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Web Exclusive: Getting a lease on green


Green leases could be instrumental in measuring and improving the overall performance of sustainable commercial buildings

 

Even though sustainable commercial buildings were built around the world before the existence of the Leadership in Energy and Environmental Design (LEED) rating system, LEED revolutionized the industry by offering a third-party certification program and the nationally accepted benchmark for the design, construction and operation of high performance green buildings. The United States Green Building Council (USGBC) stated on their website that the LEED for New Construction rating system is designed to guide and distinguish high-performance commercial and institutional projects, including office buildings, high-rise residential buildings, government buildings, recreational facilities, manufacturing plants and laboratories. The LEED system helps minimize the consumption of fresh water and electricity and the emission of generation of greenhouse gases. However, once the certificate is issued, the LEED system offers no facility whatsoever for conducting periodical audits to ensure the performance of the buildings. This was one of the main reasons for the popularity of green leases as it empowers the owners and tenants to measure and improve the performance of commercial buildings in the interest of sustainability and cost-savings.       

 

Hammonds Built Environment Group in their publication, Alert, which was published in July 2008, stated that green leases are believed to have originated in Australia from an initiative taken by the Australian Government’s Department of the Environment and Water Resources. The Australian Government Solicitor prepared a template lease for use in lease transactions involving government agencies or bodies. The key elements of the template were as follows:

·        A commitment on the part of the tenant to achieve a rating under the Australian Building Greenhouse Rating Scheme;

·        A commitment on the part of the landlord to maintain the central services of the building to such standard to ensure the Australian Building Greenhouse Rating is retained;

·        An obligation on both parties to consider “in a reasonable and co-operative manner” whether an improved rating can be achieved during the term of the lease and, if they agree, to take whatever steps lie within their control to achieve that rating; and

·        Both parties to commit to an energy management plan to operate the building in accordance with prevailing government policy on energy conservation.

 

Green Leases Building Management group summarized on their website that green leases provide a proactive, sustainable yet flexible method for landlords and tenants of commercial buildings to explore opportunities and to improve building performance providing shared bottom line business benefits.

 

A green lease is a lease between the landlord and tenant of a commercial building with an additional set of schedules compared to a ‘normal’ lease contract.  Green leases include a legal basis for monitoring and improving energy performance that provide mutual contractual lease obligations for tenants and owners to achieve resource efficiency targets (e.g. energy, water, waste) and to minimize the environmental impacts. This demonstrates and ensures that tenants and landlords have adopted environmentally friendly practices and the building operates at an agreed level through regular monitoring and addressing issues as they arise.

 

One of the major reasons for adopting the concept of green leasing in North America is that North Americans are the highest per capita users of fresh water in the world. In North America, energy consumption by commercial buildings represents 10 to 20 per cent of total energy and commercial buildings account for approximately 20 per cent of the total annual water consumption. Furthermore, in commercial buildings up to 50 per cent can be used in water cooled chillers, approximately 35 per cent is for domestic use (e.g. flushing toilets) but only about five per cent is actually consumed by the occupants of the commercial buildings. There is too much solid waste produced — in tenant premises turnover and operating waste — and most of it is still going to landfills.

 

Investa Property Group in their publication, Green Lease Guide for Commercial Office Tenants, described the mechanism for creating and managing green leases which includes the following elements:

1.      Targets and Benchmarks:  The inclusion of targets, expressed either as a percentage reduction or an absolute target;

2.      Ecologically Sustainable Development Principles and Regulations:  It may include indoor air quality standards, and rules governing the use of material and recycling;

3.      Performance Standards:  These may include specifications as well as procedures as to how environmental performance is measured;

4.      Dispute Resolution Mechanism:  These may include ways to resolve disagreements as to why a particular target or prescribed objective is not achieved; and

5.      Environmental Management Plan and a Green Lease Schedule:  These components are the foundation of these green leases.

 

The following is summarized based on the basic information provided in the Green Lease Guide for Commercial Office Tenants, published by Investa Property Group. The commitments for green leases are divided into the following two categories:

1.      Owner’s Commitments:

The most important aspects from an owner’s commitment perspective in a building include: Comfortable, productive and healthy indoor environment, low energy use and greenhouse gas emissions, sustainable and healthy transport options, low potable water use, recycling of office waste, cleaning services, building management and tenant support, further innovations. These aspects are supported with the following categories:

·        Management of indoor environment quality;

·        Management of energy use and greenhouse gas emissions;

·        Key strategies for reducing travel demand and car dependency;

·        Efficient water management;

·        Efficient waste management;

·        Cleaning services alignment with environmental objectives; and

·        Building management and tenant support.

