Green leases per se are in increasingly common usage in the United Kingdom, though with certain types of green clauses being more frequently being incorporated into lease contracts. Significantly, acceptance by tenants of these provisions are becoming the market norm and such provisions, (e.g., those requiring the tenant to contribute to carbon-reduction commitment costs related to the service charge provision) are being accepted without material amendment (see section entitled "Regulation" above.).
The private sector is taking the lead, mostly through large private sector institutional landlords. Nonetheless, both those landlords and tenants that have adopted environmental and sustainability considerations into their corporate strategies tend to be much more receptive and, in certain cases, are trailblazing the green lease agenda.
It continues to be extremely uncommon for green lease provisions to be retrofitted into existing leases. In its place, there are many notable examples of landlords agreeing with their tenants to set out aspirational, and largely non-binding, objectives in a separate memorandum of understanding (MoU).
As yet, there is no mandatory requirement to include green clauses in leases either within the private or the public sectors in the UK, and we don't see this changing in the foreseeable future, particularly in relation to the private sector, where legislative interference with open-market negotiations is always unwelcome.
In the UK, the debate on green lease clauses is being championed by a number of sector organizations. These include RICS and the Better Buildings Partnership (BBP).
On 29 January 2024, the BBP launched a radically updated Green Lease Toolkit ("Toolkit"), for use in the UK. It is an invaluable resource to inform and normalize green lease thinking between landlords and tenants, and to facilitate a more seamless incorporation of sustainability-focused provisions within commercial leases.
The Toolkit was originally launched in 2008, and last updated in 2013. Notwithstanding, it has been one of the BBP's most prolifically used publications, as owners, investors, tenants and agents recognize the increasing urgency of, and market desire to pursue, increased sustainability measures.
The 2024 update is significant. It provides stakeholders and advisers with a more robust legal framework to guide conversation, agreement and drafting. It contains suggested legal clauses (and detailed explanatory notes) at levels ranging from "light" to "dark" green, depending upon the level of commitment that the parties agree to in a number of environmental action areas.
Core, but not-exhaustive, areas for green drafting are set out in the Toolkit's Green Lease Essentials, and focus on matters such as co-operation, building management, sustainable use, data sharing and metering, energy performance certificates, waste and renewable energy, and others.
Alongside the Toolkit's drafting options are user-friendly statements of intent and guidance, to aid understanding between the parties and to drive discussions as to how to make a meaningful, workable environmental plan that stretches, and delivers on, industry ambitions to reduce emissions.