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In an evolving commercial property sector, environmental sustainability is no longer a buzzword. As corporate occupiers favour buildings with enhanced aesthetics and greener credentials, the green lease is gaining traction as a means of embedding sustainability into commercial real estate.


What is a Green Lease?

A green lease essentially follows the form of a standard commercial lease, but with additional ‘green’ clauses. The function? To encourage landlords and tenants to work together to save money and reach building efficiency goals.


BBP Toolkit

We have recently seen an update to The Better Buildings Partnership (BBP) Green Lease Toolkit, which is widely regarded as the benchmark for ‘market standard’ green clauses. The Toolkit offers clauses in several key areas, applicable to multi-let offices and adaptable to a range of asset types.

Clauses are categorised into ‘light, ‘mid’ and ‘dark’ green options, enabling users to tailor the transaction at hand. Light green clauses promote shared compliance, whereas dark green clauses may encompass more detailed obligations on either party or both.


Suggested Green Clauses include:

  • Sustainable use – setting out how a tenant should use/operate the property, and if applicable, how a landlord manages common areas. The aim is to foster cooperation between the parties to promote efficient energy/water use and minimise waste generation.
  • Recycling of waste – encouraging both landlord and tenant to reduce landfill waste and increase salvageable materials. Medium and dark green options reference a waste policy, detailing local businesses, charities and educational facilities that can salvage waste, as well as how landlords and tenants track and record data on the amount of salvaged waste.
  • Data sharing – enabling landlords to comply with green finance requirements and/or reporting obligations, as well as grant access to a tenant’s utility suppliers. Tenants may also choose to publish data about the buildings they occupy. Due to its critical importance, the Toolkit offers a single, balanced data sharing clause, that should be acceptable to both parties.
  • Landlord’s works catering for a scenario whereby the parties disagree on works to be undertaken by the landlord to enhance the building’s environmental performance. Drafting options permit the landlord to undertake works unilaterally. A light green clause requires the landlord to obtain tenant consent to the works, whereby a dark green provision removes this requirement. Whether it is reasonable for a tenant to share the cost of the works, and how to manage this, should be mutually agreed upon by the parties.
  • Sustainable tenant fit-out restricting a tenant from undertaking works that detriment a building’s environmental performance. The clause supplements a typical lease alterations clause, to include the environmental impact of matters such as water consumption, the biodiversity present in the building and the resilience of the property to climate change.

    The definition of environmental performance is wide-ranging, including the impact arising from materials used in the building, as well as from travel to and from the same.
  • Reuse/regeneration of resources when carrying out works - embracing the potential for reusing and regenerating resources (circular economy). We haven’t yet witnessed a trend in leases making express reference to a circular economy, but it’s possible that commercial landlords who already promote best practice in the form of alterations and fit-out guides may reflect the same recommendations in the lease proper.

    Where the parties require this, we suggest that we examine the lease clauses to avoid risk of inconsistency. Where landlord works are involved, caution is required to eliminate any discrepancy with service charge provisions.  
  • Reinstatement of tenant alterations – reconciling whether a tenant is required to reinstate, if such reinstatement may cause an adverse environmental impact to the building. The parties might also consider how reinstatement of tenant works may affect targets for material salvage and waste reduction.
  • Service charge – proposing that a tenant cannot challenge expenditure incurred via the service charge where a product or service could have been obtained at a lower cost. The reasoning? There is justification for the increase because it enhances the environmental performance of the building. The clause suggests that the landlord ensures such costs are subject to a cap of a 10% increase.

    This seems a sensible approach for both parties. Funding a sustainability project via the service charge is a key advantage to a landlord, whilst a tenant will expect a demonstrable benefit for the service charge cost; a cap provides a level of predictability.

    Our observation? We’ve seen landlords and tenants showing a willingness to improve efficiency through collaborative practice on improving the building and how best to allocate the cost of doing so. This may be implemented in express lease commitments or indirectly achieved through flexible service charge provisions.


What are the benefits to a green lease?

  • Aligns the leasing of commercial property with the corporate social responsibility goals of both landlords and tenants;
  • Ensures compliance with current/future environmental regulations, mitigating the risk of fines and legal issues;
  • Increases market demand – as sustainability becomes a priority, green certifications and sustainability measures may enhance marketability, leading to higher occupancy rates and rental values;
  • Contributes to cost savings – energy efficient buildings contribute to lower operating costs, leading to financial benefit for both landlord and tenant over the lease term;
  • Improves energy and water efficiency, thereby reducing utility bills.


Green lease clauses

In summary, incorporating green clauses into commercial property leases is a proactive step towards sustainability, benefiting both landlords and tenants. We are increasingly seeing sustainability initiatives addressed at Heads of Terms stage, encouraging collaboration at early doors and streamlining the transaction.

Whether you are a landlord looking to enhance the value of your property or a tenant aiming to align with your sustainability goals, adopting green lease clauses could be the right choice.


How we help

Our Commercial Property team at Boyes Turner can assist you with adopting the appropriate clauses to incorporate into your commercial lease.

Get in touch

If you have any questions relating to this article or have any commercial property matters you would like to discuss, please contact the Commercial Property team.

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