 

The building owners or manager will develop a checklist under each category to indicate which services, facilities or attributes apply to the building. Once the checklists have been completed, tenants will know exactly what’s on offer and why it’s of value to their organizations.

 

2.      Tenant’s Commitments:

A typical list of tenant’s commitment is divided into the following two categories:

a.      Fitout Design and Construction:

The fitout stage provides an interested organization with a cost-effective opportunity to enhance its reputation, boost employee satisfaction and lock-in significant ongoing cost savings over the lease period. A checklist should be developed by the owners under each category for monitoring key commitments in relation to:

·        Fitout ratings;

·        Lighting;

·        Floor Finishes;

·        Walls and Ceilings;

·        Joinery (doors, built-in furniture, kitchenettes); workstations; general office furniture;

·        Kitchen Fittings and Appliances Paints, Sealants and Adhesives;

·        Bathrooms and Toilets;

·        Supplementary Air Conditioning;

·        Sub-meters and ‘smart’ meters;

·        Indoor Plants; and

·        Demolition and Construction Waste Management.

 

b.      Office Management and Operation:

Necessary checklists should be developed under each category to seek tenant’s key commitments in relation to:

·        Company policies and procedures;

·        Purchasing smart office equipment;

·        Managing office equipment;

·        Purchasing stationery and consumables;

·        Lighting and HVAC management;

·        Waste management;

·        Sustainable transport;

·        Electricity supply contract; and

·        Cleaning and maintenance contracts.

 

Green Leases Building Management group have included a list of countries that are practicing green leases that includes Australia, Canada, New Zealand, United Kingdom, and the United States. Here is an example of the Public Works and Government Services Canada that has developed a green lease which includes:

·        Management of wastewater;

·        Indoor air quality;

·        Recycling;

·        Energy efficient lighting fixtures; and

·        Greenhouse gas reduction.

 

This green lease has been applied to over 70 new or renewed leases since it was released in 2004. Its main difficulty has been ensuring that people are informed of their option to sign up to a green lease on renewal.

 

REAlpac in Canada has recently released their National Standard Green Office Lease for Single-Building Projects 1.01 20082. Based on their established lease, this incorporates an Environmental Management Plan as an additional schedule. The lease deals with issues such as indoor air quality, targets for water and power usage, carbon offsetting and carbon taxes. It also addresses the apportionment of costs for equipment upgrades to meet targets and related issues.  REALpac also suggest that the lease can be adapted to other scenarios, and give permission for such adaptations. Other relevant information can be downloaded from this website, including a document which illustrates the variations from their original Standard Office Lease.

 

·        Public Works and Government Services Canada. Real Property.  2008: http://www.tpsgc-pwgsc.gc.ca/apropos-about/fi-fs/bi-rp-eng.html

·        National Standard Green Office Lease for Single-Building Projects – 1.01 – 2008. 2008, Ontario: Real Property Association of Canada. http://www.realpac.ca/s_223.asp

 

Annie Thuan, in her June 27, 2008 article in The Lawyers Weekly, stated that from a landlord’s perspective, a green lease provides the advantage of reducing the environmental footprint of the building, which could translate to significant cost savings. There is also the added benefit of an enhanced social and environmental image while simultaneously avoiding the negative perception of owning a poorly designed and energy inefficient building — both of which are positive from a public relations and brand perspective.

 

From a tenant’s perspective, a green lease may be appealing due to the resulting cost savings, perhaps through reduced rent and/or energy costs. A tenant may also benefit from the positive environmental image of leasing space in a green building. Additionally, improved indoor space boosts employee well-being, which has been linked to reduced absenteeism and increased productivity.

 

However, in order to realize the potential benefits associated with the concept of green leases, it is absolutely critical that tenants are genuinely committed to their obligations for energy conservation regardless of how hard building owners try, otherwise the results will not match up to the targeted levels of building performance.              

 

 

Dr. Mir F. Ali is a Sustainability Analyst with Turner Lane Development Corporation, a real estate development company with the commitment to build sustainable buildings in British Columbia.

 

 

 




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