Green leases: top 5 negotiating tips for commercial tenants

Below are some points that you may want to consider when negotiating a new lease.

Drafting for net zero is now freely available from The Chancery Lane Project (TCLP) and other sources, such as the Better Buildings Partnership’s Green Lease Toolkit.

TLT is heavily involved in TCLP, which is a collaborative effort of lawyers from across the world to create net zero drafting for businesses to incorporate in their contracts.

1) Do you want to give the landlord a right of access to carry out works that will improve the environmental performance of the building?

Whether or not you are willing to do this will depend on the current state of the premises, how disruptive the works will be to your business, and how long the term of your lease is. If the landlord is planning improvement works, could it do these before your lease starts?

If all works that could be carried out have been completed, and the landlord is including this right just in case it wants to carry out further works during the term of the lease, think about including safeguards to ensure that you have a say in the extent of works that you will allow, whilst your lease is in place. Also consider who will pay for the works – will the landlord be able to recover costs via the service charge?

2) If the property is already equipped with technology to analyse matters such as utilities consumption, the lease may contain an obligation to share data.

If you are sharing your data with the landlord, they should share data in relation to the common parts with you. If separate metering isn’t already installed, the landlord may want the option to install it in the future.

You should consider if this will be unduly disruptive to your business, and weigh this against the usefulness of having data available.

3) Could you oblige the landlord to procure all electricity for the building from a renewable source?

Doing so will be beneficial for the landlord (by reducing its scope 3 emissions), you (especially if you have signed up to the global ‘Race To Zero’ campaign, or otherwise set interim net zero targets on your pathway to net zero), and, of course, the environment.

See TCLP’s Lotta’s clause for suggested drafting.

4) Traditionally, there has been an obligation for parties to use ‘new’ materials when carrying out alterations, but is this really necessary?

Could you re-use materials, or use reclaimed or recycled materials? Doing so will reduce the embedded carbon in the building, and may also reduce costs (although the administrative burden of sourcing such materials could be greater than simply buying new).

If you are committing to re-use, or use reclaimed or recycled materials, should the landlord also do this when providing services? See TCLP’s Aatmay’s clause for suggested drafting.

5) Removing alterations at the end of the term can be time consuming and wasteful, particularly if the incoming tenant is going to carry out similar works as part of its fit-out.

It is becoming more common for leases to include provisions that do not oblige the tenant to remove alterations, as a matter of course.

Instead, consideration is given to whether reinstatement is actually required, given the intended use of the property following lease expiry. See TCLP’s Aatmay’s clause and BBP’s Green Lease Toolkit for suggested drafting.