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What is a green lease?

green lease

Property developers, landlords and tenants are increasingly required by government policies to prioritise the energy efficiency and sustainability of buildings. The trend towards greater sustainability in commercial property has accelerated the use of ‘green leases’. 

What is a green lease?

A green lease is a series of provisions within a commercial lease that encourages or requires the landlord and tenant to reduce the environmental impact of the premises. 

We are seeing landlords and tenants work together to minimise the environmental impact of a property by making a series of green commitments on issues such as water efficiency, minimising waste/recycling, green transport facilities and the use of sustainable materials.

The different approaches include:-

  • Green clauses within the lease 
  • Green obligations in the tenant regulations or an environmental handbook
  • A requirement in the lease for the tenant to comply with an environmental policy for the building
  • Memorandum of Understanding (MoU). An MoU can be more flexible than clauses within a lease or in tenant regulations. Unlike the other options, it is likely to be voluntary rather than legally binding. An MoU will usually not run with the lease so if there is a new landlord, tenant or sub-tenant, the parties will need to enter into a new MoU. This approach is usually most attractive to tenants.

The benefits of a green lease 

Green clauses enable the building to be occupied and managed in a more environmentally-friendly way, so reducing the building’s environmental footprint. The benefits for landlords and tenants include:-

  • Achieving greater energy efficiency
  • Providing some protection from future commercial or physical risks e.g unstable energy prices, uncertain energy supply and increasing regulations 
  • Complying with Environmental, Social and Governance policies 
  • Complying with statutory requirements to report on environmental issues 
  • Complying with the government’s public procurement requirements 

If you need advice, guidance or support from our team of legal experts, please email or call us on 02920 224433. Please contact Jo Whitehead, Partner and Head of Property at Loosemores to find out more.

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