How green leases benefit owners and tenants

Agreements to spur efficiency upgrades are slowly gaining popularity.

January 18, 2017 |

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Green leases, also called energy-aligned leases, have been gaining more adherents since they were introduced to the market about 10 years ago.

They are effective tools to ensure that both landlords and tenants benefit from energy and water efficiency building upgrades. Traditional leases tend to create disincentives for landlords and tenants to invest in more efficient systems and equipment.

For example, the financial savings from lower operating costs in a net-leased building go to the tenant while the landlord pays the capital costs for improvements. And, in buildings with a full-service lease structure, the landlord has incentive to keep energy costs down, but the tenant is not penalized for wasteful energy consumption.

Owners who have successfully implemented green lease programs have shared the costs of energy-saving improvements; ensured tenants build out to green standards; increased transparency by sharing access to energy consumption data and ENERGY STAR scores between tenants and landlords; and encouraged cooperation on environmental initiatives, such as recycling.

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