Michael L. Caldwell
Dolan Media Newswires
Detroit – A combination of factors ranging from global climate change to the price of oil has created a market for environmentally sustainable buildings.
These green buildings present issues that must be addressed in commercial leasing. Specifically, a commercial lease for a green building must allocate the benefits and burdens of maintaining green certification between landlord and tenant.
Green buildings often achieve higher rents, occupancy rates and sales prices. However, the undeniable benefits of owning and occupying a green building come with costs and obligations that differ from those associated with traditional commercial buildings.
The relationship between the landlord and tenant must be negotiated in a “green lease” that clearly allocates costs, benefits and obligations associated with a green building.
The tenant has to implement or cooperate with many of the obligations necessary to maintain the building’s green status.
Landlords, meanwhile, must include specific lease provisions wherein the tenant acknowledges the landlord’s intention to operate the building in a sustainable fashion. The green lease also imposes a greater level of control on the tenant’s operations than a traditional lease.
For instance, a green lease often will require the tenant employ energy-efficient practices, such as lighting controls, energy-efficient bulbs, and Energy Star-qualified office and kitchen equipment.
In order to ensure a healthy interior environment is maintained, the landlord also will want to require the tenant use green cleaning products and materials, including paints with low volatile organic compound levels.
The landlord also may want to require the tenant participate in recycling programs and employ cleaning staffs to work during normal business hours to reduce after-hours heating and cooling of the building.
A tenant, on the other hand, must be assured the landlord can obtain and maintain its promised level of green certification for the entire lease term and must be assured the burdens on the tenant’s operations are realistic and can be managed without negatively impacting the tenant’s business.
The costs and cost savings of achieving green status must be allocated between the landlord and the tenant.
Landlords will want a broad definition of operating costs that, for example, includes the amortized costs of maintaining and updating green technologies employed within the building.
The tenant will want its exposure capped at an amount that reflects the actual, not expected, reduction in energy costs.
These considerations, among others, will require lawyers representing landlords and tenants revisit existing leases and prepare new leases that differ from traditional forms.
Michael L. Caldwell leads the environmental law and real estate practice groups at the law firm Zausmer, Kaufman, August, Caldwell & Tayler PC.