CMS Study on the use of Green Lease Clauses in Europe
Introduction & recommendations
In the age of global warming people are increasingly turning their attention to the idea that resources should be used carefully and responsibly. This is particularly the case in the real estate sector as the energy consumption of buildings creates greenhouse gases which in turn contribute to global warming. Moreover, the ever-increasing energy prices mean that there is a greater interest in saving energy.
Governments and the European Union are also conscious of the importance of sustainability. As well as signing the Kyoto Protocol obliging all those who signed it inter alia to commit to ensuring the rise in global temperatures stays below 2%, the EU issued directives to pursue the goal of reducing energy consumption in buildings and promoting the use of renewable energy sources. These directives have been transposed into national law by most of the EU Member States (such as Germany, Belgium, Spain and Romania).
In the meantime, many companies have incorporated sustainability into their marketing and image programmes. As part of”Corporate Social Responsibility” firms have developed a growing environmental awareness.Sustainability issues play a key role in the construction of new buildings as well as in the refurbishment and use of existing buildings.
Buildings which are considered to be sustainable are deemed “green buildings” although there is no generally accepted definition of this term. These are buildings, whether under new construction or refurbishment, which have adapted their systems to limit energy and water consumption, to reduce emissions and the consumption of resources and to use renewable sources of energy.
In this context the focus is shifting more and more towards “green lease” contracts. “Green buildings” on the one hand do not make any sense if the use they are put to cannot be considered “green” at a later point in time while on the other hand they are of significance to prospective tenants because of their vast potential for saving energy and as a proof point for their business’ environmental credentials. There is no generally accepted definition of this term either.
As a rule of thumb, lease contracts can qualify as “green lease” contracts if they fulfil stringent and/or mandatory requirements with the aim of improving the energy efficiency of the leased premises. Such green leases typically contain clauses charging operating costs based on consumption via separate metreing, sharing data on energy and water consumption and waste generated by the occupancy of the building on a regular basis or obliging both parties to commit to renewable forms of energy.
Sustainability of a building and the sustained use of the building can be determined by certification. Certification both highlights and promotes the issue of sustainability. The most well-known international certification systems are LEED (USA) and BREEAM (GB) in some countries closely followed by DGNB (GER).
Energy certification plays a role in “green buildings” and “green leases” and provides information on the energy performance of a building, e.g. year of construction, energy consumption, etc.
We have reviewed the legal basis and legal practice in several European countries, summarising them in in this study, which led to the following recommendations on how to draft a green lease:
- The green lease should regulate the recording and calculation of operating costs based on consumption (especially heating, refrigeration, electricity, water, etc.); in some countries this has already been prescribed by law.
- The tenant should be obliged by contract to accept the measures undertaken by the landlord (in particular refurbishment) to improve energy efficiency in the building and to promote environmental protection.
- The contract should grant the landlord the right to pass an appropriate amount of the costs of improving energy efficiency and observing environmental principles onto the tenant or to increase the rent by a reasonable amount.
- If a building has been certified as “green”, the tenant should undertake to observe the certification conditions and act accordingly, e.g. only install elements in the building which are made of energy-efficient and eco-friendly materials.
- The parties should agree to act in such a way as to save energy and promote environmental protection (e.g. correct conduct as regards heating or refrigeration, water consumption or recycling waste).
- The landlord should inform the tenant about possible ways to save energy and be environmentally responsible.
We would be pleased to offer you assistance when drafting a green lease.