A revised Green Office Lease: A greener shade of green

Commercial property leases are contracts that can span between five to twenty years often limiting the opportunity for landlords and tenants to make modifications for energy conservation or environmental reasons. A 'green lease' intends to create incentives and remove the barriers to the introduction and maintenance of sustainable building practices within the contractual agreement between owners and occupants.

With the pressure mounting for North American property owners to mitigate the negative consequences of green house gas emissions and the unconstrained consumption of natural resources, The Real Estate Property Association of Canada (REALpac) released a still 'greener' version of its state-of-the-art National Standard Green Office Lease for Single-Building Projects this week. The Green Office Lease (available on the REALpac website) provides a template that can be used in its entirety or modified for other property types and as circumstances dictate. It is valid everywhere in Canada except Quebec.

In North America 10% to 20% of energy consumption can be attributed to commercial buildings with a proportional contribution to the production of green house gases the main cause of global warming. Commercial buildings also account for 20% of annual water consumption and contribute to solid waste production in their daily operations and due to renovations generated by occupant turnovers.

In June of 2008 REALpac issued its first 'Green Lease' which Michael Brooks, Chief Executive of REALpac says has achieved global reach. The head of the Property Council of Australia has commended the lease and the United States Green Building Council has solicited REALpac's assistance in preparation of their latest "Tenant's Guide to Green". Brooks receives 'green lease' requests from all over the U.S. and lawyers in the U.K. refer to it.

Recent revisions to the Green Lease recognize the prevalence and added value of green rating systems and give the property owner authority over a tenant to maintain a 'green' standard. The Green Lease references the Green Building Councils Leadership in Energy and Environmental Design (LEED) new construction programs as well as LEED for Commercial Interiors (CI) and LEED for Existing Buildings Operation and Management (EBOM). It also references Energy Star, Green Globes, BREAM and BOMA Best and presumably could be modified to include any new standard that may emerge.

REALpac's revised Green Lease may also be one of few in the World to incorporate terms and a condition pertaining to carbon offsets credits and costs. Carbon offset credits would be generated when a building or building portfolio reduces its green house gas emissions below a regulated threshold. If there were a market for carbon in North America, the resulting carbon credit could then be sold or traded.

While carbon regulation does not apply to buildings in Canada, and may never apply to buildings, the lease allows for the possibility that it may in the future. Discussion of carbon taxes and a carbon Cap and Trade market amongst Federal Canadian and U.S. politicians in 2008 and similar discussions in British Columbia and Ontario suggest a carbon market may be established in North America but not necessarily for commercial buildings.

In addition to the regulatory environment the cost of carbon is a critical factor. The high cost of the process for validating carbon usage in commercial building means that at today's low price of carbon there is little financial incentive for property owners to determine carbon credits. Carbon is currently trading in Europe at about 11 Euros and reached about 30 Euros in 2008. According to Brooks, "it would be 'a different story if it were $150 a tonne or higher".

The REALpac Green Lease is described as a 'landlord centric' document that could be modified to be more 'tenant centric'. In its current 'landlord centric' version, representing the 'default' position of REALpac says Brooks, all the carbon offset credits would belong to the landlord, the landlord would control the allocation of credits to a tenant and any costs associated with a carbon offset would be passed through to the tenant as operating expenses.

The REALpac news release concerning the Green Office Lease attributes the development of the product to the Association’s Green Lease Committee, comprised of lawyers, sustainability experts, leasing specialists and Leadership in Energy and Environmental Design (LEED) Accredited Professionals with a broad cross section of representation from the Canadian commercial real sector.

Learn more about the green buildings and sustainable building management in up and coming issues of the RENX Green Building Newsletters.

Ann launched RENX in 2001 as a part-time venture and has grown the publication to become a primary source of online news for the Canadian real estate industry. Prior to…

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Ann launched RENX in 2001 as a part-time venture and has grown the publication to become a primary source of online news for the Canadian real estate industry. Prior to…

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