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What is a Green Lease?

How to reduce our environmental footprint is something that, as a society, we are having to consider more and more on a daily basis. 

Landlords and Tenants are also being forced by government policies to re-focus on energy efficiency and sustainability for buildings they hold an interest in. 

Provisions in a commercial property lease that encourage or require the Landlord and Tenant to reduce the environmental impact of the Property, taken as a whole, are considered ‘green clauses’. 

The intention is to work towards improving the sustainability and energy efficiency of a building. This is because reducing greenhouse gas emissions to combat climate change is a priority for the UK, both, at the international and national level. 

At present, there is no legal requirement to use green leases. We are however seeing that more and more Landlords who have Environmental, Social and Governance (ESG) requirements and targets are inserting green clauses into both new leases and renewal leases.  Such changes can contribute towards reducing the carbon footprint of the building.

Where green lease provisions are added to a lease, the Landlord and Tenant have a joint objective to minimise the environmental impact of the Property for example energy efficiency measures, waste reduction and water management. Such measures require a collaborative approach and so the provisions tend to focus on obligations in terms of communication and co-operation.

The main areas in a lease impacted by the inclusion of green lease provisions are:

  • Service charge clauses
  • Alteration clauses
  • Reinstatement (or ‘yielding up’) clauses
  • Remedies for breach

It is however difficult to produce a standard set of green lease provisions given the wide range of age/type of buildings and different commercial aims of Landlords. 

When drafting the lease, Landlords will often adopt a subjective approach to suit their own particular circumstances.  As a Tenant, you will want to ensure that the provisions do not adversely affect the running of your own business or your responsibilities to comply with environmental policies.

There needs to be a sensible approach with the Landlord (and between the Solicitors) to ensure that this balance is reflected in the lease. 

Used properly, green clauses can be a powerful tool for reducing running costs and achieving sustainability goals for both parties. 

Contact a member of our Commercial Property team to find out more about how we can help with Green Leases