Close Menu
  • News
  • Home
  • In Profile
  • Finance
  • Legal
  • Technology
  • Events
  • Features
  • Wellbeing & Mental Health
  • Marketing
  • HR & Recruitment
  • About
  • Advertise
  • Events Calendar
  • Business Wall
  • Subscribe
  • Contact
  • 0843 289 4634
X (Twitter) LinkedIn YouTube
Trending
  • Let’s Talk – Business In Profile, Paul Day, Filestream.
  • How SMEs can create effective marketing and advertising creative on a budget
  • Why Fraud Prevention is No Longer Just a Finance Function
  • I’ve been in employee benefits a long time: it’s about time we supported SMEs
  • SMEs say funding is vital – so why are a third not applying?
  • The CEO of Nothing. Why You Should Avoid ‘Gurus’
  • Can an ex-employee be silenced by an NDA in 2025?
  • E-Invoicing: The Lifeline UK Small Businesses Can’t Afford to Ignore
X (Twitter) LinkedIn YouTube
SME Today
  • About
  • Advertise
  • Events Calendar
  • Business Wall
  • Subscribe
  • Contact
  • 0843 289 4634
  • News
  • Home
  • In Profile
  • Finance
  • Legal
  • Technology
  • Events
  • Features
  • Wellbeing
  • Marketing
  • HR & Recruitment
SME Today
  • About
  • Advertise
  • Events Calendar
  • Business Wall
  • Subscribe
  • Contact
  • 0843 289 4634
  • Twitter
  • LinkedIn
  • YouTube
  • RSS
You are at:Home»Environment»How green is your building’s lease?
Green leases

How green is your building’s lease?

0
Posted By sme-admin on January 18, 2022 Environment, Features

Richard Beaumont, a partner at the multi-disciplinary property specialists Matthews & Goodman, examines the growing use of green leases

Richard Beaumont partner Matthews & GoodmanWith all the talk of sustainability, net zero and carbon management in a post-COP26 world, what are the implications of this ‘green conversation’ to companies which lease or own offices and other types of workplaces?

Enter the relatively new concept of ‘Green Leases’ (a legal document which identifies specific ‘green’ obligations on both tenants and landlords). Clauses could include:

  • Monitoring and collection environmental date
  • Non-enforceable schedules relating to detailed tenants’ obligations
  • Guidance issued by landlords to tenants at the start of the lease term, which may be anything from a statement of aspiration to a detailed guide for using effective building management systems.

The truth is the content of lease clauses regarded as ‘green’ is subject to considerable variation. Whilst they can be a valuable catalyst for either tenants’ or landlords’ sustainability goals, it is important to be aware that there can be differing interpretations about what could be included in a lease, in order to classify it as ‘green’.

Benefits of being ‘green’

Beyond the marketing value of having a Green Lease and working in, what is deemed to be, a ‘green/sustainable building’ there are tangible benefits for tenants including:

  • Sustainable buildings offer savings through reduced running costs
  • Better working environments help attract and retain talent and it can also enhance productivity
  • There is a growing community businesses with a strong/growing ESG* agenda which prefer to work with suppliers and advisors who share their ESG values. The implication of working in a green workplace is “we believe in green so deeply, we work in a green workplace.”

The benefits to landlords for having tenants who agree to a Green Lease include:

  • ‘Greening’ a building makes the asset more marketable and will increase its longer-term investment value
  • Buildings with good environmental performance are likely to be ‘future-proofed’ and less susceptible to value depreciation
  • An improved and safer (think COVID) working environment will help improve the asset’s compliance with forthcoming environmental legislation
  • Creating a more efficient building monitoring and analysis framework, will allow owners and tenants to improve the building’s environmental performance and generate operational savings – which could translate into more favourable Service Charges for tenants.

Being ‘Green’ should have an amber warning.

Whilst Green Leases can boost a business’s environmental credentials, it is important to be aware of a number of inherent issues such as:

  1. They impose clauses on tenants which some might find onerous
  1. Some owners might ‘greenwash’ their building at the expense of tenants – by claiming back the capital cost through Services Charges
  1. As landlords need validated proof of the savings gained from improving the building’s environmental performance, this could mean additional admin work for tenants (ie collecting and collating the data)
  1. Tenants should ensure that that there are no onerous terms which may reduce their ability to assign their interests, should they want to
  1. Tenants might be reluctant to carry out improvements to their workplace because they may have a relatively short-lease (perhaps three-five years) and any significant savings might only be recouped in the long term – making the benefits less attractive
  1. Improvements could lead to the possibility of rental increases, which would offset any operational savings.

Some experts believe that this and future Governments will introduce additional legal obligations to upgrade buildings’ environmental performance – in addition to the Energy Performance Certificates (EPC) which have been in place for several years.

The reality is that new legislation could present significant risk and financial exposure for tenants as the responsibility to ensure a workplace/building complies with the new rules could fall on tenants – the costs could be significant and disproportionate to tenants’ short term leasing commitments,

Some people have found that negotiating and agreeing Green Lease clauses can be complex and time consuming. This can be especially problematical in multi-let buildings where different tenants consume building services (such as heating, light, cooling, utilities, etc) differently.

Think about the disparity between tenants who have a 9-5/five-day-a-week operation and those which work in the same building who have a 24/7/365 operational model. The latter will consume more heating, lighting, electricity etc than the former, therefore it would be inequitable to split the Service Charge equally between all tenants in the building.

To bypass all the issues associated with negotiating and signing a Green Lease, both parties can opt instead for a Memorandum of Understanding (MOU) which outlines how they will work together to improve and manage a building’s environmental performance. However, MOUs are not legally binding documents and can be updated, by either party, without impacting or requiring any changes to the terms of the lease. In addition, there is no stipulated timeframe from an MOU.

Therefore, when companies think strategically about how to ‘green’ their service/offer, they should also consider the premises they occupy and/or own and ‘sweat’ that asset to ensure it underpins their green credentials.

 

 

Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

Related Posts

Why Fraud Prevention is No Longer Just a Finance Function

The CEO of Nothing. Why You Should Avoid ‘Gurus’

The Digital Trap: Why Cancelling Online Subscriptions Is Still Needlessly Difficult in the UK

Comments are closed.

Follow SME Today on Linkedin and share all the topics you find interesting
Invest in your pension

The Newsletter

Join our mailing list for the best SME stories, handpicked and delivered direct to your inbox every two weeks!

Sign Up
Events Calendar
    • Marketing
    May 19, 2025

    How SMEs can create effective marketing and advertising creative on a budget

    May 6, 2025

    Why WordPress Remains One of the Best Website Platforms for Entrepreneurs

    • Finance
    May 19, 2025

    Why Fraud Prevention is No Longer Just a Finance Function

    May 16, 2025

    SMEs say funding is vital – so why are a third not applying?

    • Health & Safety
    January 29, 2025

    UK takeaways guilty of shocking hygiene failures:

    December 18, 2024

    Comment on Covid Corruption Commissioner Investigation

    • Events
    November 19, 2024

    Seventeenth Global Entrepreneurship Week (GEW)

    October 22, 2024

    Winners Announced for Sheffield Business Awards 2024

    • Community
    May 14, 2025

    Social care experts launch an online marketplace to disrupt a sector in crisis.

    May 1, 2025

    A Marathon Effort: Managing Director Raises Over £4,000 for Charity

    • Food & Drink
    April 16, 2025

    Cutting Down on Business Costs in Your Cafe

    April 15, 2025

    Allergy Awareness Advocate Julianne Ponan MBE To Address Gousto   

    • Books
    April 24, 2025

    Values-Driven Professionalism: A Path to Client Loyalty

    December 2, 2024

    Banish the banshee boss: how to lead without fear – addressing the issue of fear-based management and how NOT to be this manager

    About

    SME Today is published by the same team who deliver The Great British Expos’. We have been organising various corporate events for the last 10 years, with a strong track record of producing well managed and attended business events across the UK.

    Join Our Mailing List

    Receive the latest news and updates from SMEToday.
    Read our Latest Newsletter:


    Sign Up
    X (Twitter) YouTube LinkedIn
    Most Recent Posts
    May 19, 2025

    Let’s Talk – Business In Profile, Paul Day, Filestream.

    May 19, 2025

    How SMEs can create effective marketing and advertising creative on a budget

    May 19, 2025

    Why Fraud Prevention is No Longer Just a Finance Function

    May 19, 2025

    I’ve been in employee benefits a long time: it’s about time we supported SMEs

    May 16, 2025

    SMEs say funding is vital – so why are a third not applying?

    Categories
    • Books
    • Community & Charity
    • Education and Training
    • Environment
    • Events
    • Features
    • Finance
    • Food and Drink
    • Health & Safety
    • HR & Recruitment
    • In Profile
    • Legal
    • Marketing
    • News
    • Property & Development
    • Sponsored Content
    • Technology
    • Transport & Tourism
    • Wellbeing & Mental Health

    Copyright © 2020 SME Today.

    • ABOUT SME TODAY: THE GO TO RESOURCE FOR UK BUSINESSES
    • Privacy
    • Contact
    Copyright © 2025 SME Today.
    • ABOUT SME TODAY: THE GO TO RESOURCE FOR UK BUSINESSES
    • Privacy
    • Contact

    Type above and press Enter to search. Press Esc to cancel.