November 8th - 2008

Green leases make going green easier for commercial buildings

The need for and benefits of green commercial buildings have been discussed for several years, and many commercial landlords agree that green is the way to go.

The need for and benefits of green commercial buildings have been discussed for several years, and many commercial landlords agree that green is the way to go.
 
Through best practices in energy measuring, monitoring and management, Canada’s commercial landlords are realizing the advantages of reducing energy consumption. The benefits of upgrades like improved insulation and windows, heating, ventilation and air conditioning retrofits, and installing energy efficient equipment are clear.
 
What’s not clear, however, is how to make sure tenants make the best use of the resources. Because even though the landlord builds or retrofits the building, the tenants are the ones who are occupying the space and using the resources.
 
Enter green leases.
 
Traditional commercial office leases usually only determine the business relationship between a landlord and tenant including what space is being occupied, the rent, who can do what, when, how, and who pays. Most don’t clearly state environmental goals that landlords and tenants should try to achieve or set rules to enable the building to get there. Most don’t allow for costs to be appropriately allocated or anticipate future green issues such as carbon trading.
 
But the Real Property Association of Canada (REALpac) Green Lease can make it easier for commercial office landlords to maintain new green buildings, and to effectively convert existing buildings to make them more sustainable.
 
“We knew as an industry, the Canadian commercial property sector could do more to reduce its resource consumption and become more efficient,” said Michael Brooks, Chief Executive Officer of REALpac. “A green lease is designed to encourage and permit sustainable practices by both a landlord and a tenant over the life of the document.
 
“The REALpac Green Office Lease incorporates the latest sustainability principles and objectives and enables landlords and tenants to establish sustainability targets for energy, water, indoor air quality, and recycling. It enables landlords to carry out green renovations to existing building stock, and anticipates and provides for both carbon offsetting by a landlord, and future carbon trading.”
 
Brooks said green leases are a critical element in greening a building, because both a landlord and a tenant have to be involved and must work together to make the areas they individually control sustainable. With the REALpac Green Office Lease, tenants can support landlords’ energy and resource conservation initiatives. The can also make socially responsible changes within their organizations to achieve real reductions in direct and indirect energy consumption and natural resource use.
 
Although just beginning to surface in Canada, green leases are common in other countries around the world. In his presentation at the RealLeasing Conference in Toronto in September, Brooks gave the example of an Australian landlord who kicked out a tenant – a law firm that did not turn off the lights, computers, printers, etc., at the end of the day and was generally not a good green tenant. The landlord had a line-up of companies wanting to get into the building; they could afford to pick and choose. They couldn’t afford to have a tenant that was an energy hog in a building that wanted to maintain the Australian equivalent of Leadership in Energy and Environmental Design (LEED®) Gold standard.
 
Although he doesn’t see the same situation happening here in the short term, if Canada gets a cap and trade system, or carbon tax, building labelling, and/or legislated maximum consumption levels for buildings, we may see landlords adjust rent based on a tenants’ carbon footprint.
 
As the adoption rate of green leases by commercial landlords grows, commercial REALTORS® and brokers will need to be aware of green lease principles and sample clauses, as well as be able to draft and negotiate some green elements into an Offer to Lease. “They need to understand the reasons why it’s important to add these provisions to leases,” said Brooks. “Landlords and tenants will increasingly seek out green-literate brokers to represent them in advocating green leases and negotiating them.”
 
Learn more about the REALpac Green Lease at www.realpac.ca.
 
What’s in a green lease?
 ome of the specific details in REALpac’s “National Standard Green Office Lease for Single-Building Projects – 1.01 – 2008” include:

  • Energy conservation/efficiency targets;
  • Water conservation measures;
  • Comprehensive landlord and tenant procurement guidelines;
  • Requirements for natural or low water consumption landscaping;
  • Indoor air quality standards;
  • Use of environmentally friendly carpet cleaning products by the landlord and tenant;
  • Day lighting and the use of screens to shield the sun’s rays;
  • Efficient appliances and fixtures;
  • Waterless urinals, low flow faucets and taps;
  • The use of EnergyStar® rated photocopiers and printers that reuse paper, or print double-sided.

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Ontario Real Estate Association

Jean-Adrien Delicano

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Ontario Real Estate Association
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