With Government targets to reach Net Zero by 2050, legislative policies have been starting to focus on reducing greenhouse gas (GHG) emissions.
As the built environment reportedly contributes to 25% of the UK’s GHG emissions, it is important that property owners and occupiers find ways to improve their environmental sustainability; Green leases are becoming an increasingly popular way to achieve this. They also assist in compliance with the Minimum Energy Efficiency Standards (MEES) regulations, which from 1 April 2023, will be more stringent.
Green leases defined
Green leases contain legally binding and/or non-binding clauses set out to improve a commercial property’s environmental performance, through a joint commitment between a landlord and tenant. They will agree on provisions to communicate and co-operate on ways to make the property more energy efficient and sustainable. This may include reporting on energy consumption to accommodate more efficient management and reduction of energy consumption; establishing a target for water usage and introducing green spaces, such as green roofs, to increase biodiversity.
Advantages
From reducing cost to improving reputation, they are advantageous to both landlord and tenant. The greater efficiency generated through the provisions of green leases help tenants to lower their utility costs and comply with any environmental, social and governance (ESG) policies. In turn, this increases the property’s desirability within the market, benefitting landlords, by making it more attractive to tenants. Green leases also have the wider benefit of helping to protect the environment.
Memorandum of Understanding (MoU)
Although green leases are intended for new leases or lease renewals, parties can enter into a Memorandum of Understanding (MoU) if they are bound by an existing lease. A MoU is a non-binding, written document that runs alongside an existing lease. Similarly, they encourage parties to communicate and cooperate on ways to improve the property’s energy efficiency and sustainability, in order to satisfy the aspirations of both parties.
If you have any further questions regarding Green Leases please feel free to contact our Real Estate team.