While green building and building energy efficiency have become more important for property owners and tenants in recent years, for many tenants with complex space requirements, deadlines for moving to new space, and limited budgets, a green building or a green lease simply can’t be the top priority.
Even so, in today’s market, tenants will need familiarity with green building requirements, since more landlords are bringing LEED–certified buildings online, or more likely, enrolling existing buildings in the LEED for Existing Buildings: Operations and Maintenance (EBOM) program, or have aspirations to obtain green-building certification in the future.
From the tenant’s perspective, having a landlord with green aspirations is generally good, as it’s a sign that the landlord is committed to a high-quality, energy-efficient, comfortable building. However, the tenant should make sure that the lease is clear about what costs and responsibilities will be passed through to it based on a green building initiative. Here are a few examples of language I have seen in recent leases:
Operating Costs shall include … all costs of maintaining the certification of the Building to conform to the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system.
This Building is or may become in the future certified under certain Green Agency Ratings or operated pursuant to Landlord’s sustainable building practices, as same may be in effect or modified from time to time. Landlord’s sustainability practices address, without limitation, whole-building operations and maintenance issues including chemical use; indoor air quality; energy efficiency; water efficiency; recycling programs; exterior maintenance programs; and systems upgrades to meet green building energy, water, indoor air quality, and lighting performance standards. Tenant shall use commercially reasonable efforts to ensure that Tenant’s construction and maintenance methods and procedures, material purchases, and disposal of waste must be in compliance with minimum standards and specifications as outlined by the Green Agency Ratings, in addition to all Governmental Requirements.
Operating Expenses shall consist of … costs incurred in connection with Landlord’s supplying of “green” or other renewable energy; …costs incurred (capital or otherwise) in order for the Building, or any portion thereof, to apply for, obtain or maintain a certification pursuant to the United States Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system, or other applicable certification agency, in connection with Landlord’s sustainability practices for the Building and all costs of maintaining, managing, reporting and commissioning the Project or any part thereof that was designed and/or built to be sustainable and conform with the LEED rating system (or other applicable certification standard).
In each example, the tenant’s exposure to green-building costs and possible responsibilities is uncertain. We can’t tell what the building’s current green-building certification is, nor can we tell whether the landlord is currently providing clean power (or purchasing renewable energy certificates) or plans to in the future. The language is (purposefully) open-ended about whether future costs of certifications or of upgrading the building or constructing new facilities to meet new green building requirements could be charged to tenant.
These issues can generally be solved, as most landlords don’t have a secret plan to saddle new tenants with green-building renovation costs, and simply want the ability to recover costs of maintaining and operating the building to its current standard. Tenants should start the conversation by asking the landlord what the current green-building certification is for the building, and what the landlord’s plans are for future certifications and green-building initiatives. Tenants should try to limit operating expense pass-throughs for green building to ordinary, noncapital costs that are required to keep the building at its current level of operation or certification. So, if the building is a LEED: EBOM Silver building under the LEED 2009 system, then operating expenses could include costs of maintaining that level of certification. A tenant should be reluctant to pick up the costs of higher levels of certification or new certifications or building upgrades, unless it is clear that the upgrades will generate clear benefits for the tenant or save operating costs.