Unlocking the green code
Green leases are becoming more common for social landlords with commercial property, says Ben Halsey, senior associate at Lewis Silkin
The drive for energy efficiency has been heating up ever since the Climate Change Act 2008. A move towards letting properties under a ‘green lease’ reflects this trend.
What is a green lease?
Broadly, a GL is any lease (usually of commercial property) that requires the landlord or tenant to reduce the carbon footprint of the premises or undertake other energy-efficiency measures.
The GL is very much the new kid on the commercial part of the block. New housing schemes often involve an element of commercial property, and many social landlords also have a portfolio of commercial properties. So not for the first time the housing sector may find itself thrust into the role of energy efficiency pioneer.
The broad idea
When a landlord and tenant enter into a GL, they will usually be jointly responsible for reducing the environmental impact of the premises. The share of responsibility will be based on factors that include the commercial bargaining strength of the parties.
Provisions dealing with service charges, alterations, reinstatement and remedies for breach will all be modified to include green provisions.
Other supplemental documents, such as memoranda of understanding, are also likely to be required. Clauses in formal licence documentation, for example for change of use, and agreements for lease may also be treated differently.
In what situation might you need a GL?
The simple answer is in most commercial property, landlord and tenant scenarios, including:
- the grant of a new lease;
- upon the assignment of an existing lease;
- when alterations or development is proposed;
- within the planning and general contractual processes.
Developers of mixed-use schemes are already encountering planning obligations that require more environmentally friendly lettings arrangements for newly constructed commercial units.
The GL has been met with scepticism by landlords and tenants alike across all sectors, especially in light of present economic conditions - it is often expensive to be green. But there are potential benefits, particularly given the rising cost of energy. But GLs can extend far beyond energy efficiency - to water and waste management and use of sustainable materials.
Is it a specific ‘green code’?
Planners’ requirements may extend to such matters as fitting out the premises and the methods or materials used. The BRE Environmental Assessment Method - abbreviated as BREEAM - is a voluntary measurement rating for green buildings. It is often cited by planners when specifying obligations.
The Better Buildings Partnership, a collaboration between London’s leading commercial property owners and allied organisations, supported by the mayor of London, has produced a GL toolkit, available on its website.