Green leases are a powerful tool to protect the environmental commitments of both landlords and tenants, reduce energy costs and build closer and beneficial relationships.

Unfortunately, they are too seldom considered during lease negotiations or struck off due to the misunderstanding that they are onerous and prohibitive. Done well though, green leases are a win-win-win framework.

“Collaboration is fundamental in achieving net zero, and green leases are a great example where landlords and tenants can work together to implement sustainable practices and technologies for the benefit of both parties” says Ben Thomson.

The purpose of a green lease is to set out clear environmental (and sometimes social) targets and responsibilities throughout the lease term by incorporating provisions that address energy efficiency, water conservation, waste management, building upgrades and other green initiatives.

James Strevens says green leases are becoming more appealing to landlords who want to attract corporate occupiers who are very focused on their sustainability commitments. “This kind of collaboration can lead to reduced energy consumption, lower operating costs, overall environmental benefits, and ultimately, a lower risk of asset stranding.”

Source: Better Buildings Partnership

Getting started: Head of Terms

The Better Buildings Partnership explains:

“The Heads of Terms stage of a negotiation is a key moment to communicate the importance and ambition of green provisions in the lease.

“To underline the importance of green lease clauses, to ensure parties and their advisers address their minds to these at an early stage and to speed up legal drafting and minimise the risk of green lease clauses being struck out by solicitors, it is recommended that reference is made to them in the heads of terms.”

Lease clauses

Each clause should detail and maintain the intent behind it so that landlords and tenants know clearly why it is being included. The clearer they are, the less likely they are to be struck out.

Clauses should include both landlord and tenant aims and obligations.

Really important

Energy efficiency

Energy source (renewable)

Waste and recycling

Metering, data capture and sharing

Co-operation provision

Nice to have

Sustainable use

Extending landlord’s right to do works

Tenant’s alterations

Reinstatement (yield up)

Tenant’s obligations

Five reasons why green leases are important:

Environmental impact:

Green leases help reduce the environmental footprint of commercial buildings by promoting energy efficiency, water conservation, waste reduction and other sustainable practices.

Cost savings:

Implementing green measures can lead to significant cost savings for both landlords and tenants through reduced energy and water consumption and lower operating.

Tenant satisfaction:

Green leases can enhance tenant satisfaction by providing reduced  costs, improved employee retention and enhanced corporate image.

Regulatory compliance:

With increasing regulations and standards related to environmental sustainability, green leases can help landlords and tenants stay compliant with legal requirements and industry best practices.

Long-term value:

Investing in sustainability through green  leases can enhance the long-term value of commercial properties by future-proofing against rising energy costs, attracting environmentally conscious tenants and mitigating asset stranding risk.

For more information, visit GREEN LEASE TOOLKIT | Better Buildings Partnership

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