Green leases

What are green leases?

There is currently no property industry standard set of green lease clauses and they come in different "shades of green" ranging from light touch to those which are more prescriptive.

Traditionally, whether or not landlords were proactive in developing green wording depended on their commitment to green issues generally and specifically to reducing the environmental impact of their properties, the nature and age of the properties within their portfolio, their tenants' perceived appetite for taking on additional green obligations and whether their funders had a green agenda.

With increased external pressure for change in recent years, a heightened focus on corporate social responsibility and ESG generally, advances in technology (particularly surrounding retrofitting) and stricter professional codes (particularly from the RICS) we are seeing a greater interest from the market in the adoption of green drafting in leases. 

Common threads

Although market standard wording is still a way off, we do see common threads in green lease drafting, such as:

• provisions identifying the agreed "green" objectives of the parties (e.g. establishing an energy reduction and waste management programme to improve a property's environmental performance)

• an overarching duty of co-operation (particularly regarding data sharing) in order to achieve those energy reduction and waste management programmes
• restrictions on a tenant's ability to make alterations that could adversely affect those objectives;
• allowing a landlord greater rights of access to a property during the term of a lease for reasons connected to environmental performance (e.g. to install sub-meters)
• a commitment by all parties to act in accordance with a landlord's responsible investment strategy or similar, with recognition that this may evolve during the term of the lease

Working with the Chancery Lane Project

Over the last 12 months, we have seen the emergence of The Chancery Lane Project (TCLP), which is an independent organisation bringing together lawyers from around the world to develop contractual drafting to help fight climate change.

TCLP ran a series of hackathons and group sessions involving more than 1,300 lawyers (including from Trowers & Hamlins) to develop precedent clauses, checklists, and glossaries across a range of practice areas. As a firm, we are proactively adapting and incorporating elements of TCLP drafting into our documents where appropriate so as to tailor them to our clients' needs.

How we can help

Green lease clauses are here to stay and landlords who consider and adopt them early on will undoubtedly find themselves with a competitive advantage.

We recognise that there is no "one size fits all" approach to green leases and that wording needs to meets clients' goals and achieve the particular shade of green that is commercially acceptable to them and their tenants. 

What is involved

We are here to guide you through the process.

Our experts will work with you to establish your requirements and to review your existing wording, if any, and where there is scope for modernisation.

If this is a new initiative then we will propose appropriate wording as a starting point with the aim of working up a bespoke precedent suite of green provisions, to apply both to new leases and, where possible, on renewals.

What it will help you to achieve

Alignment of your property portfolio with responsible business and ESG principles will add real and perceived value to your organisation and will appeal both to tenants and investors.