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Manchester has set a target of achieving net zero by 2038 – 12 years ahead of the Government's target for the rest of the UK.
Reducing the carbon footprint of new builds and existing commercial properties will prove key to achieving this goal.
By "green proofing" a commercial property, either by building new buildings, or retrofitting existing buildings, to be more energy efficient, businesses may achieve cost-saving efficiencies on utility bills and foster a better reputation.
In this article, we explore how landlords and tenants may collaborate when looking green proofing commercial property and the practical measures businesses may take to leverage technology to reduce a property's carbon footprint.
What is a green lease?
Green leases are commercial leases that incorporate sustainability practices into the terms and conditions by placing obligations on landlords and tenants to minimise carbon emissions from property development, operation and occupation.
Green leases are becoming increasingly popular in the commercial real estate industry, and broadly speaking, there are three main forms: light green, medium green, and dark green.
Light green leases
A light green lease includes sustainability clauses that encourage tenants to be more environmentally responsible – the provisions are usually non-enforceable and therefore have no teeth.
Such clauses cover a wide range of behaviour, from energy efficiency, waste reduction to water conservation.
The objective is to create a collaborative partnership between landlords and tenants that supports sustainability efforts and reduces the overall environmental impact of a building or occupying the building.
Medium green leases
Medium green leases impose sustainability obligations that are ordinarily legally binding but are not intended to be onerous or financially burdensome.
Medium green leases are appropriate where the parties have set sustainability targets and wish to commit to sustainable practices.
Dark green leases
Dark green leases impose much more responsibility on the parties, and the terms are ordinarily legally binding.
Whilst landlords and tenants can both benefit from improving the environmental performance of a building - tenants may be reluctant to take on any additional responsibilities, which will result in additional costs to them.
Dark green provisions
Dark green provisions will impact several different areas of the lease, especially in relation to the following:
Consent for alterations
A tenant could impact a property's environmental performance when carrying out a fit-out or alterations.
Landlords now frequently assess the environmental impact of such proposed works when considering whether to provide consent.
A dark green lease may prohibit tenants from making alterations or additions which may adversely affect the asset rating in any EPC commissioned or require that the tenant uses materials from sustainable sources.
Rent review
Landlords may seek higher rents for greener premises.
Tenants, in turn, may request that the effect of any energy efficiency works (paid for by the tenant) be disregarded at rent review, as ultimately, the works will increase the property's value and drive up hypothetical rents.
Service charge
Landlords may want the right to carry out alterations to common parts to improve energy efficiency and environmental performance in multi-let properties.
This will potentially mean additional costs to occupiers through increased service charges to pay for the initial works. In the long term, this may reduce energy costs; however, short-term tenants may pay for the work but never reap the long-term benefits.
Dilapidations
Traditional leases often require that the tenant leave the property in its original condition, regardless of any improvements made during the tenancy.
However, dark green leases may focus on the landlord and tenant working together to agree on what elements of the tenant's alterations could remain for an incoming tenant.
This may be achieved by including a schedule of conditions that considers any sustainable upgrades made to the building and limits the tenant's liability for returning the building to its original condition.
Dark green leases can also allow the tenant to transfer ownership of sustainable upgrades to the landlord at the end of the lease or to negotiate a reduced dilapidations liability based on the value of such upgrades.
Sustainable practices
Green leases provide a framework for landlords and tenants to work together to reduce the environmental impact of commercial properties.
By incorporating sustainable practices into leases, both parties can benefit from cost savings, improved environments, and enhanced reputations as socially responsible businesses.
When considering a green lease, landlords and tenants should review the lease terms carefully to ensure they align with their sustainability goals and consider the costs and benefits of implementing these practices.
What practical steps can a landlord or tenant take to green-proof a property?
By leveraging the latest technology, landlords and tenants can implement practical measures to reduce the carbon footprint of a building.
Step 1: Conduct an Energy Audit
Before making any changes to a commercial property, it is important to understand where energy is being used and where it is being wasted.
This can be done through an energy audit conducted by a professional energy auditor or a do-it-yourself audit.
An energy audit can identify areas for improvement, such as inefficient lighting or heating and cooling systems.
Step 2: Switch to Energy-Efficient Lighting
One of the easiest and most cost-effective ways to green-proof a commercial property is to switch to energy-efficient lighting.
This can be done by replacing traditional light bulbs with LED bulbs or installing motion sensors to turn off lights when unnecessary.
LED bulbs use less energy and last longer than traditional bulbs, which can lead to significant cost savings over time.
Step 3: Upgrade Heating and Cooling Systems
Heating and cooling systems can account for a significant portion of a commercial property's energy use.
Upgrading to a more efficient system, such as a high-efficiency furnace or air conditioner, can lead to significant cost savings and reduce the property's carbon footprint.
Regular maintenance and cleaning of these systems can also improve their efficiency.
Step 4: Insulate the Property
Proper insulation is essential for reducing energy waste and improving the comfort of the property.
Insulation can help to keep heat inside during the winter and outside during the summer, reducing the need for heating and cooling systems.
This can be done by adding insulation to walls, ceilings, and floors and sealing gaps or cracks that may allow air to escape.
Step 5: Use Renewable Energy Sources
Using renewable energy sources, such as solar or wind power, can help to reduce a commercial property's reliance on fossil fuels and reduce its carbon footprint.
This can be done by installing solar panels on the roof or using a wind turbine to generate electricity.
In some cases, a property can generate more energy than it needs and sell the excess back to the grid, leading to cost savings.
Step 6: Implement Water-Saving Measures
Water is a precious resource, and implementing water-saving measures in commercial property can help to reduce waste and lower water bills.
This can be done by installing low-flow toilets and faucets, fixing leaks, and using drought-resistant landscaping.
