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Is green the new black? Environmental sustainability in leasing

Posted by Andrew Grima on 5 May 2017

Businesses are incorporating sustainability practices into their business models at a rapid pace and the leasing world has taken note with the introduction of ‘green leasing’. Green leasing aims to incorporate ‘green’ terms into commercial leases. The landlord and tenant may in turn have certain obligations in order to meet these additional sustainability terms. So is green really the new black in the leasing world? 

What is a ‘green lease’ and what kind of clauses can they include?

A green lease is a lease which incorporates certain clauses which promote environmentally sustainable practices in the operation of a premises.

Green leases may include clauses which implement the following:

  • Energy performance measures (i.e. NABERS and Green Star);
  • Clauses that request reporting and auditing systems for the building in respect to practices which may impact the environment;
  • Requesting the establishment of a committee to monitor the environmental impacts of the building; or,
  • Creating practices that will benefit both the tenant and landlord in their sustainability ventures. 

How does the process work?

If a landlord wants to develop a green lease, the initial step is to include green terms into their heads of agreement. These terms can then be incorporated into the final lease during the negotiation process.  

What are the benefits for tenants and landlords?

There is no denying that the monitoring of wastage in large commercial buildings can have significant benefits for the environment. However, they can also have added benefits for both tenants and landlords: 

  • Tenants: Naturally, the less consumption there is, the less cost tenants have to pay in outgoings such as electricity payments. The tenant can also promote their ‘green vision’ to the potential and current clients by implementing such clauses. 
  • Landlords: Landlords also benefit from less building operating expenses due to less usage from the tenant. Landlords may also have the ability to increase the rent payable by the tenant because of the sustainable benefits the tenant will receive from occupying the premises.  

Conclusion 

The introduction of green leasing demonstrates that the property world is listening and responding to current public concerns about the environment and can assist businesses in implementing some sustainability measures. However, it’s important that tenants know exactly what they’re getting into as once the dotted line is signed, they will need to adhere to all green clauses in the lease. 

If you would like to discuss green leasing for your business, please contact: