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With increasing focus on environmental issues worldwide, more and more landlords and tenants are looking at incorporating environmentally sustainable design ("ESD") principles in the construction of new premises, and in negotiating lease terms.
Green Leases
This changing focus has seen the advent of so called "Green Leases", which impose positive ESD-style obligations on both tenants and landlords to ensure any negative environmental impacts of the building being leased and its use are minimised.
Some of the more common obligations on tenants along these lines include:
- Compulsory shutdown of mains power supply after a certain time, with auxiliary power available thereafter for emergency purposes;
- Use of collective recycling bins;
- Additional charges for excess water use, with the "excess" level being a lower figure than used in the previous year;
- Adherence to water efficiency management plans.
Obligations which are becoming more common for landlords include the installation of reflective glass coverings to reduce a building's air-conditioning needs, fans to reduce constant use of air-conditioning, and skylights to allow natural light.
Tips for Negotiating Green Leases
Parties who decide to incorporate ESD type obligations in lease terms should keep the following tips in mind:
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Make sure the proposed ESD obligations are clear and certain otherwise they are likely to be the source of conflict, and may ultimately be unenforceable. To that end, ESD obligations should include measurable goals such as: "the overall energy consumption for the premises must not be higher than x";
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ESD obligations should be realistically capable of being achieved. Simple and easily understood ESD obligations are likely to attract tenants, but excessive or overly complex ESD obligations are likely to drive tenants away or lead to disputes;
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Provide a mechanism for dealing with disputes - the traditional modes of dispute resolution provided for in leases may need to be amended to deal in particular with environmental matters;
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Finally, provide clear terms about the consequences of failure to comply with ESD terms.
Impact of Environmental Legislation on Existing Leases
Green Leases aside, landlords and tenants should also consider when entering into a lease how they would deal with potential new environmental legislation throughout the term of the lease, e.g. water saving devices. Leases commonly provide general statements about the costs of compliance with new legislation falling either to the landlord or the tenant. With environmental issues becoming increasingly pertinent, parties should now give more thorough consideration as to who should properly bear the burden of structural or practical changes required to premises, or practices at the premises, arising from environmental legislation and provide for this in the lease. If you would like advice on your position under current lease arrangements, or on the process of negotiating a Green Lease for your premises, please do not hesitate to contact any member of our team.
Our Hospitality Team:
Michael Potts | Partner
Brisbane
Reg Lillywhite | Partner
Cairns
Peter O'Connor | Partner
Cairns
Steven Titmus | Partner
Townsville
Michael Keir | Partner
Townsville
Louise Sloan | Senior Associate
Brisbane
Joanne Lillywhite | Senior Associate
Cairns
Stephanie Sanders | Associate
Brisbane
This is a newsletter intended only to provide general information about current legal issues and does not constitute, nor should it be used or treated as, professional or legal advice. Readers should make their own enquiries or seek legal advice before making any decisions concerning their own interests.
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