The Green, Green Grass of Collaboration – could the BBP Green Lease Toolkit bring some green sky thinking?

Negotiating green lease clauses has quickly become an everyday task for transactional real estate solicitors. In the drive to net zero, with around 20% of built carbon emissions stemming from commercial property, stakeholders within the market have had to start seriously evaluating their impact and developing long term initiatives. The results, in terms of environmental, social and governance ("ESG") lease provisions, are variable – some landlords are taking a light touch, creating flexibility for the future, whilst others reflect clear current objectives. However, the guidance to date has a common bias; allowing landlords to drive the agenda.

What has changed? The new BBP Green Lease Toolkit ('toolkit')

Since January this year, the market has had some refreshed and more detailed guidance from the Better Buildings Partnership ('BBP'). The BBP produced original guidance in 2008 but a renewed vision was called for to keep up with the need for consistent market positions in the growing trend for embedded green drafting.

The BBP look to provide 'practical tools to support the delivery of better buildings for investors, owners, occupiers and the communities in which they operate'. The toolkit is presented as a reference point for best practice within the industry to 'enable market transformation through sustainability leadership and collaboration', 'improve professional understanding through knowledge sharing by providing model clauses, drafting guidance and resources' and 'develop common approaches for the industry'.

The new approach

The new toolkit has an overarching aim to drive collaborative efforts to meet sustainable objectives. It presses the need for both landlord and tenant to recognise a responsibility, throughout the whole leasing process, to achieve global sustainable targets. The focus is not only on the improvement of the environmental performance of buildings but also on their social impact.

Throughout the toolkit, drafting is offered on three bases: light green (flexible), medium green (commercially reasonable) and dark green (stringent). As mentioned above, the position of stakeholders in the market is variable, so flexibility is offered to allow adoption and commitment at some level. The toolkit identifies certain provisions as 'essential', which parties should aim to include in all leases (albeit it is in the shade of green most aligned with commercial strategies for the sector).

Assisting occupiers

A supporting statement of the toolkit is that 'co-operation is at the heart of the success of a green lease'. With the focus being on meaningful engagement and alignment of both parties, it will be key to see how the landlord position responds to requests from tenants to initiate sustainable changes.

Although encouraging co-operation, the toolkit and its supporting drafting still largely assume a landlord led initiative. But what about where the tenant looks to drive the agenda? What proposals might we usefully see to actively support the co-operative approach, particularly as the market struggles to retain occupiers in physical space?

Conflict or collaboration?

The BBP comments that green leases can 'sometimes be seen as contentious'. In practice, contention more readily arrives from drafting which is unbalanced and does not recognise the commercial needs and sustainable initiatives of both parties. We wait to see whether the toolkit is the positive catalyst for a new industry approach that really will mean collaborative and informed discussions between parties in agreeing on lease terms.

Our asset management team advises clients on green lease provisions. Please get in touch to discuss how we can assist you.