‘Green Leases’ of Commercial Property

Reflecting a growing concern in the commercial property sector to limit premises’ impact on the environment, Landlords of commercial properties are increasingly requiring their Tenants to sign ‘Green Leases’.

‘Green Leases’ are encouraged by the RICS Code for Leasing Business Premises and include “provisions relating to sustainability and the environment that urge cooperation throughout the lease term between the landlord and the tenant to ensure that the property is used as sustainably as possible”. This is particularly important if anticipated increases in the minimum energy efficiency standards of commercial buildings are introduced in 2027 and 2030 as planned.

For example, Landlords and Tenants can agree that premises will not be altered if this decreases their energy efficiency rating, that waste will be properly recycled, data on water efficiency and emissions will be shared, or that energy supplies will be purchased from a renewable energy source.

However, when it comes to agreeing a ‘Green Lease’ there are three types which can be agreed between the parties. These are defined by the Law Society as follows:

  • A ‘Light Green Lease’ – this type of Green Lease includes a statement of intent – i.e. the Landlord and Tenant agree they will use best endeavours to cooperate and achieve a level of sustainability. This type of agreement is aspirational and non-binding – it is not possible for either the Landlord or Tenant to enforce these obligations against the other.
  • A ‘Medium Green Lease’ – these types of Leases introduce obligations which are enforceable by either the Landlord or Tenant. However, they are known as ‘Medium’ green as these obligations do not tend to impose a significant financial burden on the parties.
  • A ‘Dark Green Lease’ – in contrast, these types of Green Leases include binding obligations on the parties to implement (and finance) sustainable and environmentally-friendly measures, and may allow a Landlord to forfeit (terminate) a Lease if a Tenant is in breach of these clauses.

It is important for both Landlords and Tenants to be aware of their rights and obligations under Green Leases, and at Else Solicitors our commercial property experts are here to advise both parties.

If you would like to discuss your commercial property matters, please contact Caroline Major on email Caroline.Major@elselaw.co.uk or call on 01283 526 200.

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