Green Leases are becoming increasingly popular due to concerns about the significant contribution of buildings to greenhouse gas emissions. This has led to an increased pressure for the Government to address energy efficiency issues in property.
A green lease is a way in which both the Landlord and the Tenant can reduce the environmental impact of the Property. Green Leases contain additional provisions which impose obligations on both the Landlord and the Tenant to manage and reduce the environmental impact of a property by way of making improvements.
Examples of areas where these additional obligations apply are:
- Energy Performance Certificate (EPC) ratings;
- Energy and waste conservation;
- Waste reduction;
- Renewable sources;
- Travel to and from the building and the materials used in the fit out; and
- Refurbishments and alterations to the Property.
There is no legal requirement in England and Wales to enter into a Green Lease, however, there is the Minimum Energy Efficiency Standards Regulation which impose energy efficiency requirements.
A primary benefit of having a Green Lease is the reduce in utility costs. The recent instability of energy supplies and the increased prices present an incentive for Landlords to reduce costs by ensuring their properties have as little energy wastage as possible and to rely less on insecure supplies.
There is also the benefit of the increases in market reputation and the property attractiveness for both the Landlord and the Tenant and any potential investors and funders.
However, the downside to a Green Lease is the impact of costs for both the Landlord and the Tenant as invariably one of them will be required to cover the costs of the initial improvements to bring about the long-term saving and benefits that such Leases can bring.
Green Leases are expected to become invaluable to help mitigate the impact on the environment and with an ever increasing focus from policymakers on taking action in relation to climate change, it is likely that Green Leases will take a prevalent role in years to come.