Emma Peveril looks at the concept of green leases and the importance of acollaborative approach between landlord and tenant

A green lease is a lease that contains provisions setting out the landlord and tenant’s position on energy efficiency and sustainability. For example, a green lease clause may require a tenant to contribute towards the cost of energy-efficiency improvement works.

Responsibility in law for carrying out such improvements currently rests with the owner/landlord but in a commercial lease, the cost of such works is a matter of negotiation. 

It is generally accepted that there is a shared desire by owners and the occupiers to operate more sustainably and improve the environmental performance of a building.  As landlord, an owner wants an asset that is efficient to run and attracts the best tenants and investors.  Similarly, occupiers want those properties that satisfy and align with their own sustainability/ESG criteria.

Unfortunately, that shared goal is not always reflected in a commercial lease and, more often than not, the green lease provisions are either diluted or removed entirely. Occupiers may be willing to accept wording to co-operate with their landlords to be more sustainable but not at the expense of placing the financial burden solely on their shoulders – this stemming from a concern that the landlord does not want to contribute.

The key is collaboration and earlier engagement between the parties on these matters. Both sides should acknowledge and accept the likelihood that these works will need to be carried out at some point during the term of the lease, and it is in both their interests to work together to not only facilitate these works but to share the financial burden jointly. In light of spiralling energy costs, how these issues are addressed will become increasingly relevant.

At DWF, we understand the importance being placed on operating sustainably because we are focusing on this ourselves. Our 2030 net zero target has been verified by the Science Based Targets initiative.  If you need support with your own ESG/sustainability requirements then please do contact us.