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Tenants Get Gold "Star" for Energy Efficiency
Practical Law Legal Update 0-610-6825 (Approx. 4 pages)
Tenants Get Gold "Star" for Energy Efficiency
by Practical Law Real Estate
| Published on 05 May 2015 • USA (National/Federal) |
President Obama recently signed the Energy Efficiency Improvement Act of 2015, which creates a "Tenant Star" program designed to encourage commercial property owners and tenants to operate energy efficient buildings.
On April 30, 2015, President Obama signed the bipartisan Energy Efficiency Improvement Act of 2015, which was overwhelmingly passed by both houses of Congress (S. 353, 114th Cong. (2015)). The Act affects both property owners and commercial tenants and aims to improve the energy efficiency of federal and commercial buildings. The Act contains three main titles:
- Better buildings. Title I requires the Department of Energy (DOE) and the General Services Administration to develop a best practices model for commercial leasing policies to help align the interests of property owners and tenants. Title I also creates a "Tenant Star" program administered by the Environmental Protection Agency (EPA), similar to the ENERGY STAR program (which awards certification to certain types of buildings for achieving energy efficiency guidelines). This program will create a rating system to recognize highly energy efficient commercial tenants.
- Grid-enabled water heaters. Title II exempts certain electric resistance water heaters used for demand response or grid-balancing assets from pending DOE regulation standards.
- Energy information for commercial buildings. Title III requires buildings leased by the federal government that do not have an ENERGY STAR label to benchmark and disclose their energy usage data (for more information on ENERGY STAR certification, see Practice Note, Green Buildings: Laws and Practices: ENERGY STAR Certification).
The Energy Efficiency Improvement Act addresses the problem that arises when property owners pass utility charges on to their tenants, a common practice in both gross and net leased properties. This practice reduces the owner's incentive to invest in energy efficient measures. As energy efficiency and green building practices surge in popularity, this legislation is expected to add further incentive to property owners and commercial tenants to work together to implement energy- and water-efficient practices and policies.
Practical Law Real Estate's Practice Note, Owning and Leasing Green Real Estate provides real estate attorneys with practical guidance for environmental issues that arise in the development, financing and leasing of real property.
For more information on recent environmental issues, see Legal Updates:
For summaries of publicly filed leases containing energy efficiency clauses, along with links to the underlying public leases, see the following from the What's Market Leases database:
For resources containing general leasing guidance, see: