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Better Buildings Partnership: Model form green lease clauses for inclusion in new leases or on lease renewal
Practical Law UK Standard Clause 6-386-1343 (Approx. 10 pages)
Better Buildings Partnership: Model form green lease clauses for inclusion in new leases or on lease renewal
by PLC Property
| Law stated as at 19 Aug 2013 • England, UK, Wales |
PLC Property has been given permission to publish the model form green lease clauses contained in the Green Lease Toolkit: Working together to improve sustainability (the toolkit). For more information, see Legal update, Green lease toolkit published.
These clauses were originally prepared for The Better Buildings Partnership (an initiative developed by the London Climate Change Agency) by:
Becky Clissmann, PLC Environment.
Siobhan Cross, Pinsent Masons.
Graham Lust, Nabarro.
We hope that by publishing the clauses on the PLC Property website in a form that can be downloaded into Microsoft Word, it will be easier for users to access and use the clauses and incorporate them into their lease documents. Due to the formatting of this document Firmstyle is not available.
NOTE: On 20 August 2013, the Better Buildings Partnership updated the Green Lease Toolkit. As such, this document has been superseded by Standard clauses, Better Buildings Partnership: model form green lease clauses.
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General clause notes
The Better Buildings Partnership (BBP) is an initiative developed by the London Climate Change Agency. It comprises a number of the largest commercial and public property owners in London acting together as a joint initiative to improve the sustainability of London's existing buildings and to accelerate the reduction in carbon dioxide emissions from those buildings.
It aims to demonstrate leadership and best practice to the wider commercial property market.
The BBP has published Green Lease Toolkit: Working together to improve sustainability (the toolkit). For more information, see Legal update, Green lease toolkit published.
The toolkit contains:
- A set of best practice recommendations.
- A model form memorandum of understanding (MoU) contained in section 3 of the toolkit.For further details of the MoU produced by the BBP, see Standard document, Better Buildings Partnership: Model form Memorandum of Understanding.
- Model form green lease clauses contained in section 4 of the toolkit.
The model form green lease clauses together with the BBP's instructive text are replicated below.
The suggestions made in section 4 of the toolkit are intended to supplement the MoU by incorporating provisions in the lease itself.
The extent to which clauses are included in the lease will be determined by the parties' ambitions, that is, how "green" they want their lease to be and what is appropriate given other relevant circumstances.
It is envisaged that parties who wish to have a green lease may also sign an MoU dealing with the practical implementation of the objectives set out in the lease clauses.
The BBP's suggested model form green lease clauses are not designed to be a substitute for legal advice; in considering their inclusion in a new lease or on lease renewal, the BBP's Green Lease Working Group suggests that parties discuss with their advisers:
- What their level of ambition is.
- Which of these clauses they wish to be included.
- Whether they wish to go even further than these recommendations.
It is anticipated that section 4 of the toolkit will act as a guide to the key issues.
The level of ambition that parties will have as regards to how green they wish their lease to be may vary considerably. This document sets out the provisions which the Green Lease Working Group considers necessary to achieve a minimum level of environmental sustainability for the property. It also identifies alternative and more challenging provisions which could be included.
It should be noted that section 4 of the toolkit focuses on clauses/ changes that are recommended in respect of new leases/ lease renewals for multi-let office buildings. Some of the suggested clauses will also be appropriate for different types of lease (for example, buildings occupied by a single tenant) or buildings used for different purposes (for example, shopping centres). Parties considering incorporating such provisions into an existing lease should review these suggestions to ensure that what is proposed is appropriate for the property and parties in question.
It should also be noted that:
- The Green Lease Working Group has not made any recommendations as to how the costs of installing any equipment or making other physical changes to the property in order to improve its sustainability will be borne or how any savings associated with improvements will be allocated. This is a matter for the parties to discuss and agree as appropriate to their circumstances.
- In addition, section 4 of the toolkit does not make suggestions for the treatment of the Carbon Reduction Commitment trading scheme under the Climate Change Act 2008. Subsequent versions of this document will cover issues arising from this so far as the Green Lease Working Group considers appropriate.
