Green leasing – it’s currently the biggest buzzword of the commercial property sector.

Why? Because approximately 40% of global annual CO₂ emissions can be attributed to real estate. And as climate policies become more and more of a priority, the government is encouraging landlords and occupiers to re-evaluate the environmental impact of their buildings.

A ‘green lease’ is a convenient way to do that. And here at St Helens Law, our commercial property solicitors can help you to get started and give your company a competitive edge.

What is a green lease?

At present, green leases only tend to apply to commercial properties – not residential.

Contrary to popular belief, they’re not a specific type of document and there isn’t an industry-standard ‘template’. It’s better to think of a green lease as a series of environment-focused provisions – which can simply be inserted into the commercial leases that are already used.

Essentially, these provisions are designed to enable both parties (i.e. the owner and occupier) to work together, to help reduce the building’s environmental impact and improve sustainability.

They can be incorporated into a new commercial lease. Or, if a lease is already in place, the parties can enter into a Memorandum of Understanding (MoU) instead. This isn’t legally binding – but it does provide a roadmap, encouraging cooperation and ensuring both parties play their part.

What type of clauses does it include?

When it comes to drafting a green lease, the building’s energy efficiency is typically the no.1 consideration – especially now that MEES (Minimum Energy Efficiency Standards) prohibits the letting of a building with a rating below ‘E’. But in addition, the provisions can also relate to:

• waste reduction and management
• energy consumption
• water efficiency
• travel to and from the building
• materials used in the fit out
• refurbishment and alterations to the property

Why should you consider a green lease?

Legally, you’re under no obligation to enter into a green lease – but that doesn’t mean you shouldn’t. As an existing or planned owner of a commercial building, there are many reasons to consider introducing such provisions (aside from the fact that you’re helping the planet!).

Here we’ve rounded up just a few of the main benefits:

1. Financial savings

On average, a commercial property wastes around a third of the energy it uses.

Given the current instability of energy supplies and soaring energy prices, imagine the difference it would make to your monthly bills, if you could find a way to reduce this inefficiency.

A green lease can help with this.

Energy-efficient retrofits tend to pay for themselves within approximately three years, and can lead to substantial long-term savings. Plus, there are many simple ways to collaborate with your tenants and significantly reduce the daily operating costs of a building – with very little effort on either side.

A well-thought-out strategy could be all it takes to reduce utility consumption – and costs.

2. Comply with Corporate Social Responsibility (CSR)

Most businesses now have a set goal to reduce their carbon footprint. As such, a successful green lease is an effective way to attract future tenants. Not only will it align with their values, it provides an easy way for them to measure and report their quantitative sustainability achievements.

What’s more, it’ll make it easy for you to gain desirable certifications (e.g. BREEAM).

Such certifications are a great way to showcase corporate responsibility. Therefore, eco-conscious tenants will be much more motivated to gain these third-party certifications – and provisions can be added to the lease to set your expectations and work together towards this common goal.

By complying with modern CSR policies – and introducing new energy-efficient initiatives – the value of your property is also likely to increase. Which means you may be able to charge higher rent.

3. Enhance your image

In today’s marketplace, people care about what a company is (or isn’t doing) to help tackle CO₂ emissions. And a green lease is an easy way to differentiate your organisation – making it clear how you’ve made a positive commitment to help the environment and operate sustainably.

It’ll also yield quantifiable environmental gains, which can be used for marketing purposes.

Drafting a green lease

Every green lease (or MoU) is unique depending on:

• the type of commercial property it relates to
• its environmental priorities
• the needs, wants and budget of the landlord and tenant

They also come in different ‘shades of green’ depending on their severity.

For example, a ‘light green’ lease is mainly aspirational provisions – which require limited commitment, aren’t legally binding and typically pertain to the building’s energy efficiency.

A ‘dark green’ lease is a little more comprehensive. This would typically include clauses that require a greater amount of commitment, are legally binding for both parties and cover more issues than just energy efficiency (e.g. an obligation for the tenant to use only sustainable materials, or for the landlord to reduce rent if targets are met).

As there’s no legal requirement to include a green clause in a commercial lease, there isn’t a standard form of wording. But there are some common overarching objectives that appear in most. These include:

• provisions identifying the agreed ‘green’ objectives for both parties
• an obligation to cooperate with each other
• restrictions on the tenant’s ability to make ‘non-green’ alterations to the property
• greater access rights for landlords, to help improve environmental performance of the building

Ready to go green?

Green leases are becoming increasingly prevalent – and as climate policies accelerate, they’re expected to become even more so in the coming years.

Landlords who adopt them early will undoubtedly give themselves a competitive edge. And here at St Helens Law, as industry-leading specialists in commercial property law, we have the knowledge and experience to set you on the right track to ‘real estate net zero’.

We recognise there isn’t a ‘one size fits all’ approach to a green lease. Which is why, our commercial property solicitors will work with you to establish your specific goals and requirements, and achieve a shade of green that is ideal for both you and your tenants.

For an existing lease, we can review the wording and introduce new clauses. Or, if it’s a new initiative, we can propose appropriate wording for both the new commercial lease and any future renewals. Either way, we’re here to guide you step-by-step through the process – offering our expertise in this area and delivering an exceptional service for a fixed fee.

An initial consultation with our commercial property team is available free of charge.

So where’s the harm in getting in touch to find out more? You can either fill out our online enquiry form and we’ll respond as soon as possible with some suggested times and dates. Or if you have any questions about green leasing, please feel free to give us a call on 01744 742360. We’re always on hand and happy to help.