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Green Leases: Part of the Sustainability Equation

April 10, 2012 | 1 comment

When it comes to sustainable multi-tenant buildings, green construction and operation are just two legs of the stool; the third is a green lease.

No matter what you call a green lease (an energy-aligned lease, a high-performance lease, or an energy-efficient lease), the intent behind the contract is the same. Green leases align the interests of building owners and tenants so that both parties have incentives to save energy and select cost-effective upgrades. Ultimately, a green lease can help owners and tenants save money, preserve resources, prolong equipment life, and operate more efficiently. They can also define how costs and incentives will be split between when it comes to paying for and benefiting from energy-efficiency measures. (What’s the motivation for a tenant to save energy if he/she doesn’t see the financial benefits of doing so?)

Because green leases require the owner and the tenant to act collaboratively, commercial green leases tend to have a more positive effect on NOI (net operating income) than traditional commercial leases.

Many of the clauses found in a green lease can be similar to those in a traditional lease, but it isn’t the piece of paper that makes the lease green – it’s the cumulative effect of the building infrastructure, the way the building is managed and operated, tenant behavior, and improvements.

Here are some things to consider including in a green lease:

  • For mechanical and electrical improvements, indicate whether these improvements will meet or exceed current codes for energy efficiency and ventilation.
  • Consider adding standards for dust and airborne pollutant control during construction and upgrades so tenants know what to expect if a project occurs during office hours.
  • If a tenant has to relocate within the building, consider adding a clause that details how closely the replacement space will meet the green standards of the original space.
  • Who will pay for LEED-associated activities? What happens to the ROI from these projects? • Map out expectations and tools for setting and tracking sustainability metrics over time.
  • Outline the type of reporting you will request from tenants, as well as the reporting you plan to provide to them.
  • Depending on how expenses are handled between you and the tenant, will there be a dollar limit on the green expenses a tenant will be asked to cover over a certain period of time?

Some organizations also supplement a green lease with a separate document that offers tenants information and advice about day-to-day decisions (selecting office equipment, recycling, using space heaters, opening windows, etc.).

Have you implemented a green lease for the tenants in your building? Has it made a difference? How are tenants responding?

1 Comment

  1. Priscilla
    October 6, 2012


    Unfortunately I am not someone who has implemented a green lease for tenants, however, I am someone who strongly believes in the benefits such “green” tenancy agreements could accrue for tenants, landlords and the environment. I really appreciate this blog and am particularly interested in what you mean by the benefit of prolonging equipment life that you speak of?

    I am part of the Green Lease Project, which hopes to bring “green” leases into the residential market. If you would like to share your knowledge, we would love to have your input in our draft “green” lease tenancy agreement

    Eagerly awaiting your response.

    Warm Regards,

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