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Green lease toolkit published
Practical Law UK Legal Update 3-385-8629 (Approx. 5 pages)
Green lease toolkit published
by PLC Property
| Published on 27 Apr 2009 • England, Wales |
An update on the green lease toolkit published by the Better Buildings Partnership.
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The Better Buildings Partnership (BBP) has published Green Lease Toolkit: Working together to improve sustainability (the toolkit).
The BBP is an initiative developed by the London Climate Change Agency. It brings together a number of the largest commercial and public property owners in London under one recognition scheme 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 toolkit contains:
- A set of best practice recommendations.
- A model form memorandum of understanding.
- Model form green lease clauses.
The memorandum of understanding and the green lease clauses have been drafted by Eversheds LLP, Pinsent Masons LLP and Nabarro LLP.
Several major institutional landlords have endorsed the toolkit.
The Green Lease Toolkit
The Better Buildings Partnership (BBP), an initiative developed by the London Climate Change Agency, has published Green Lease Toolkit: Working together to improve sustainability (the toolkit).
The toolkit includes the following:
- A set of best practice recommendations.
- A model form memorandum of understanding.
- Model form green lease clauses.
The BBP believes that owners and occupiers should work together to improve the sustainability, and reduce the environmental footprint, of commercial buildings.
Over the next six months, BBP members will trial the operation of the toolkit. The BBP invites other companies to do the same and welcomes feedback on the toolkit.
Green leases
A green lease in its simplest form consists of a standard lease with a number of additional clauses inserted that provide for:
- Obligations between the landlord and the tenant governing the tenant's use of, and the landlord's improvements to, a building.
- Rent review incorporating energy efficiency measures.
- Requirements on assignment or underletting for the assignee or sub-tenant to covenantwith the landlord to comply with any landlord's environmental policy for a building.
- Requirements for tenant's works to meet certain standards of energy efficiency (for example, insulation and ventilation).
- The inclusion of an adjustment system for service charge contributions, which may penalise tenants who have not met specified energy efficiency targets.
- Requirements for the landlord to keep in good and efficient working order all plant such as air conditioning systems and boilers that are subject to the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 and which contribute to the energy use of a building.
Green leases can also deal with matters such as building management, waste disposal, transport, catering and caretaking services.
For a comparison of the initiatives to improve the sustainability of buildings in the UK, US, France, Germany, Spain and Sweden, see Article, Green buildings: a comparative study.
Memorandum of understanding
An alternative approach to a green lease is to include, alongside the lease, a separate memorandum of understanding requiring both parties to comply with various green obligations.
A memorandum of understanding can be either voluntary or legally binding. Whether or not the memorandum of understanding is a binding contract depends on the presence of all the constituent elements of a contract. For more information on the formation of contracts, see Practice note, Contracts: formation.
A memorandum of understanding is a more flexible arrangement as it can be updated to allow for the setting of targets and actions to reduce energy use without amending the lease. Consequently, it provides a solution to those owners and occupiers that want to address environmental issues but may be deterred by the costs and the amount of time it may take to document the arrangement.
Summary
The toolkit comprises 4 sections:
- Section 1 sets out how owners and occupiers should use sections 2-4 of the toolkit.
- Section 2 contains best practice recommendations (see note, Best practice recommendations).
- Section 3 contains the model memorandum of understanding (see note, The model form memorandum of understanding).
- Section 4 contains the model green lease clauses (see note, The model form green lease clauses).
Best practice recommendations
The toolkit makes a number of best practice recommendations that include:
- Owners and occupiers should share data on energy and water consumption.
- Sub-metering should be installed for individual utilities and occupiers.
- Both owners and occupiers should respond to reasonable requests from the other to co-operate on strategies to reduce energy and water consumption, and improve recycling.
- The implementation of periodic audits of energy consumption and water consumption, and the amount of waste generated and recycled.
- Suitable considerations when altering or replacing equipment:
- suitability for purpose.
- 'like for like' replacement should be avoided.
- alterations that affect the energy performance of the building should be avoided.
- Building occupancy should be recorded and reviewed against actual energy usage.
- The establishment of building management committees.
- The inclusion of sustainability initiatives in the Tenant's Handbook.
- Where possible, owners should separately identify costs of green initiatives in service charge reporting.
- Owners should consider requests for the installation of renewable energy and low-carbon technology, where operationally possible and the value of the building is not affected.
- Owners should consider waiving the reinstatement obligations where occupiers' alterations have improved the environmental efficiency of the building.
The model form memorandum of understanding
The model form memorandum of understanding:
- Covers all the best practice recommendations set out in section 2 of the toolkit.
- Can be used in full, or in part, to incorporate the best practice recommendations.
- Can be entered into by the parties at any stage of the lease.
- Can be time limited. It need not run for the entire duration of the lease.
Comment
The green lease toolkit is a welcome publication. Although the BBP's remit extends only to the commercial property market in London, the BBP hopes that the toolkit will reach a far wider audience than the BBP's membership.
Several major institutional landlords have endorsed the toolkit, and Eversheds LLP, Nabarro LLP and Pinsent Masons LLP have been involved in the drafting of the model memorandum of understanding and the green lease clauses.