Introduction to GREEN LEASE MENU
The Green Lease Menu has been compiled by the Green Desk of Jones Lang LaSalle real estate consultancy on the instructions of and in cooperation with the Sustainable Housing Platform (Platform Duurzame Huisvesting) and VGM NL. It is a specific follow-up to the Green Lease Guidance which was published at the end of 2011. This introduction explains a number of reasons and advantages that are important for the implementation of a green lease. It also briefly explains how to start, what approach to be taken and how to set a sustainable target level. You can start working with the Green Lease Menu yourself. If you have any questions or need any help, you may contact the Sustainable Housing Platform, VGM NL or the Green Desk of Jones Lang LaSalle.
Sustainability is becoming an increasingly important theme for organisations. More and more companies have developed their own policy in the area of CSR (Corporate Social Responsibility). Property users also aim at using their operating assets in the most sustainable manner. They want to use their accommodation to communicate a sustainable image or want to get a grip on their total accommodation costs. A green lease is a means to implement this.
Owners are also given more and more reasons to have sustainable property in their portfolio, such as attracting ever more conscious tenants. Owners must also meet ever more stringent laws and regulations and, for institutional investors, meet requirements of shareholders. That is why a green lease is an excellent tool for owners to guarantee sustainability and, thereby, (financial) future-proofness.
Eliminating the split incentive
The problems of the split incentive are an invariably restraining factor in sustainability or energy-saving measures being taken by the owner. Under a traditional contract, the owner bears the costs of the investment, while the lower energy bill is paid by the tenant. As a result, owners are less inclined to take far-reaching measures.
A green lease may include agreements on a fairer division of proceeds, so that both the tenant and the landlord can benefit from the sustainability measures taken.
Advantages for users
Organisations become increasingly aware of the fact that they can use their sustainable working environment to obtain financial objectives, such as:
- Improving their reputation (sustainable property is a means to express CSR policy).
- Attracting and keeping suitable staff.
- Increasing welfare and staff productivity.
- Reducing risks (laws and regulations on labour conditions become increasingly stringent).
- Savings on energy costs and reducing energy consumption.
Many advantages for owners
By concluding a green lease, property owners may meet the users’ ever increasing demand for sustainable property. Apart from concluding traditional leases, offering the possibility of concluding a green lease expands the group of possible tenants. Owners may use a green lease to achieve the following:
- Guaranteeing sustainable building-specific features and taking further sustainability measures.
- Complying with ever more stringent laws and regulations in the area of sustainability.
- Meeting the ever more stringent sustainability requirements of any end-investors (GRESB).
- Positively influencing property value retention.
Approach and ambition
Any party who decides to conclude a green lease for the first time may best proceed in a structured manner. The course of the process determines the final result. Good and open cooperation between tenants and landlords are the decisive factor here. We therefore recommend that you have this process facilitated by an external specialist who is competent in the matter. This specialist may, where necessary, take on the role of mediator and ensure the best possible cooperation between a tenant and a landlord.
“Dark green” becomes a standard
The Green Lease Menu shows the most complete range of possibilities for green provisions within green lease contracts. All parts of the menu vary from ‘green’ to ‘dark green’. It is probably impossible now to include the full Green Lease Menu in the first green leases to be concluded. However, based on the ambition that any provisions that are now ‘dark green’ will be a market standard in a few years’ time, the Green Lease Menu offers the broadest possible perspective.
Translating the organisation’s sustainability objectives into a sustainable property strategy is a challenge for both owners and users. A green lease is a means to implement this strategy at object level. It is also a means to deal with sustainability in an increasingly conscious manner in the long term as well (at least for the duration of the lease and possibly longer). That is why it is no problem to make an easy start, or to start with a building that is not yet sustainable or does not perform in a sustainable manner at the time of concluding the lease.
Start working with the basis
In the Green Lease Menu, BREEAM was used as support or certification method as a basis for making buildings sustainable. This does not mean that certification is compulsory for a green lease. Other methods can also be used as a basis.
“To measure is to know” applies to the best possible use of property. It is therefore wise to make at least a number of basic agreements about this. Information about the performance of the building (and thereby also the management thereof) and the way in which a user handles the building form the basis for improvements. A property manager has a decisive role in determining the possibilities for sustainable provisions; for example measuring consumption.
Legal status of the contract
The Green Lease Menu offers a lot of room to users to determine the legal status they want to attach to the contract. Depending on the wishes and possibilities of parties and the features of the building, parties may include individual arrangements in the lease.
It is possible to include the menu (or parts thereof) as an integral part of the lease. It is recommended that, in that case, the lease should expressly state that the agreed provisions from the Green Lease Menu form part of the lease and that, without these provisions, the lease would not have been concluded or would have been concluded otherwise. As a rule, this results in the Green Lease Menu provisions passing, by operation of law, to the next landlord upon sale of the leased property or parts thereof.
The parts from the Green Lease Menu included by parties in the lease impose mutual obligations on them. This Green Lease Menu deals with both the manner of cooperation and the meaning of the relevant obligations. It is recommended that parties state the consequences they want to attach to these provisions when concluding the lease. The Green Lease Menu primarily distinguishes between best efforts obligations and result obligations. The former concerns a party’s obligation to make every effort to comply with a certain standard. Only the making of these efforts can be enforced, not the result. If it concerns a result obligation, the party who has undertaken the relevant obligation can be held responsible for achieving the result or the failure to do so.
The menu has the following structure:
- Firstly, a summary is given of all main themes of the Green Lease Menu, with a brief explanation. The main themes give structure to the process of concluding a green lease.
- Secondly, the (joint) objectives are determined and the procedural agreements are laid down.
- Then the financial set-off method is agreed upon.
- Based on the basic method for financial set-off, agreements on furnishings and fittings, usage, exploitation and monitoring are set out in more detail.
After that, it is set out for each main theme which detailed topics and agreements may be included in the green lease. A number of these agreements has been classified according to sustainability level, stating how ‘green’ each choice is. Depending on the target level of both parties, a ‘greener’ agreement may be chosen.
Do you want:
- Support in determining your sustainable target level.
- Assistance with the process of concluding a green lease.
- To develop your own “Green Lease Standard”.
- Information about the feasibility of certain sustainability measures and agreements in your accommodation/portfolio.
Please contact the Green Desk of Jones Lang LaSalle via Christina.Cramer@eu.jll.com or +31(0)20 5405405.