Green leases Malcolm Dowden

What is a ‘green lease’? Developed in Australia for the public sector, 2006 Extended into the private sector on a voluntary basis Promoted in UK by leading landlords

Green leases in the UK Better Buildings Partnership (BPP) published its Green lease toolkit in April 2009 –

Green leases in the UK Common clauses include: –rental level and review attached to energy performance targets –service charges enabling landlords to recoup costs of introducing, replacing or maintaining energy and water efficient plant, equipment and machinery –fit out covenants prohibiting tenants to carry out works detrimental to the energy performance of the demised premises as a whole –financial reward for tenant’s complying with energy efficient incentives

MOUs An alternative to lease schedules or variations Recommended for use within a lease term where variation is not possible

What are the drivers? Corporate social responsibility? Energy Performance of Buildings regulations? CRC Energy Efficiency Scheme?

CRC – flawed assumptions? Cost of allowances – who should pay? Recycling payments/rebates –who should receive them? –How should they be applied?

Institutional lease – fit for purpose? Landlord’s objective is a ‘clear’ lease –Rent represents ‘pure’ profit –Costs of repair and operation collected from tenants –Capital value a function of clear rental income

Drafting for CRC CRC has accelerated the use of ‘green leases’ Clauses in circulation seek to pass all costs on to tenant Tenant amendments seek a ‘fair and reasonable’ apportionment of costs

Drafting for CRC Tenants’ requirement for information, within a building and across a portfolio Tenants’ amendment excluding additional costs triggered by the landlord’s commercial activity Tenants’ amendments requiring distribution of recycling payments – and then what?...