Square Footage: Top 10 questions to consider before "greening" commercial property
With a large portion of commercial U.S. real estate tenant-occupied, many landlords and tenants are looking to “green” their buildings - from increasing energy efficiency to improving indoor air quality.
But “greening” a building leased in whole or in part to tenants creates a whole set of new issues to consider. This is especially true when it comes to “greening” an existing building as opposed to new construction.
Below are some issues landlords and tenants should consider when preparing or negotiating a “green” lease.
1. What are the objectives of the landlord and tenant relating to sustainable aspects of the building and leased space?Â Do the parties have the same or differing goals? What should be their performance targets? It is extremely important the parties understand their respective goals and the economic impact of these goals.
2. Is either party seeking LEED or other certification of the building or tenant space?Â If so, it is likely the landlord and tenant will have to cooperate to either meet or maintain the applicable certification requirements. For example, the landlord may need tenants to recycle, use certain green cleaning products, and to provide information regarding their energy use.Â The tenant may need the landlord to assist it with stormwater design, reduction of heat island effect or water use, or installation of bicycle racks and storage units.
3.Â How will the additional cost of any “green” requirements be allocated between the landlord and the tenant(s)?
4. Will the “green” duties of the landlord and tenant be mandatory or voluntary?Â This is especially important if the tenants are selecting the building for its green qualities.
5.Â Will the lease impose limits on the tenants’ use of materials and energy?
6.Â What are the parties’ respective duties where governmental regulation requires compliance with sustainability standards?
7.Â How will disputes relating to compliance with any joint goals or duties be resolved?Â Some leases provide a process for appointment of an environmental engineer who is charged with resolving any “green” issues.
8.Â Who is responsible for any carbon off-set costs or credits, should they become effective?
9.Â To what extent will the parties be required to maintain and exchange information relating to energy use and other sustainable activities?
10.Â How will the sustainability requirements affect the type and manner of installing tenant improvements?
Harvey Berman, a LEEDÂ® Accredited Professional, is a partner at the law firm of Bodman LLP practicing in its Ann Arbor office.Â He is chair of the firm's Construction Practice Group and represents clients in construction, real estate, and commercial matters.Â Contact him at (734) 930-2493 or at email@example.com.
Useful information relating to “green leases” is available from the California Sustainability Alliance, the Real Property Association of Canada, and the Building Owners and Managers Association International.