Clauses to Consider in Green Leases

GreenLeaseImpactPHOTOGreen or energy-aligned leases have the potential to cut energy consumption by up to 22 percent in leased buildings, according to a new study released by the Institute for Market Transformation.

Green leases address the split incentive problem by linking financial incentives in a traditional commercial lease, wherein both owners and tenants can better realize the benefits of investing in energy efficiency.

The report, “What’s in a Green Lease? Measuring the Potential Impact of Green Leases in the US Office Sector” lays out several of the clauses that owners may want to include in a green lease, including:

  • Savings Pass-Through: Landlords can choose to avoid amortization and other payback mechanisms in favor of adopting lease language that allows the landlord to recoup all operational savings resulting from energy efficiency improvements.
  • Energy-Efficient Tenant Buildout: Requiring tenants to meet basic sustainability guidelines through the lease or building rules can ensure that their spaces are high-performing and efficient as core building spaces.
  • Plug Load: The efficiency of tenant spaces can be improved by allowing half of the traditional tenant plug load without any disruption to the tenant experience.
  • Submetering: A straightforward way for landlords to make tenants aware of their utility bills and energy consumption and align incentives to install submeters in tenant spaces, and bill tenants according to actual energy use.
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