1652186830945 B 0309 Greenlease

Build a Greener Lease

March 19, 2009
A green lease removes the hindrances to reducing energy and water, increasing recycling, and encouraging sustainable practices

From the perspective of a facility manager or building owner, having a building that operates more efficiently reduces operation and maintenance costs (at the very least). While there are several ways to make that happen, a green lease can help you get there.

"A green lease is just a term for a lease agreement that takes into account sustainability goals that the landlord or the tenant might have, and/or the inherent green attributes of a building. Generally, you start with a green building, and that’s what drives the need for the green lease," says Aleka Eisentraut, attorney at Wendel, Rosen, Black & Dean in Oakland, CA.

According to William C. "Beau" Byrd II, partner at Bradley Arant Boult Cummings LLP, Birmingham, AL, a green lease removes the hindrances to:

  • Reducing energy, water, and raw-materials consumption commonly found in a commercial lease.
  • Increasing recycling and the use of sustainable materials in tenant improvements.
  • Encouraging sustainable practices by the landlord and the tenant.

"Some people hear the term ‘green lease,’ and they think it has to be much more than it is," says Eisentraut. "They think that it has to make statements about people committing to act a certain way or to uphold certain principles. It can have that, especially if both parties are willing participants, but it doesn’t have to." She states that a green lease can be as simple as something that focuses on energy efficiency, construction, etc. Or, it can strive to maintain energy-efficient practices and make sure that future maintenance exercises improve the building’s sustainability. A green lease could also be as detailed as to indicate that a broken faucet should be traded for a new low-flow model when it’s replaced.

Turning existing leases into green leases is possible, but it can be difficult. "To convert a lease into a green lease would require material modifications to the existing lease," explains Byrd. In an existing landlord-tenant relationship, when a building is renovated and made into a sustainable building, the landlord and tenant will need to work closely together to modify the current lease, or enter into a new lease.

"The toughest transition right now is getting all of these existing building leases switched over to green leases," says Eisentraut. "It really depends on the type of building, the type of lease, how the pass-throughs are set up, the operating expenses in the pass-throughs, etc."

Multi-tenant buildings can also pose challenges to implementing green leases: leases come up for renewal at different times, tenants are moving in and out, etc. The easiest way to introduce green leases in these situations is to start with the first tenant. But, that’s not always realistic. "If you have someone come in who is going to submeter his/her space, everybody else in the building is paying on a pro-rata basis. That’s a difficult situation – to be on the same page with that, and [figuring out] who’s going to be paying what percentage of common-area maintenance, etc.," says Eisentraut. No matter what you do, be prepared: You’ll inevitably be faced with periods of time when some tenants are under the old lease and some are under the new (green) lease.

"The myth about green leases is that they’re difficult and cumbersome documents. In fact, green leases are about partnering up and sharing the responsibility of maintaining a sustainable building where the tenant and landlord are concerned about the environment and reducing the use of our natural resources. Thus, green leases are less adversarial and more of a partnership," says Byrd. "As we build and renovate more buildings in a sustainable manner, green leases will become more prevalent."

If the concept of green leasing is new to you, check out what BOMA Intl. has to offer: its Guide to Writing a Commercial Real Estate Lease, Including Green Lease Language. With instructions to help building owners and managers write green practices into lease agreements, it will be highly beneficial as you implement your own green lease.

Leah B. Garris ([email protected]) is managing editor at Buildings magazine.

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