The Greening of the Office Lease – Sustainability in Commercial Buildings

The Saint ReportEnergy, Environmental Planning, saintblog0 Comments

ellen sinreich(Ellen Sinreich, green building strategist, attorney and president of Green Edge LLC, is a guest columnist who has written about the sustainability of green building)

By Ellen Sinreich, President, Green Edge LLC

In order for a commercial office building to achieve the most in terms of sustainability, the landlord and its tenants must partner in working toward that goal. As with any partnership, the document that governs the partnership relationship should set forth the rights and responsibilities of the parties as they relate to the goals and objectives of the partnership.  In the case of the landlord and tenant relationship, the governing document is the lease, and if the landlord and tenant agree that the property that is the subject of their relationship should be constructed, operated and occupied in a sustainable fashion, that should be reflected in the lease.

WHAT SHOULD A “GREEN” LEASE COVER?

A “green” commercial office lease should incorporate the agreed upon sustainability goals for the building and the rights and responsibilities of each party necessary in order to achieve those goals.  Typically, sustainability goals for a commercial office building would include one or more of the following:

  •          Goals for reduced consumption of energy, water, and other natural resources;
  •          Goals for minimizing waste and diverting both construction and operational waste from landfill – in other words, recycling goals;
  •          Goals for creation and facilitation of superior indoor and exterior environmental quality; and
  •          Data collection, sharing and use as between landlord and tenant.

After these goals have been agreed to, the lease should be clear about the level of commitment on the part of the parties to achieve them.  One suggestion is that landlord and tenant agree in the lease to make good faith, reasonable efforts to achieve the stated sustainability goals and to reevaluate each of the goals periodically during the lease term.

REDUCED ENERGY AND WATER CONSUMPTION

            In order to make the goals of reduced energy and water consumption realistic and achievable, the parties must be able to measure their consumption.  After all, if you can’t measure it, you can’t fix it.  Thus, the green lease should provide for metering or submetering the tenant’s consumption of energy and water in its premises as well as metering or submetering common area energy and water consumption. The cost and responsibility for installing and periodically reading these meters should also be addressed in the lease.  The party responsible for reading the meters periodically should also be responsible for promptly communicating the information gleaned from the meter readings to the other party to the lease. 

Equally important in a green office lease, the economic costs and benefits of reduced resource consumption should be allocated between landlord and tenant in a manner that both facilitates the goal of reduced consumption and compensates the appropriate party(s) for the cost(s) (if any) incurred to get to that goal. There are many variations on how energy and water consumption costs are allocated between landlord and tenant in traditional office lease arrangements. There are also variations on the extent to which a landlord is able to recover the cost of building wide energy and water efficiency upgrades. In all cases, to the extent that the landlord pays for the cost of energy and water efficiency upgrade, but the tenants reap the reward of reduced operating costs, the landlord has a disincentive to make those upgrades and achieve building wide efficientcies that are technologically feasible. These economic disincentives need to be examined and modified.

Finally, the green office lease should set forth milestone dates around which the parties agree to discuss how actual consumption compares to the sustainability goals set forth in the lease and to use reasonable efforts to correct any discrepancies. 

DIVERTING WASTE FROM LANDFILLS

            It is hard to imagine a “green” office building that does not have a recycling program, including a reasonably convenient space for the collection and separation of materials to be recycled, and arrangements with third parties to pick up the materials to be recycled.   Thus, a “green” office lease should obligate the landlord and tenant to recycle both construction and operational waste and to keep track of and share with one another the percentage of that waste that is recycled and the percentage that goes to landfills.  To the extent that the landlord’s recycling program is a profit center, entitlement to those profits as between landlord and tenant should be spelled out in the lease. 

INDOOR ENVIRONMENTAL QUALITY

            The “green” office lease should also cover indoor environmental quality.  Both landlord and tenants should be “obligated” in the lease to use low or no VOC materials in the construction of the interior of the building, as well as materials that are rapidly renewable, regionally extracted and manufactured, contain recycled content and are themselves recyclable at the end of their useful life within the building.  In order to facilitate this and make “going green” easy – especially if the tenant is doing any construction or fit-out work in the premises – a green lease should include an exhibit or be accompanied by guidelines that will educate the tenant about the green options for materials, mechanical and utility systems and contractors in the geographic location of the building.      

CONCLUSION

Although “green” office leases are the subject of increasing interest on the part of real estate industry professionals, in greening your office lease, there is still significant opportunity to be creative and responsive to the goals and realities of the situation at hand, rather than following a pre-determined formula.  In other words, this is a chance for landlords and tenants and their real estate attorneys to break new ground and really make a difference.  

Ellen Sinreich is president of Green Edge LLC, a Green Building consulting/law firm that provides strategic sustainability services to businesses and governmental entities. email ellen@greenedgellc.com  web www.greenedgellc  phone      212-828-3840  212-828-3840    212-828-3840  212-828-3840      212-828-3840  212-828-3840    212-828-3840  212-828-3840        212-828-3840  212-828-3840    212-828-3840  212-828-3840      212-828-3840  212-828-3840    212-828-3840  212-828-3840           

Leave a Reply

Your email address will not be published. Required fields are marked *