Business-tenant green leases

As more green buildings enter the market, either newly constructed or renovated, commercial building owners are starting to ask businesses to sign "green leases."

A green lease helps a building owner operate an environmentally friendly building with a low carbon footprint and sustainable building materials and systems, and thus maintain the certification needed to enjoy the tax breaks of operating green. The most common green lease terms give landlords more control over certain aspects of the tenant's operations on the premises or greater access to the premises.

Terms in green leases can have a profound impact on how a business operates by stipulating that:

• The business operates only energy efficient equipment

• Only specific types of lighting be put into fixtures

• Only certain types of material be used in space renovation and modification

• The contractors employed by the business recycle materials.

In a traditional lease, the landlord has limited rights to enter the premises, but many green leases allow the landlord to enter the space to determine if the tenant is complying with the green terms of the lease, for example, separating trash for the building's recycling program.

Because operation of a green building requires the cooperation of all the tenants, most green lease terms will be non-negotiable.

Green leases are expected to become prevalent in the next few years. Certain government and government-funded projects already require compliance with green construction and operation standards. And many landlords are going green of their own accord because while the cost of constructing or renovating a green space is higher, the operating costs over the life of the lease are typically lower.

--

-- Patricia Farrell,
Meyer Unkovic & Scott,
pef@muslaw.com