Article - Green Lease - The Way of the Future

Worldwide focus on environmental sustainability has given rise to a green building movement that aims to incorporate environmentally sustainable design principles into the building process and maintain those principles after the building has been built.

When a building is completed, and the tenant moves in, what measures need to be put in place to ensure ongoing commitment to environmentally sustainable design principles?
Addressing these issues has resulted in the introduction of the Green Lease concept.

Green Lease Schedule
It is predicted that the concept of the green lease will become a standardised schedule to company standard commercial lease documents. At this stage, however, drafting is
done on a case by case basis. The schedule could incorporate obligations of landlords and tenants to comply on an ongoing basis with environmentally sustainable design principles. A collaborative approach is required by landlord and tenant to ensure that the principles are complied with over the term of the lease.

Contents of Schedule
A green lease would include the following:
• binding promises
• remedies
• incentives for both parties to improve environmental performance
ongoing requirements such as:
1. obtaining Green Star NZ ratings
2. cleaning with environmentally friendly products
3. reducing energy/water use
4. recycling
5. having an environmentally friendly fit-out and building
management process.

The landlord would be obliged to ensure that target ratings are achieved and maintained for the term of the lease. The tenant would also make a similar undertaking in relation to its fit-out.

Management committee
A management committee is required in accordance with the green lease schedule. There should be a binding agreement to comply with obligations under a ‘green management plan’ and a review by the management committee at least every two years. A process for remedial action should be included, with disputes referred to a 'green expert’.

Landlord/Tenant benefits
The scheme will provide benefits for both landlords and tenants. The benefits for tenants include:
• Reduced outgoings (likely to include: water, electricity, waste management,
• Ability to provide an excellent working environment
• Enhancement of reputation

Landlords would benefit as they are able to attract quality tenants and increased returns over the long term.

Environmentally sustainable buildings
Some of the factors requiring consideration when constructing environmentally sustainable buildings include:
• a comfortable, productive and healthy environment
• low energy use/greenhouse gas emissions
• sustainable/healthy transport options
• low water use
• recycling

More prescriptive green leases are likely to emerge over time. What could be perceived by developers/ landlords as un-welcomed increased costs in the short term may eventually provide long term cost benefits associated with putting in place environmentally sustainable design principles.

Author: Legal News Letter 2008
Distributor: AnnanLaw - Lawyers Tauranga
For more information contact: AnnanLaw
Posted 21 November 2008