Webinar: Industrial Property and Energy Efficiency: Key Legal Issues for Manufacturing Tenants

What Is a Green Lease?

A green lease integrates environmental performance clauses into a commercial lease. For manufacturers, whose energy consumption and carbon footprints can be substantial, these leases aim to foster collaboration with landlords to drive sustainability and reduce costs.

Green leases vary from:

• Light green: Cooperative aspirations (for example, agreeing to discuss improvements)

• Dark green: Binding obligations (for example, to meet specific energy performance targets, or to use specified materials and suppliers)

Why Does It Matter to Manufacturers?

Energy-efficient properties are increasingly becoming a market expectation. Properties failing to meet minimum EPC ratings risk becoming unlettable, impacting long-term operations.

Green leases often include:

• Data sharing obligations for energy consumption

• Restrictions on alterations that reduce the EPC performance of a property

• Landlord access rights for green improvements

• Cost-sharing through service charges

In a recent manufacturing case, a plastics recycler faced serious disruption and legal action due to disputes over energy contracts and faulty metering.

The Issues:

• The landlord entered into an energy contract without consultation

• Sub-meter installation was delayed and faulty

• Electricity usage, including peak and off-peak consumption, became unverifiable

• Disputes arose over billing, apportionment and potential forfeiture

Lessons Learned:

• Confirm how electricity will be supplied, billed and monitored before signing a lease

• Insist on sub-metering where energy usage is critical

• Negotiate a right to be consulted on utility contracts

• Consider engaging an independent energy consultant before entering into a lease

When leases end, tenants may face terminal dilapidations claims, which are legal demands to return the property in full repair or to compensate the landlord.

What Can You Be Liable For?

• Repairs needed to return the property to the lease condition

• Reinstatement of unauthorised alterations

• Lost rent or business rates due to disrepair

Legal Limits on Landlord Claims:

Under Section 18 of the Landlord and Tenant Act 1927:

• Landlords cannot claim if repairs are rendered obsolete by redevelopment

• Claims are capped at the lower of repair costs or the reduction in the property’s value

Top Tips:

• Commission a building survey well in advance

• Consider using a schedule of condition to limit repair liability

• Negotiate a dilapidations settlement where appropriate

• Always consider the landlord’s intentions for the property after the lease ends

Property management in the manufacturing sector does not need to be a burden. By understanding your legal position, engaging early and negotiating robust lease terms, you can safeguard your operations and make your property work for your business.

As Big Energy Saving Week highlights the importance of energy efficiency and cost control, now is an ideal time for manufacturers to review how their leases support, or hinder, those goals.

At Myerson Solicitors, we partner with industrial occupiers and owners to navigate these complex challenges. Whether you are negotiating a green lease, reviewing operational costs or exiting a site, we are here to help.