UK: The new Green Lease Toolkit – a ‘market standard’ or something better?

Hogan Lovells

Hogan Lovells

The Better Buildings Partnership’s launch of their heavily revised and updated Green Lease Toolkit, at the end of January, has undoubtedly galvanised the conversation about green leases. 

Since its inception in 2008, the original toolkit had been one of the BBP’s most widely used and recognised tools, and the new toolkit – developed with the support of stakeholders from across the industry – is likely to be adopted as a ‘go to’ resource for many going forward. 

Given the pace of change over the last decade, in terms of both legislative impetus and a more holistic adoption of sustainability as a key focus of corporate governance, the greatly expanded toolkit represents a resource which will help many to navigate the green lease landscape.   

The toolkit is far more than just a precedent bank for lawyers.  The toolkit itself states that “A green lease does not automatically result in a more environmentally efficient or sustainable building” and it is intended to be used alongside the range of other toolkits published by the BBP which focus on the likes of green building management and responsible fit-out. 

Importantly, though, the Green Lease Toolkit recognises that the likelihood of green lease clauses being accepted in leases – and, importantly, then being adhered to – rests upon engagement between owners and occupiers from the earliest point in their journey together.  Each set of clauses in the toolkit is therefore accompanied by ‘statements of intent’, which set out a shared understanding of the parties’ agreed positions, and many of which can be incorporated into heads of terms using the ‘Heads of Terms Guidance’ section of the toolkit.

There’s been much discussion already about the extent to which the Green Lease Toolkit sets a new ‘market standard’ for green lease drafting.   The BBP themselves acknowledge that that is not the intention (in other words, that a ‘one size fits all’ approach cannot work).  But that is a good thing.  Rather, the toolkit offers a menu of ‘light’, ‘mid’ and ‘dark’ green drafting for each set of clauses, recognising that a wide range of factors – ranging from sector specific to asset specific and including the fact that owners and occupiers will often be at different stages of their sustainability journeys – will affect what can be agreed.  In practice, this approach is more likely to result in ‘appropriately ambitious’ clauses being agreed, included and observed.

Interestingly, though, even if there is no single set of clauses which are deemed to represent a market standard for a green lease, the BBP have set out what they consider to be a minimum level of expectation for a green lease.  Their ‘Green Lease Essentials’ comprise a series of clause ‘areas’ that the BBP views as “essential to cover in a lease for a lease to be described as a ‘green lease’.”  The ten areas are listed as:

  • Cooperation, setting out the shared aim of the parties to improve environmental performance.

  • Building Management / Sustainability Group, making provision for the parties to communicate on matters such as data-sharing and environmental performance.

  • Sustainable Use, encouraging behavioural change in the consumption of energy and water.

  • Data Sharing & Metering, providing for regular and transparent sharing of data regarding at least the use of energy, water and waste.

  • Extending Landlord rights to do works, to enable further energy improvement work to be carried out during the life of the lease.

  • Tenant's Alterations, to restrict alterations which adversely affect environmental performance and ratings.

  • EPCs, governing the process by which EPCs are obtained in order to ensure high quality EPCs are commissioned.

  • Waste, with objectives for both landlord and tenant to minimise waste and maximise recycling and re-use.

  • Re-instatement, providing for regard to be had to adverse impacts on environmental performance and, where reinstatement is required, for waste to be minimised.

  • Renewable Energy, promoting the procurement of renewable electricity for the premises.

Many of our clients will be comforted that, to a large extent, their leases already meet the expectations set out in the BBP’s Green Lease Essentials.  For others – and for the industry as a whole – this section of the toolkit provides an undeniably helpful benchmark which should help to drive both change and accountability at a time when scrutiny of ESG credentials is only increasing.

[View source.]

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.

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