Green leases create binding rules

The drafting of leases for green buildings still lags behind developments in the property market. Guidelines for sustainable leasing and letting provide direction.

Sustainable buildings are the future

A range of national and international certification schemes and quality marks now exist to document sustainability in buildings. Green leases, on the other hand, which promote sustainable use of commercial property, are still comparatively rare in Germany. Standard guidelines are also lacking.

 

There is, however, a clear trend among companies in favour of green buildings. They are motivated both by a sense of corporate social responsibility and by the belief that sustainable, efficient properties deliver economic benefits. Tenants appreciate lower costs for electricity, hot water and heating, while landlords and investors benefit from the enhanced attractiveness and marketability of such buildings.

sustainability guidelines

50 recommendations that benefit landlords and tenants alike

Against this backdrop, a number of leading real estate companies joined forces to develop standards for green leases. Union Investment also supported this project. The objective was to create a framework for leases that would encourage tenants to become sustainable occupiers and incentivise landlords to manage properties to equally high sustainability standards; a classic win-win situation. The outcome was a catalogue of 50 recommendations for lease clauses. The project group that created the guidelines won the 2013 German Real Estate Manager Award in the Sustainability category.

Green leases continue to evolve

The clauses were “road-tested” for several years, but market players proved very reluctant to adopt them. What was good for the environment was often not accepted as part of a lease agreement. Accordingly, a new industry working group incorporating Union Investment developed and published revised guidelines in 2015: “Green Lease Agreements – Recommended clauses and actions for sustainable building use”. The focus in this document is on a reduced set of goals, but ones which are more specific and easily achievable. The guidelines also contain valuable advice, such as suggested content for a user handbook and details of environmentally friendly construction and cleaning materials.

Achieving objectives together

By raising mutual awareness, regularly sharing information and engaging in constructive cooperation, the parties to a lease can make building management and use more sustainable. A green lease provides the necessary framework for achieving this. Even without any previous experience in the area of sustainability, landlord and tenant can work together to optimise the building and achieve the defined goals.

Green leases on the rise

Elsewhere in the world, particularly in the English-speaking countries, green leases are already much more established. However, the authors of the two sets of guidelines referred to above were only able to make limited use of this international experience due to the very different legal frameworks. Interestingly, some provisions that have long been customary or even legally prescribed in Germany are celebrated in other countries as a "green achievement". A good example of this is the apportionment of service charges based on actual consumption.

 

The high value placed on sustainability by society in general, combined with growing pressure from legislators, should ensure that green leases become increasingly widespread in Germany going forward. The new recommendations provide a solid foundation for agreeing binding rules between landlords and tenants on sustainable occupation of properties, without waiting for corresponding legislation.