Tuesday, July 14, 2009

Green Building and Environmental Trends-Decertification

Green Leases: How to avoid the devastating consequences of decertification

This past week Chris Cheatham of GBLU wrote an excellent blog post discussing LEED v.3.0 and the potential for a LEED certified building to be decertified. After reading the post and pondering the implicatitons for landlords and building owners one thing is abundantly clear to me, attorneys must advise owners of LEED certified buildings to begin using green leases. An article from 2006 by EDC Magazine states that the following ten requirements must be included in any green lease.

1. Gross lease format with appropriate escalation clause and expense stop clause to reward landlord for operating a high-performance building.

2. Appropriate operational procedures and building control/management systems for charging tenants for after hours/excess energy usage, supported by appropriate lease language.

3. A comprehensive and equitable definition of building operating costs in the lease to protect the interest of both the landlord and tenant.

4. As part of the definition of building operating costs, the lease should contain language that allows the landlord to amortize the cost of projects that will reduce operating costs and treat those amortization costs as operating costs, as long as they do not exceed savings.

5. Right to Audit – This lease clause protects the tenant from overcharges and defines the audit process to protect the landlord from frivolous audits.

6. Hazardous Materials – A clause that defines what it is and that neither the landlord or any tenant violates laws or regulations regarding the hazardous materials.

7. Green Cleaning Specifications – This lease exhibit should define the materials, procedures and protocols for cleaning the building in a sustainable manner.

8. Building Rules and Regulations – This lease exhibit stipulates a building-wide recycling program.

9. Tenant Construction Agreement – This lease exhibit defines sustainable product requirements and construction practices.

10. Tenant Manual & Development Guidelines – A guide to explain the building’s sustainable features and benefits, procedures and operating parameters, that should provide insights into how to maximize the building’s features to create a sustainable workplace.

With the new potential for a building to lose its status as LEED certified if it fails to properly perform a green lease is more important than ever. There are reports in existence which state that LEED buildings actually use more energy than their non-certified counterparts, this increased energy use is more likely than not due to improper use of the building by the occupants rather than faulty design. Real estate attorneys, construction attorneys, real estate brokers, and landlords need to take measures on the front end to ensure that tenants placed in LEED certified buildings understand the energy saving measures that are put in place, what requirements must be adhered to for the building to remain LEED certified, and the consequences for failing to adhere to these standards. Tradititonal commercial leases are simply put not properly drafted to deal with the unique challenges that green buildings can present and as such we must all learn how to properly address the potential liability by learning to draft effective green leases