Drafting assumptions
The suggested drafting of the model form green lease clauses assumes a multi-let property and so there are references to "the Building" and the "Demised Premises" in the suggested drafting. These will need amendment for use in the cases of buildings let to one tenant.
Areas of leases where changes are suggested
Section 4 of the toolkit suggests the areas of leases where changes should be considered either by way of new clauses or amendments to existing clauses. The toolkit states that as a minimum, every lease which purports to be a green lease should address these issues.
2.Environmental Management Plan (EMP)
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Environmental Management Plan (EMP)
Where the Landlord employs a managing agent and/ or a facilities manager, the terms of such appointments should dovetail with the obligations accepted by the parties under the MoU. Arrangements should be made to ensure that the Tenant is obliged to cooperate with the Managing Agent/ or facilities manager in respect of sharing data needed for the EMP, allowing reasonable access to the building and so forth.
The Landlord will use reasonable endeavours to ensure that:
2.1When appointing third parties for the supply of services to or management of the Building they are suitably qualified and accredited for their specified role.
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Drafting consideration
2.2Its Managing Agent or other party responsible for the operation or management of the Building will:
(a)either put in place an appropriate Environmental Management Plan that is suited to the size and occupation of the Building or where the Memorandum of Understanding requires the Building Management Committee to put in place an Environmental Management Plan, work with the Building Management Committee to achieve this objective;
(c)keep all data provided by the Tenant confidential (save where disclosure of it is required by law) and only to use such data to ensure that the Building is run in a sustainable way that minimises its environmental impact.
The Tenant agrees that the Managing Agent or other party responsible for the operation or management of the Building will be entrusted to use the energy and water consumption data and the data regarding waste generated by the Building provided by the Tenant at or ahead of each BMC meetings for the purposes of creating the EMP and ensuring that the Building is run in a sustainable way that minimises its environmental impact.
3.Building Management Committee
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Building Management Committee
In order to run the Building in a sustainable way, communication between the parties is critical and must occur in a regular way between the appropriate members of the Landlord’s staff (or Managing Agent) and the Tenant’s staff. Where a Building Management Committee (BMC) already exists, the parties will include environmental issues on the agenda. Where no such committee already exists, the parties will set one up.
It is considered that this clause should be expressed as a requirement to set up the BMC in respect of the first lease of a building and that in respect of subsequent leases, that the Tenant will be obliged to:
(i) join the BMC by nominating a representative; and
(ii) attend the meetings of the Committee wherever practicable/ upon sufficient notice being given.
EITHER OPTION A
3.1The Landlord will set up a Building Management Committee comprising a representative of the Landlord, (or its Managing Agents), the Tenant(s) and such other third parties deemed necessary by the parties to meet [quarterly] (or on an ad hoc basis) to:
(a)consider the adequacy and improvement of data sharing on energy and water use and waste production/ recycling;
(b)agree the targets and strategies to reduce energy use and water consumption, improve waste management in the Building, consider green travel options and agree strategies to implement other aspects of any agreed Memorandum of Understanding.
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Drafting consideration
OR OPTION B
3.2The Building Management Committee will also:
(a)consider the adequacy and improvement of data sharing on energy and water use and waste production/ recycling;
(b)agree the targets and strategies to reduce energy use and water consumption, improve waste management in the Building, consider green travel options and agree strategies to implement other aspects of any agreed Memorandum of Understanding;
Where Building Management Committee meetings are attended by more than one tenant, the Landlord and Tenant shall hold additional meetings as may be reasonably necessary to discuss matters relating to a) and b) above which are concerned exclusively with the Demised Premises [and which either party wishes to discuss only with the other].
The Tenant will co-operate in the setting up of the Building Management Committee and the Parties’ representatives will attend the meetings of the Building Management Committee wherever reasonably practicable and provided that appropriate notice of such meeting is given by the party arranging such meetings.
4.Data Sharing and Metering
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Data Sharing and Metering
4.1The Landlord and Tenant will share the data they hold in respect of energy and water use and waste production/ recycling [quarterly] between themselves and with any other third party who the parties agree needs to receive such data.
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Drafting consideration
The Parties will keep the data disclosed under this provision confidential and will only use such data for the purposes of ensuring that the Building is run in a sustainable way that minimises its environmental impact.
