Sustainability in Leasing Series — Part II: The Green Lease Policy Statement & Practical Solutions to Implementing Green Goals

more+
less-

An operational policy document drafted by key company officers, a Green Lease Policy Statement should define the company’s long and short term sustainability goals as they relate to its owned and leased locations and set out the preferred practices that the company will use to meet those goals. Ideally, the Policy Statement should correspond to an acceptable measurement and verification standard or rating system, such as LEED Certified or EnergyStar®. Decisions about certification should be made very early in the process. At the end of this article there is a sample Green Lease Policy Statement that corresponds to LEED 2009 for Retail: Commercial Interiors©, which can be modified to fit your company’s sustainability goals.

As sustainability practices increase in use and popularity amongst landlords and tenants, it is becoming clear that the parties will have to work closely together to meet their sustainability goals. A landlord seeking LEED certification for its building will want all of its tenants operating efficiently and following LEED guidelines in order to prove the building’s compliance. Tenants seeking LEED certification for leased space will not be able to obtain certain credits without their landlords’ consent and cooperation. Here are a few practical solutions that landlords and tenants can discuss and implement to help meet each other’s green lease goals:

  • Consider creating LEED pre-certified prototype designs that are energy-efficient and, ideally, improve employee satisfaction, reduce construction time, and cost less than traditional designs. The tenant should ensure that the landlord’s approval of its prototype plans will not be unreasonably withheld. The landlord should ensure the improvements remain a part of the premises in order to reap the benefit of owning a green space long term.
  • Consider standardizing green leases and construction contracts. This keeps costs down and ensures uniformity with respect to achieving a green space. Landlords and tenants can draft green lease riders for use in green buildings or create a green cleaning contract for use with local cleaning contractors. Leases and construction contracts should reflect the preferred use of low-emitting and non-toxic products and materials.
  • Consider sharing the costs of installing sub-meters for locations where utilities are paid through Common Area Maintenance (CAM) charges or gross rent. This incentivizes tenants to keep energy usage in check and gives landlords more accurate measurements of building energy usage data. Additionally, ensure that the building is not wasting energy by including a lease covenant to not operate outside of the hours of operation or on weekends or holidays.
  • Consider a lease obligation that any service included in CAM or operating charges must improve the sustainable rating of the building, such as retro-commissioning in addition to routine HVAC repairs, green cleaning rather than cleaning with toxic products, recycling in addition to trash removal services, and sustainable landscaping with native plants that survive on natural rainfall rather than costly spray-irrigation.
  • Consider implementing lighting design changes that save energy consumption without sacrificing visual appeal, such as by replacing existing bulbs with high efficiency options, reducing the number of lamps in pendants, and using different luminaries to house lower-wattage lamps. These types of efficient designs could save energy usage costs by up to 30% annually; however, without audit rights and reconciliation, gross rent tenants have little incentive to use efficient designs.
  • Consider investing in efficient cooling equipment, such as multi-stage air volume packaged rooftop units that enable the HVAC system to match output with demand, which in turn conserves power. Such an HVAC system could reduce energy use by 65% and could have a payback period of 2 years or less depending on the energy model. Since landlords may require that such improvements remain part of the premises at the end of the term, tenants who incur the initial capital costs should ensure that any improvement allowance sufficiently accounts for the eventual change in ownership.

By communicating their policies early on, drafting leases that reflect their intentions, and working together during the term, landlords and tenants are much more likely to align their sustainability goals and successfully collaborate to implement them.

SAMPLE GREEN LEASE POLICY STATEMENT

General Policy: The Company has adopted a sustainability policy regarding its leasing strategies and will adhere to the following practices to the extent financially feasible. The Company has designated LEED 2009 for Retail – Commercial Interiors© as the primary rating system used in connection with its leases. The Company will endeavor to:

  • Continually assess the entire real estate portfolio and the feasibility of each sustainable goal based on project budget, lease type, location, and parties involved.
  • Conduct routine financial and energy data analysis to assess energy efficient practices.
  • Create a preferred network of consultants, attorneys, vendors and service providers that have expertise in sustainable practices.

Site Selection Policy: The Company will evaluate every new leased site’s overall sustainability performance and select sites that are already LEED Certified (5 points) or that have conditions that would count towards LEED Certification, such as a brownfield redevelopment site (1 point), sites with reflective or green roofs (1 point), or buildings that supply at least 2.5% of the building’s own energy with onsite renewable energy (1 point).

Water Efficiency Policy: The Company will reduce aggregate water use by 20% and annual water costs by 15%, by increasing its water efficiency. When conducting a build-out of a leased space, the Company will use efficient-flow bathroom and kitchen fixtures. After usage reductions reach 20%, the Company will continue to aim for reductions of 30% (6 points), 35% (8 points), and 40% (11 points) in building water usage and process water consumption.

Energy & Atmosphere Policy: The Company will work with landlords during the first year of the lease term to develop and implement a commissioning plan for HVAC, lighting and water systems to ensure compliance with LEED energy efficiency standards. No chlorofluorocarbons (CFC)-based refrigerants will be used. The Company will reduce lighting density by 15% (1 point) to 35% (5 points), install daylight controls or occupancy sensors (1 point), and ensure that 70% (1 point) to 90% (4 points) of its appliances, equipment and electronics are EnergyStar.®

Materials & Resources Policy: The Company will conduct a waste stream study across its leased locations to determine its top recyclable waste streams by either weight or volume, and will work with landlords to provide an easily accessible area dedicated to the separation, collection and recycling of the top three waste streams. The Company will enter into leases for a minimum of 10 years (1 point). Any tenant improvements will reuse at least 40% (1 point) to 60% (2 points) of the existing interior walls, flooring, and ceiling systems.

Indoor Environmental Quality Policy: The Company will work with landlords to ensure that its leased locations meet established minimum indoor air quality standards. To promote occupant comfort and well-being, leased locations will use naturally ventilated spaces (1 point) and conduct air testing prior to occupancy (1 point). The Company will require its contractors to use low-VOC emitting, adhesives, sealants, paints, coatings and flooring (1 point each).

This article is the second part of a Sustainability in Leasing Series designed to assist commercial landlords and tenants with implementing green leasing practices by providing practical insight and solutions. The next installation in the series is: Sustainability in Leasing – The Green Request for Proposals & Due Diligence Checklists.

Questions can be directed to Inshirah A. Muhammad, Associate in the Phillips Lytle Environment and Real Estate Practices at (212) 508-0465 or imuhammad@phillipslytle.com.    

 

Published In: General Business Updates, Construction Updates, Environmental Updates, Commercial Real Estate Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Phillips Lytle LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »