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Green Leases

With more and more focus on the need to reduce the UK's carbon footprint initiatives are being taken to improve the environmental performance of commercial property - and "green leases" or at least green clauses are seen by some as the way forward.

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Green Leases

Although the first initiatives are to reduce London’s CO2 emissions there is no reason why similar changes cannot be implemented elsewhere.

“Green Lease” clauses

Green Lease clauses could be added to a standard commercial lease to provide for some or all of the following measures aimed at minimising environmental impact:

  • To implement  an Environmental Management Plan for the building – arrangements could be made for individual tenant’s to co-operate with the managing agent in sharing data on energy and water consumption to assist the landlord in implementing measures to reduce energy use and water consumption or improve waste management
  • To allow the landlord to install sub-metering at its own cost
  • To allow the landlord access to carry out  works agreed with the tenant and  aimed at improving energy efficiency
  • To require the landlord to keep plant such as air conditioning and boilers in energy efficient working order
  • To require that any alterations proposed by the tenant meet certain standards of energy efficiency (for example, insulation and ventilation)
  • Preventing the landlord from requiring the removal of alterations which have improved energy or water efficiency at the end of the lease
  • To allow works which have been carried out at the landlord’s cost, and which have increased both energy efficiency and  open market rental value, to be taken into account on review
  • To require any assignee or sub-tenant to covenant with the landlord to comply with the landlord’s environmental policy for a building
  • To include an adjustment system for service charge contributions  which may penalise tenants who have not met specified energy efficiency targets

Agreements to improve the carbon footprint of a commercial property

Changes may also be implemented during the term of an existing lease if the Landlord and Tenant commit to a Memorandum of Understanding, in keeping with the property, as to how carbon, energy, waste and water can be reduced.

Agreement could be reached on matters such as purchasing energy from renewable sources, recycling facilities, use of energy efficient plant and equipment or provision of bike storage and showering facilities.

The extent of the measures to which the Landlord and Tenant wish to commit and the time scale for implementing the agreed programme would be  matters for contractual agreement between the parties . A model Memorandum of Understanding with a ‘checkbox’ Schedule of possible measures is available to assist in agreeing a co-operative framework.

It is hoped that this will provide a solution to those owners and occupiers that want to address environmental issues but may be deterred by the costs and the amount of time it may take to document the arrangement.

If you wish to discuss this article or require any advice or assistance in relation to commercial leases then please do not hesitate to contact Jonathan Senior on 0114 2536543.

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