Green Leases

“Green leasing” is a term that has sparked quite a bit of interest in the real estate world. However, there still seems to be some confusion regarding what green leases are and how they work.

What’s a Green Lease?

A green lease is a great opportunity for commercial or residential landlords and tenants to work together in going green. By doing so, both parties will save money on property costs while simultaneously helping the environment. A green lease carefully outlines the way in which a building must be occupied, managed, and operated to achieve energy-efficiency. The landlord and tenant will establish a legal agreement on sustainable practices and reap the rewards together.

Keep in mind that a green lease really isn’t all that different from a regular lease. The only difference is the provisions included for energy efficiency and sustainability.

The Incentives

Green leases will help landlords reduce energy usage by implementing sustainable practices and installing energy-efficient amenities. By monitoring the energy usage of electricity, gas, and water (both hot and cold) with the use of meters, tenants will be paying for the exact amount of energy they are using. Landlords can set this up by structuring energy payments with rent. For instance, the property’s target rating can be accounted for in the lease, and if the tenant goes over, they will pay the overage costs. In commercial properties, green leases are especially attractive because tenants can benefit from an improved corporate image and business model.

An environmentally conscious outlook will set companies apart and strengthen their credibility, as well as corporate social responsibility. Employees will also benefit, as their work environment will be safe, productive, and “green.” Green leases are great for the environment and everyone in them.

What to Include in a Green Lease Agreement

When writing a green lease agreement, it’s important to include some key elements.

  • A “target rating” and annual assessments should be specified. By agreeing upon certain scores and recording data regularly, tenants and landlords will be able to stay on track.
  • Digital metering should be implemented. This will track the usage of energy on the property, allowing for tenants to accurately manage energy efficiently.
  • Make an in-depth energy management plan with specific requirements for building operation.
  • Create a building management committee with representatives for each party. These individuals will keep in touch to discuss green practices and property management.
  • Include a provision for a remedial action plan and dispute resolution process. Should there be an instance of noncompliance with a green lease, the steps in the outlined provisions will be followed.
  • Commercial properties should define a green building operating program through a third-party certification standard such as LEED, BREEAM, Energy Star, or Green Globes. Your lease should align with the standards of your chosen program.

Elements of a Green Building

The goal of a green lease is to make a property as environmentally friendly as possible. That being said, there are certain amenities and services that should be focused on for energy efficiency.

  • HVAC: Heating, ventilating, and air conditioning units should be chosen based on their energy efficiency. HVACs determine a building’s indoor air quality, so going green in this aspect is very important.
  • Energy efficient design: The construction of a building is crucial for sustainability. A “green building” should strive for excellent insulation, ventilation, and materials. Maximization of natural light with the use of windows is also important.
  • Water: Reducing water consumption is essential in green leases. Low flow taps, toilets, and showerheads should be used throughout the space. A water recycling system may create “greywater” to be reused for lawn or garden use. A water collection and purifying system may also be installed for increased productivity.
  • Recycling and composting: To reduce waste, buildings with green leases should use on-site solutions to encourage green practices. Items like compost bins and recycling bins should be placed throughout the property. Paperless offices and waste-free options should also be promoted.