CMS pan-European study into “green” lease clauses: a converging patchwork

Leading European legal and tax services provider CMS today launches the CMS e-guide: Study on the use of Green Lease Clauses in Europe, the first pan-European study into the existing regulations and market practices around "green" clauses in leases.

Combining information from 21 European countries, the Study is an invaluable tool for comparing current regulations and practices between jurisdictions. The Study also includes recommendations on how to draft green leases.

Dirk Rodewoldt, partner with CMS Hasche Sigle (Germany), explains: "With so much focus on green buildings, we wanted to find out what was being done across Europe, identifying best practice. The information provides investors, asset managers and users with precise information to ensure that buildings stay green throughout their lifetime."

The study shows an increasing use of "green" clauses amid a patchwork of regulations and market practice. "This shouldn't be surprising," says Arnout Scholten, partner with CMS Derks Star Busmann (The Netherlands), "environmentally friendly and sustainable buildings are only starting to become the norm across Europe in a push to reduce emissions and energy consumption in a region fully committed to the Kyoto Protocol. So ensuring buildings stay green during their entire lifetime is essential to future-proof investments."

One of the main findings is that at the moment, there is little consensus on a standard for energy certification. The increasing use of three leading standards, LEED (Leadership in Energy and Environment Design), BREEAM (Building Research Establishment Environmental Assessment Method), in some countries, closely followed by DGNB (the German Sustainable Building Association), demonstrates an increasing importance of certification across Europe, although with strong national differences. One of these is the development of national standards in Belgium, the Czech Republic, France and Italy, while other countries, such as The Netherlands and Poland, opt to adapt international standards to their national requirements. "These certifications are very useful but not entirely comparable with each other. This can be confusing to both investors and users alike," explains Bruno Duquesne, partner with CMS DeBacker and Head of Real Estate in Belgium. "A national harmonization of standards would be beneficial to the European Real Estate industry. However, given the small percentage of new build in relation to the existing stock, the emerging use of certification standards for existing properties is a positive evolution."

Across Europe, the incentives for landlords to keep their buildings current in terms of energy efficiency are very limited. With the emergence of certification standards for existing buildings, and given the huge existing stock available throughout Europe, CMS experts believe that responsible authorities should look at expanding incentives for landlords and lessees alike. This will be beneficial in terms of energy conservation as well as to the construction industry, in what are challenging economic times with high unemployment.

For the Study, CMS Real Estate experts reviewed the legal framework and market practice in Austria, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, France, Germany, Hungary, Italy, The Netherlands, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Switzerland, Ukraine and the United Kingdom (including England & Wales, Northern Ireland and Scotland).

The CMS e-guide: Study on the use of Green Lease Clauses in Europe is only available as an online document, which can be downloaded at: http://eguides.cmslegal.com/greenleases/index.aspx.