SUSTAINABILITY PART 3
Green leases PARTTHREE
Increasingly commonplace in the commercial sector, there is agitation in some quarters around how Green Leases might be applied in the residential sector, writes Gordon Miller.
T
he recent announcement by Legal & General Property (LGP), which has £10.3bn of property assets under management, that it has
amended its standard lease format to include ‘green’ clauses, is a game changer for the commercial property industry. Notifying its full panel of lawyers, LGP
has issued a memorandum of green lease principles that must be considered in the drafting of all standard leases going forward, including clauses relating to the use of environmental contractors and upholding Energy Performance Certificates (EPCs). Bill Hughes, MD of LGP, said, “The
decision to implement green lease clauses further demonstrates LGP’s ongoing efforts to reduce the environmental and social footprint across its portfolio, working from the grass roots up to implement change. “As one of the UK’s largest property fund
managers, we recognise our responsibility to minimise the environmental impacts of our assets, and believe that by working closely with our occupiers, we can take these changes to the next level. The move to incorporate green lease clauses represents just one element of LGP’s wider sustainability strategy which we look forward to continuing to develop going forward.”
IMPLEMENTING CHANGE With a sustainability strategy centred on maximising the efficiency and sustainability of its portfolio, LGP recognises the fundamental importance of working with tenants to take these changes to the next level. Additional conditions set out in the lease include the implementation of a recycling strategy, and the agreement by both parties to meet regularly to discuss such issues as energy consumption and the use of grey water. The lease also sets out amendments to
tenants’ handbooks, to include incorporating information regarding energy and environmental management in
18 MARCH 2012 PROPERTYdrum
relation to the estate, including EPC ratings and recommendations. Furthermore, leases may include energy reduction targets, monitoring data and other green initiatives in relation to the estate. LGP considers it of the upmost
importance that tenants understand the benefits of green policies, especially where they reduce energy costs and therefore the running costs for their premises. Its decision to adopt green leases follows a number of comprehensive initiatives undertaken by the Company to engage with occupiers, including the ‘Office, Retail and Leisure Occupiers’ Guides to Sustainability’. The Guides seek to equip tenants with a thorough understanding of the environmental impact of property and the necessary toolkit to implement change. Additionally, the company has broken
new ground by being the first investment management firm to provide an intensive, six-month training course on sustainable property investment. Participation has been made compulsory for all property fund managers within the business and rolled out to the rest of the industry through its partners and agents. Katherine Laurenson, Senior Solicitor
at Legal & General Property, said, “The memorandum sent to our full panel of lawyers seeks to provide full, clear guidelines as to the issues that we consider key, so that they can effectively liaise with our tenants’ representatives to find a lease structure that accommodates both parties’ needs and responds to the fundamentals of the building. “We work from a principle that
encouragement and flexibility is the most effective way to deal with green issues in leases, rather than enforcement provisions with penalties for tenants who fail to comply. If tenants can see that these procedures enhance their Corporate Social Responsibility (CSR) profile, reduce their energy costs and are less harmful to the planet, it is more likely that they will implement them.”
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