Green leases - a step in the right direction?

As businesses with office space continue to navigate their way through the challenges brought about by COVID-19, it seems unlikely that many will be focusing their efforts on their environmental impact from an office occupier perspective.  The report suggests that environmental issues are only having a moderate influence alongside the COVID-19 effect on office strategy in the medium term.

However, some tenants may have little choice but to consider sustainability in the context of their office spaces as landlords, in a bid to move towards more energy efficient buildings, are increasingly proposing "green leases" which are leases that set out specific obligations on both parties in connection with the improvement and management of the environmental performance of the occupied building.  In practice, this means that landlords may request that their tenants agree to a variety of "green" obligations in their leases such as:

• to share any data relating to environmental performance in respect of the occupied premises;
• to co-operate with the landlord in order to identify appropriate strategies for the management of environmental performance; and
• not to carry out any works which may have an adverse effect on the environmental performance of the occupied premises.

Green leases, whilst not particularly widespread at this moment in time, are increasing in popularity due to the benefits that they may offer not only from an environmental performance perspective, but also from both a landlord and tenant perspective:

• they can help businesses to comply with their corporate social responsibility policies;
• greater energy and resource efficiency may help to reduce overhead costs; and
• they can encourage collaboration in the context of the landlord and tenant relationship.

With the government increasingly looking at ways to encourage businesses to pay more attention to their environmental impact, green leases are, for many, becoming a welcome way of helping to tackle this ever-evolving issue in the real estate sector. Tenants will no doubt tread carefully at the point of negotiation, particularly in current times, as their objectives may well be focusing in another direction.

If you need any guidance on green lease proposals and what they could mean for you and your business, please do get in touch.