Buildings are the source of half all greenhouse gas emissions in the UK. The Climate Change Act 2008 set a target of an 80% reduction in greenhouse gas levels by 2050.

Section 172 of The Companies Act 2006 imposes a new legal duty on company directors to have regard “to the impact of the company’s operations on the community and the environment”. The “corporate social responsibility” benefits of having a “green” lease are certainly worth investigating.

A “green lease” is a standard lease including additional clauses requiring landlords and tenants to work together to develop and improve the sustainability of the building, maximise energy savings and drive down greenhouse gas emissions thus creating an energy efficient, cost effective and sustainable space. The Better Buildings Partnership (BBP), a group of leading property owners, publish the Green Lease Toolkit which provides a set of guidelines for green leases based on the model first introduced by the Australian government in September 2006. The guidelines provide best practice recommendations based on a partnership approach and a Model Memorandum of Understanding (MoU) which can be entered into between the parties at any time during the life of a lease and which runs alongside it. It is not legally binding but requires the co-operation of the parties to ensure the building is run in a sustainable and energy efficient manner.

Green lease clauses might include aspects such as:- Co-operation in relation to energy and water consumption and waste generation; data sharing on energy and water use, waste production and recycling and maintenance records; restrictions on tenant’s alterations and landlord’s works which may affect the efficient use of water or energy; avoidance of adverse affects of alterations on the existing Energy Performance Certificate rating or the efficiency of a building; flexibility to allow the landlord access to perform energy saving works; rights to install sub-metering to common parts and the demised property where appropriate; restrictions on reinstatement obligations where measures have been taken to improve energy or water efficiency; establishment of a Building Management Committees to ensure the parties communicate to discuss environmental issues and agree an energy management plan; energy efficiency targets, possibly backed up by rental adjustments to reward good performance or penalise bad performance; service charge adjustments to reflect the use of individual tenants’ energy and water use; provision of a tenant handbook providing energy and environmental information; waste strategy; water saving measures; dispute resolution procedures.

Clearly, not all of these measures will be appropriate for all buildings and landlord/tenant relationships. Potential disadvantages of having a green lease include the risk of going into the unknown, the cost of making improvements (particularly for a short term lease) and expenditure of time and resources but against that the long term advantages should include reduction of operating costs, an energy efficient building being more attractive to tenants concerned about their own green credentials, improved reputation, compliance with corporate social responsibility policies and the new Companies Act 2006 duties.

If you require any further advice or assistance please contact Jane Winfield or a member of the Property team at Wortley Byers on 01277 268314 or jwinfield@wortleybyers.co.uk.

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