Post-Lockdown Perspective – Green Leases – The Eco-Friendly Lease

Many companies and individuals have used the coronavirus lockdown period to reflect and take stock of what is important to them and, for many, lockdown has triggered a shift towards a more environmentally friendly way of living.

Many individuals have had to change their lifestyles very quickly over the past few months. Many have taken up gardening; dug their bikes out of the garage to enjoy the cleaner air and quieter roads; and for many, the lack of food availability has resulted in meal planning, and in turn, reduced household waste.

As we are all spending more time in the home, people may also be conscious of an uptake in home energy consumption.

With the ever-increasing awareness and pressure regarding environmental matters, many landlords and tenants will demand to enter into leases that actively promote a reduction in a building’s impact on the environment.

Recent Government policies such as the Minimum Energy Efficiency Standards (MEES) regulations, which came into force on 1st April 2020, are also beginning to force developers, landlords and tenants to consider their energy efficiency and the sustainability of a building throughout its entire life cycle.

How can a landlord/tenant be more environmentally friendly?

One way for landlords and tenants to take steps towards improving the sustainability and long-term attractiveness of their lease is by entering into a ‘green lease’.

A ‘green lease’ is a lease which incorporates agreements as to how the building will be occupied, operated and managed with a view to working as sustainably as possible. This will include sustainable operations, such as energy efficiency measures, waste reduction and management and water efficiency.

Can I force a tenant to be more eco-friendly?

Under a ‘green lease’ a landlord and a tenant can be obliged to enter into so called ‘green’ covenants within their leases.

For example, a landlord may agree to:

  • Improve the efficiency of a property in order to meet a specific energy efficiency rating;
  • Separately meter the water and electricity consumption for each tenant;
  • Create and follow a green management plan that organises the targets and plans that the landlord and tenants wish to meet; and
  • Ensure all plant and equipment – particularly air-conditioning systems – are operating at maximum efficiency.

Equally, a tenant may agree to:

  • Fit out using recycled materials or those which can be recycled;
  • Make all alterations energy neutral/provide energy savings;
  • Observe and perform the landlord’s green management plan; and
  • Give the premises back with at least the same energy rating as at the beginning of the lease.

History of the green lease

The green lease was first developed in Australia where it is now mandatory for all Government owned and occupied buildings. Since being introduced in Australia ‘green lease’ requirements have been imposed across London and throughout the UK.

Benefits of a green lease

While there are benefits to feeling that you are doing your bit to protect the environment, there are also a range of further benefits including:

  • Increasing the longevity of a building which ensures increased rental returns and occupancy rates;
  • Ensuring that the property is maintained in accordance with its design – particularly following refurbishment;
  • Reducing the cost of operating and maintaining the property;
  • Meeting Corporate Social Responsibility requirements;
  • Providing a ‘green’ work environment to tenants; and
  • Improvements in public image and related marketing positions.

Many landlords may wish to attract tenants by offering green leases to show their commitment to reducing a building’s impact on the environment. However, existing tenants can also enter into a green agreement, known as a memorandum of understanding, which commits all occupiers and landlords to promoting the energy performance of a building.

As well as providing a commercial benefit to landlords and tenants, a ‘green lease’ is also perceived to offer a genuine long-term benefit to both landlords and tenants, as it ensures that developments are sustainably occupied, operated and managed in accordance with their design.

Green Lease

How can Nelsons help?

Nathan Wescott is a Solicitor in our expert Commercial Property team.

For further information on the subjects discussed in this article, please contact Nathan or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.

 

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