Use A Green Lease Less You Lose Out
Green buildings are unique in many ways but share one common trait with traditionally constructed buildings, without tenants they are of little use to their owners. With tenants comes the need for leases and with green buildings a green lease is a necessity. A green lease is needed from the owner's perspective to ensure that their investment is protected and from the tenant's perspective to ensure that the owner constructs and operates the building in a manner that ensures energy efficiency. Traditionally there have been two types of leases used in the leasing of commercial property, triple net leases and gross leases. A triple net lease is a lease where the tenant pays their monthly base rent, a portion of the building's energy costs, real estate taxes and insurance costs proportionate to their percentage occupancy of the building, and their proportionate share of the buildings public area maintenance. A triple net lease provides no incentive to the owner to increase energy efficiency as the tenants are already paying these costs. On the other hand a gross lease where the tenant pays a monthly rent which covers the tenants insurance, real estate taxes, and public area maintenance.
In buildings which utilize a gross lease the owner would be well advised to take measures to increase the buildings energy efficiency as they will directly benefit from any savings. However, owners continue to fight measures such as those proposed by New York City which would require energy efficiency increases.
So what exactly should a green lease address? The following list while by no means exhaustive provides a good starting point for owners considering implementing green leases:
- Require tenants to use energy efficient lighting fixtures which include occupant sensors and not to override these sensors if installed by the owner.
- Require tenants to use low flow fixtures to reduce water use.
- Permit entry by the owner's agents to monitor building systems on an ongoing basis to ensure that they are operating at their highest possible efficiencies.
- Require tenants to utilize low Volatile Organic Compound (VOC) paints, adhesives, and cleaning supplies to ensure the highest possible indoor air quality.
- Implement waste management policies which incorporate recycling programs to minimize the amount of waste sent to landfills.
- Require that any tenant build-outs are conducted in a manner which will permit upgrading of building systems in the future if more energy efficient systems become available.
- Ensure that provisions are in place which clarify what the owner's and tenants rights and cost burdens will be if energy efficiency measures are implemented in the future which either interfere with the tenant's use and enjoyment of the building or which require large capital expenditures by the owner but which pass tangible financial benefits onto the tenant.
- A clause which allows the owner to terminate the lease if the tenant's use of the building is inconsistent with its design as a sustainable building.