The Landlord will ensure that similar restrictions on the publication and use of such data are placed on its Managing Agent/ and any other party responsible for the operation or management of the Building.
AND EITHER
The Landlord shall have the right [at its own cost] to install separate sub-metering of utilities used in the Common Parts and the Demised Premises and the Tenant shall have the right at its own cost to install separate sub-metering of utilities used in the Demised Premises. The Parties will give each other the necessary access in order to allow for such metering to be installed provided that reasonable notice of the intention to install such metering is given and provided further that such installation will not disturb the Tenant's beneficial use and occupation of the Demised Premises.
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Drafting consideration
These provisions may be inserted where the Common Parts and the Demised Premises are not already separately metered. The BBP Green Lease Working Group recognises that it would be better to decide what metering was necessary and have it installed ahead of the lease being signed but where the timing of the transaction does not allow this or where the lease of a building without sub metering is being negotiated these terms may be appropriate. Half hourly digital metering is currently considered the best option (as noted in the BBP Best Practice Recommendation (see section 1 of the toolkit) but has not been specified in this drafting to ensure flexibility to adapt to changing technology.
OR
The Landlord shall install separate sub-metering of any Common Parts and the Demised Premises and the Tenant shall install separate sub-metering of utilities used in the Demised Premises. The Parties will give each other the necessary access in order to allow for such metering to be installed provided that reasonable notice of the intention to install such metering is given and provided further that such installation will not disturb the Tenant's beneficial use and occupation of the Demised Premises.
5.Flexibility
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Flexibility
Generally a landlord would be able to carry out improvements to common parts or plant and equipment without an express provision to this effect either because:
- Nothing in the lease prohibits this; and/or
- The landlord has express rights to take steps it deems necessary for good estate management.
However, the parties may wish to consider whether any additional provisions might be required to enable a landlord to carry out such improvements where they are aimed at reducing energy and water use and waste production without liability for disruption to tenants. It is not proposed that the cost of such works would be within the service charge but the parties may wish to consider this.
In order to give the parties flexibility unilaterally to take steps which are aimed at reducing energy or water use or improving waste management in the event that the parties do not reach agreement (or sufficient agreement) in an MoU, the Green Lease Working Group considers the lease should include provisions which enable unilateral action to be taken. Such provisions will relate to landlord's access rights to, and rights to do works within, the demised premises and the tenant's rights to carry out alterations. Drafting for these elements is contained in this clause.
The Landlord and its servants or agents or contractors shall be entitled at all reasonable times and on reasonable prior notice to the Tenant to enter and remain on the Demised Premises for:
5.1The purpose of taking reasonable steps to review or measure the Tenant’s energy and water use and its waste production or waste management save where up-to-date information in this respect has already been provided to the Landlord by the Tenant;
5.2Carrying out works which are agreed by the Tenant (acting reasonably) and are aimed at more effective management of, or reducing, energy or water use or waste production and for setting up and managing recycling schemes (provided that such works cause as little disruption as reasonably possible and when complete do not adversely effect the Tenant’s beneficial use and occupation of the Demised Premises and that any damage caused by such works is made good).
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Drafting consideration
It is not intended that the landlord would be obliged to undertake such works but that if it chose to then it would have the appropriate powers to do so. The clause seeks to balance the interests of the parties.
With regard to that part of the clause that reads "Carrying out works which are agreed by the Tenant (acting reasonably)", the parties may wish to consider dispensing with any requirement for tenant’s consent thereby giving a landlord an absolute right unilaterally to carry out improvements.
5.3For the purposes of preparing EPCs or DECs or undertaking an air conditioning inspection and for such purposes the right to carry out the necessary tests on equipment.
The Tenant may with the Landlord's consent (which shall not be unreasonably withheld) carry out alterations to the Demised Premises aimed at reducing energy use or water consumption or improvement of waste management provided such alterations do not adversely affect the performance or life cycle of any mechanical or electrical services or any other plant, equipment or services in the Building and are not structural alterations.
