reputation and help attract and retain employees.

“The Government has pledged to meet its legislative target of 78% reduction in greenhouse gases by 2035 and Net Zero by 2050, so commercial property and green leases will play a big part in this moving forward,” said Gary.

“If you are a landlord or a tenant it is worth having a chat with us about green leases and how your commercial property solicitor can ensure that there is a sound legal framework in place to establish the roles and responsibilities for each party and help to deliver some key environmental changes.”

How can we help?

Our Commercial Property Solicitors work with businesses and landlords, for legal advice on lease reviews and green leases contact us on 0161 785 3500 or email enquiries@pearsonlegal.co.uk

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Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.