Commercial Update 95: Green Lease Overview

Following on from last week’s update and with thanks to my colleague Matthew Wernham for his assistance, I’ve been asked to unpack the concept of green leases a little more.

A green lease fundamentally is a lease including provisions that aim to improve the environmental performance and sustainability of a property.

The scope and ambition of these provisions can vary greatly as currently the market standards are very low. However, three types of green lease clauses have been developed: light green, mid-green, and dark green.

These break down as follows:

  • Light green clauses are unlikely to be legally binding and are usually limited to simply improving the premises’ energy efficiency.
  • Medium green clauses are likely to involve meeting specific efficiency targets, without legal enforcement if they are not met.
  • Dark green clauses can involve targets that become legally binding through Heads of Terms.

So why the interest in them, outside of the environmental imperative?

Well, although green leases are not yet a legal requirement, they are becoming more common in the UK, especially in retail locations.

Recently, many companies in the retail sector have come under fire for their high carbon footprints – green leases are a good way to show their commitment to a more sustainable future and boost their company’s environmental reputation.

Additionally, green leases are changing the traditional landlord-tenant dynamic by creating a joint objective to reduce the environmental impact of the premises. This leads to greater communication, co-operation and education between landlords and tenants that, in turn, creates a stronger relationship between them.

Overall, green leases are a step in the right direction as they aim not only to improve the environment but also to improve landlord-tenant relationships, bear them in mind as change will come here.

Regards to all