Green Leasing
Most new commercial leases written every day are largely based on language that has changed little over the years. Energy is generally given slight consideration. Typically, the allocation of energy savings between parties bears little or no resemblance to the allocation of responsibility for creating the savings. This creates split incentives which discourage owners and tenants from saving energy. Common lease structures, such as net and gross leases, perpetuate this dilemma: a gross lease offers tenants no incentive to operate their space efficiently because their utility payments are fixed, while a net lease discourages a landlord from making efficiency investments because the savings will be passed through to tenants. Incentives are fundamentally misaligned.
Green lease (or "aligned lease") terms harmonize the financial and energy interests of landlords and tenants. Inserted into existing lease forms, green leasing terms realign incentives, facilitate information sharing and encourage landlord and tenant to work together on the efficient use of energy and other resources. The governments in the U.S. and Australia require green lease terms for their office buildings, and cities like New York, London, and Melbourne are working with the real estate community to promote the use of greener lease terms. Green leases have huge potential to create economic and environmental savings - unfortunately, this potential is still largely untapped. IMT is working to make green leasing practices standard among commercial real estate brokers, lawyers, landlords, tenants, and other actors in the leasing world.
BACKGROUND PUBLICATIONS
The origins of green leases, their mechanics, and how they are used.
- "If You Build It (Efficiently), They Will Come" (Background on the green leasing requirements for the U.S. government) - Andrew Burr & David Leipziger, IMT
- Green Leasing Improves Building Efficiency - Steven Teitelbaum
- Green Lease Forms in the Marketplace 2011 - Steven Teitelbaum
GREEN LEASING RESOURCES
Click image to open document.
GOVERNMENT RESOURCES
A Forbes article on changes to federal leasing policies.
U.S. Government
The 2007 Energy Independence & Security Act (EISA) requires green leases in all office buildings leased to and by the federal government.
- General Services Administration (GSA): Green Lease Policies and Procedures
- EPA Energy Star: New Energy Star requirements for Federal leases
- Department of Energy (DOE): Green Lease Policies and Procedures for Lease Acquisition
The Government of Australia enacted a green leasing standard for all government office buildings as part of the Energy Efficiency in Government Operations (EEGO) plan adopted in 2006.
- Department of Climate Change and Energy Efficiency: Green Lease Schedule
- Department of Climate Change and Energy Efficiency: Green Lease Schedule FACTSHEET (pdf)
- Department of Climate Change and Energy Efficiency: Green Lease Schedule: Energy Use in the Australian Government's operations (pdf)
Green Leasing
Most new commercial leases written every day are largely based on language that has changed little over the years. Energy is generally given slight consideration. Typically, the allocation of energy savings between parties bears little or no resemblance to the allocation of responsibility for creating the savings. This creates split incentives which discourage owners and tenants from saving energy. Common lease structures, such as net and gross leases, perpetuate this dilemma: a gross lease offers tenants no incentive to operate their space efficiently because their utility payments are fixed, while a net lease discourages a landlord from making efficiency investments because the savings will be passed through to tenants. Incentives are fundamentally misaligned.
Green lease (or "aligned lease") terms harmonize the financial and energy interests of landlords and tenants. Inserted into existing lease forms, green leasing terms realign incentives, facilitate information sharing and encourage landlord and tenant to work together on the efficient use of energy and other resources. The governments in the U.S. and Australia require green lease terms for their office buildings, and cities like New York, London, and Melbourne are working with the real estate community to promote the use of greener lease terms. Green leases have huge potential to create economic and environmental savings - unfortunately, this potential is still largely untapped. IMT is working to make green leasing practices standard among commercial real estate brokers, lawyers, landlords, tenants, and other actors in the leasing world.
BACKGROUND PUBLICATIONS
The origins of green leases, their mechanics, and how they are used.
- "If You Build It (Efficiently), They Will Come" (Background on the green leasing requirements for the U.S. government) - Andrew Burr & David Leipziger, IMT
- Green Leasing Improves Building Efficiency - Steven Teitelbaum
- Green Lease Forms in the Marketplace 2011 - Steven Teitelbaum
GREEN LEASING RESOURCES
Click image to open document.
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GOVERNMENT RESOURCES
A Forbes article on changes to federal leasing policies.
U.S. Government
The 2007 Energy Independence & Security Act (EISA) requires green leases in all office buildings leased to and by the federal government.
- General Services Administration (GSA): Green Lease Policies and Procedures
- EPA Energy Star: New Energy Star requirements for Federal leases
- Department of Energy (DOE): Green Lease Policies and Procedures for Lease Acquisition
The Government of Australia enacted a green leasing standard for all government office buildings as part of the Energy Efficiency in Government Operations (EEGO) plan adopted in 2006.
- Department of Climate Change and Energy Efficiency: Green Lease Schedule
- Department of Climate Change and Energy Efficiency: Green Lease Schedule FACTSHEET (pdf)
- Department of Climate Change and Energy Efficiency: Green Lease Schedule: Energy Use in the Australian Government's operations (pdf)
