Green Leases

For help with lease matters contact Tim Rankin (379 4383)

Green leases are a relatively new phenomenon, but are becoming more common in Australia and New Zealand in association with the "Green Building". Parry Field Lawyers provide legal advice on a range of property matters including green leases.

What is a Green Building?

Green Buildings are designed to be environmentally sustainable (environmentally sustainable design or "ESD"), as well as to comply with an external environmental rating (the "Green Star NZ Rating" in New Zealand). This incorporates sustainability matters by evaluating building projects against eight environmental impact categories, such as energy, water, indoor environmental quality, and materials. Within each category, points are awarded for energy efficient initiatives, or an environmental weighting factor is applied and overall score is calculated.

The Lease Document

Once built, a key document setting out ongoing lessor/lessee obligations in order to ensure the building retains its rating is the Green Lease, which will contain required ESD outcomes and associated requirements for meeting them, as well as an environmental management plan, or user guide on the correct and sustainable use of the building.

Though obligations are imposed on lessor and lessee under a green lease, the emphasis is on "collaborative property solutions" to ensure the ESD outcomes are achieved. However, the lease can specify penalties for failing to comply with lease obligations/achieve prescribed ESD outcomes, such as a reduction in rent commensurate with any increased costs associated with a lessor’s failure to achieve ESD outcomes

Obligations

The principal obligations for lessor and lessee are:

conservation of energy such as heating, cooling, ventilation, lighting, pumping, lifts, hot water and flushing water, as well as recycling where this is available.
separate metering of energy and water consumption of each lessee as well as common areas for diagnostic purposes.
lessee fitouts being consistent with that of the base building in order to meet agreed as-built environmental ratings.
ongoing consultation between lessor and lessee is important to ensure that ESD outcomes are being achieved or, if not, how they may be achieved.
regular meetings via a building management committee.
regular independent building audit which might advise on performance of the building, and also set out where and why ESD outcomes are not being achieved, along with attributing responsibility for any non-performance.
promoting energy conservation beyond direct usage of the building, such as by providing bicycle storage and changing rooms.

Becoming Mandatory

Rather than being merely a trend towards "green" thinking, the Government appears to have mandated the green building rating system by requiring from 1 July 2007 that all new A-grade office buildings being constructed to house Government staff in CBDs must have a minimum 5 star Green Star NZ Rating, with a 4 star rating required for B-grade office buildings.

There would appear to be increased development costs associated with delivering a green building, but some in the industry argue there are in fact long term savings to be had. One major rationale for the Green Building is that it greatly increases marketability to potential tenants. The anecdotal evidence from Australia is that those buildings possessing a high green rating have long waiting lists of tenants, whose corporate philosophy deems it important to possess, or to be seen to possess, green values.

Should you need any assistance with this, or with any other Commercial matters, please contact Peter van Rij or Tim Rankin at Parry Field Lawyers (379-4383).