Guest Post by Ellen Sinreich, CEO Green Edge, LLC

In order for a commercial office building to achieve the most in terms of sustainability, the landlord and its tenants must partner in working toward that goal. In the case of the landlord and tenant relationship, the governing document is the lease. If the landlord and the tenant agree that the property subject to the lease should be constructed, operated and occupied in a sustainable fashion, that should be reflected in the lease.

What Should a Green Lease Cover?

A “green” commercial office lease should incorporate the agreed upon sustainability goals for the building and the rights and responsibilities of each party necessary in order to achieve those goals.  Typically, sustainability goals for a commercial office building would include one or more of the following:

  • – Goals for reduced consumption of energy, water, and other natural resources;
  • – Goals for minimizing waste and diverting both construction and operational waste from landfill – in other words, recycling goals;
  • – Goals for creation and facilitation of superior indoor and exterior environmental quality; and
  • – Data collection, sharing and use as between landlord and tenant.

After these goals have been agreed to, the lease should be clear about the level of commitment on the part of the parties to achieve them.  One suggestion is that landlord and tenant agree in the lease to make good faith, reasonable efforts to achieve the stated sustainability goals and to reevaluate each of the goals periodically during the lease term.

Reduced Energy and Water Consumption

In order to make the goals of reduced energy and water consumption realistic and achievable, the parties must be able to measure their consumption.  After all, if you can’t measure it, you can’t fix it.  Thus, the green lease should provide for metering or submetering the tenant’s consumption of energy and water in its premises and should address the cost and responsibility of installing and periodically reading the meters.  The party responsible for reading the meters periodically should also be responsible for promptly communicating the information gleaned from the meter readings to the other party to the lease.

Equally important in a green office lease, the economic costs and benefits of reduced resource consumption should be allocated between landlord and tenant in a manner that both facilitates the goal of reduced consumption and compensates the appropriate party(s) for the cost(s) (if any) incurred to get to that goal.  Thus the traditional office lease arrangement whereby the cost of the energy and water consumed by the tenant in its premises is included in the base rent, with the tenant possibly paying its share of building wide cost increases over base year costs, needs to be examined and modified.  In the traditional scenario, the tenant typically has no knowledge of what it is consuming and it has no economic incentive to minimize that consumption.

Finally, the green office lease should set forth milestone dates around which the parties agree to discuss how actual consumption compares to the sustainability goals set forth in the lease and to use reasonable efforts to correct any discrepancies.

Diverting Waste from Landfills

It is hard to imagine a “green” office building that does not have a recycling program, including a reasonably convenient space for the collection and separation of materials to be recycled, and arrangements with third parties to pick up the materials to be recycled.   Thus, a “green” office lease should obligate the landlord and tenant to recycle both construction and operational waste and to keep track of and share with one another the percentage of that waste that is recycled and the percentage that goes to landfills.   Ideally the landlord’s recycling program will be a profit center and entitlement to those profits as between landlord and tenant should be spelled out in the lease.

Indoor Environmental Quality

The “green” office lease should also cover indoor environmental quality.  Both landlord and tenants should be “obligated” in the lease to use low or no VOC materials in the construction of the interior of the building, as well as materials that are rapidly renewable, regionally extracted and manufactured, contain recycled content and are themselves recyclable at the end of their useful life within the building.  In order to facilitate this and make “going green” easy – especially if the tenant is doing any construction or fit-out work in the premises – a green lease should include an exhibit or be accompanied by guidelines that will educate the tenant about the green options for materials, mechanical and utility systems and contractors in the geographic location of the building.

There is not much precedent in creating a “green” office lease. Therefore it is an opportunity to be creative and responsive to the goals and realities of the situation at hand, rather than an opportunity to follow a pre-determined formula.  In other words, this is a chance for landlords and tenants and their real estate attorneys to break new ground and really make a difference.

© 2009, Ellen_Sinreich. All rights reserved. Do not republish.

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Author: Ellen_Sinreich (1 Articles)

Ellen Sinreich, is the President and CEO of Green Edge, LLC, a Green Building consulting/law firm that provides strategic sustainability services to businesses and governmental entities. As a LEED Accredited Professional with more than 20 years of experience as a real estate executive and attorney, Ellen Sinreich is well-versed in Green Building practices and knows how to balance the need for sustainability with hands-on, ellen sinreichbottom-line-oriented solutions. In her role as President and CEO of Green Edge LLC, Ms. Sinreich dedicates her expertise to helping companies create value through sustainability measures at the enterprise, portfolio, and individual property levels.Ms. Sinreich is the Chair of the Urban Land Institute’s CRC Gold Council, a member of the Environmental Committee of the International Council of Shopping Centers and former New York State Government Affairs Chair of the ICSC. Her publications include: Land Use and Greenhouse Gas Emissions: Navigating a Changing Regulatory Landscape; Greening the Office Lease; The Business Case for Sustainable Real Estate; and The Greening of Retail: What’s the Bottom Line?

  • http://www.Green-Buildings.com Rob

    Agreed. It’s also important to consider the structure of the commercial green lease as well. The wrong type of lease (i.e. gross vs. net, etc.) carries with it ramifications to the building owner and operator and may introduce unwanted tension between landlord and tenant. Some more information on green leases and various options is here: http://bit.ly/green_lease