Green Leases
Are green leases or green lease provisions mandatory or optional? If mandatory, to whom do they apply? If optional, is there significant take up?

There are no mandatory requirements with respect to green lease provisions in the US, and adoption of green leasing has not been particularly widespread so far. Nonetheless, a number of public and private initiatives have made substantial efforts to promote green leasing and create innovative solutions to the "split-incentive" problem (discussed in the second bullet point below) and other challenges facing green leasing. Some of these efforts are as follows:

  • As described under the section on “Green certification,” the US GSA has issued the Leasing Desk Guide, incorporating, among other items, modified and additional green language for all leases.
  • The New York City Mayor's Office of Long-Term Planning and Sustainability has developed model lease language that aims to solve the "split-incentive" problem in modified gross commercial leases — the most common type of commercial lease in New York City. This model language, known as the Energy Aligned Clause, creates a pass-through structure where both sides share the costs and benefits of energy retrofits by agreeing on a predicted amount of annual savings and having the tenant pay the owner recovery costs based on the predicted savings.

Additionally, there are a number of nongovernmental resources that address green leasing, such as the Green Building Alliance, the Better Buildings Partnership and the Chancery Lane Project.

Green leasing has also been seen as a collaborative effort between landlords and tenants to incorporate sustainable building practices and environmental initiatives into the construction and operation of commercial buildings. Historically, US commercial leases and construction agreements have had limited clauses for sustainability, but green leases include specific clauses that focus on areas such as energy management, indoor air quality, waste reduction and water conservation. The most recently updated construction agreement forms developed by the American Institute of Architects (AIA) also include AIA Document E204™–2017, the Sustainable Projects Exhibit), which has been specifically developed for use on a wide variety of sustainable projects. These sustainability initiatives comprise those in which the sustainable objective includes obtaining a sustainability certification, such as LEED, or those in which the sustainable objective is based on incorporating performance-based sustainable design or construction elements. By addressing these aspects, green leasing and sustainable construction help develop more robust legal mechanisms for creating a sustainable environment.