Monday, November 2, 2009

Lease Green, But Know What It Means

Green leasing is in vogue these days and I suppose that’s a good thing. As with any initiative, however, it is important that it be done right; and that can vary from tenant to tenant and landlord to landlord. Many companies are taking advantage of current economic conditions to leverage concessions from landlords, renegotiating leases to lower rates in exchange for extended terms. More and more frequently green leasing is included in these discussions. For some it may even be a prime goal.

It is important that landlord and tenant agree on what their particular form of green lease will include. For some it may be as basic as assuring that building service providers use green products or that a good recycling program is in place. Others may set standards for common spaces, ventilation, natural light or other elements. Some property owners are investing in green building projects as a way of differentiating themselves in a tough market.

Aside from requiring consensus on what green means in a particular case, a green lease also brings accountability for measuring and reporting performance against the green lease standards. The parties must agree here also. What will be measured? What is the standard? How will it be reported? How often will it be reported?

The lease should also be specific and fair in how projects will be capitalized and benefits allocated. For example, an owner will have a hard time justifying capital to retrofit building energy systems to increase efficiency if the resulting benefit goes primarily to tenants. In short, the lease should be crystal clear on the questions of who is responsible for paying for projects or initiatives, how benefits are shared, tracking mechanisms and how differences of opinion will be resolved.

Tenants who occupy a majority or very large portion of a building have more leverage with the landlord and can help move the green initiative along. If this is you, don’t forget to network with other tenants in the building. Including them in the process will be beneficial to them and you, demonstrate your recognition of their role in the building and help speed acceptance by other tenants and the landlord.

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