6.Restrictions on Tenant's Alterations and Landlord's Works
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Restrictions on Tenant's Alterations and Landlord’s Works
Both Tenant's alterations and works by the Landlord to common parts or plant and equipment have the potential adversely to affect the efficient use of energy or water in the demised premises or the building. The BBP Green Lease Working Group considers that restrictions should be imposed on the parties to prevent works from having such an effect.
6.1Where the Tenant wishes to make changes to the Demised Premises or its use which may adversely impact on an existing EPC rating or which may adversely affect the efficiency of the use of energy or water within the Demised Premises or the Building, the Tenant shall provide sufficient information to the Landlord to enable the Landlord to ascertain the effects of the alterations and the Tenant shall consider [and, where reasonable, implement] any suggestions the Landlord makes to [avoid/ minimise] any such adverse effect.
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Drafting consideration
6.2The Landlord will consider any reasonable suggestions made by the Tenant to [avoid/minimise] so far as reasonably possible, any adverse impact on an existing EPC [or DEC] rating or the efficiency of the use of energy or water within the Building which may be caused by any works to be carried out by the Landlord.
6.3Where the Tenant carries out alterations which necessitate the provision of a new EPC, the Tenant shall obtain a new EPC [at its own cost] and shall provide a copy of such EPC to the Landlord.
6.4Where the Tenant carries out alterations to any plant equipment or services in the Building which affect the energy efficiency of such plant equipment or services, the Tenant shall provide such information about the energy efficiency of the altered plant or equipment as the Landlord shall reasonably require.
7.Dilapidations Clause
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Dilapidations Clause
This clause is to be incorporated in the reinstatement of alterations and yield up provisions.
The Green Lease Working Group recognises that blanket requirements for removal of Tenant's alterations can lead to unnecessary waste and inefficiencies. It also recognises however, that where the landlord judges it necessary for the reletting of the demised premises, it should not be prevented from requiring the removal of tenant's alterations which the landlord would have to remove in order to present the demised premises in the manner it deems appropriate for re-letting. On the occasion of each request by a tenant for landlord's consent to alterations, the parties should give consideration to sustainability issues in connection with the imposition and scope of any reinstatement requirement. In view of the fact that it is difficult to foresee at the time of consenting to the works what reinstatement a landlord is likely to reasonably require, any lease restriction on reinstatement should take this uncertainty into account.
7.1The Tenant shall not be required to reinstate any tenant's alterations which have been carried out lawfully during the term and which improve the energy or water efficiency of the Demised Premises unless such reinstatement is reasonably required by the Landlord having regard to its intentions in respect of the use or re-letting of the Demised Premises or the Building after the expiry or sooner determination of the term.
8.Rent Review
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Rent Review
Where clauses are incorporated giving the parties the right to carry out works aimed at reducing energy, water use or waste production (as in the section entitled Flexibility) questions arise as to the treatment of such works on rent review. The BBP Green Lease Working Group recognises that this will be a matter for discussion between the parties but would suggest that the following principles represent a fair position for both parties:
- Such tenant's improvements, provided they are carried out in compliance with the lease, should be disregarded. This would normally be assumed in modern rent review clauses in any case.
- Where the landlord takes advantage of right to carry out such works at its own cost and those works reduce utility bills or enhance the environmental performance of the demised premises or the building, any benefit which such savings would have on the open market rental value of the demised premises should be taken into account on review. For the avoidance of doubt this is only to capture increases in open market rent and is not seeking to rentalise capital expenditure. The parties should consider what agreement they can reach on these issues.However if these principles cannot be agreed by the parties then the Green Lease Working Group would still recommend the inclusion of provisions such as those set out under the section entitled Flexibility above, coupled with an express disregard of such works for rent review purposes, leaving the parties free to carry out the works.
Where a tenant has made alterations which have an adverse impact on the existing energy or water efficiency and waste production of the building and where this impact in turn has a negative impact on the rental value, it is considered that the negative impact of such alterations should be disregarded on rent review. Most modern rent review provisions will include a disregard of the effect on rent of alterations carried out lawfully by a tenant and/or an assumption that no work has been carried out which diminishes rental value. Such a clause may be wide enough to cover the issues referred to in this paragraph without the need for any additional wording.