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Negotiating a green lease

A green lease is a lease of space in a green building. Green buildings are designed, constructed and operated to achieve sustainability, water efficiency, energy, resources and indoor environment quality goals. This may impact the lease document in three ways:

  1. A green lease provides for an integrated design process. This may mean the tenant requires the landlord to provide certification the building achieves a specified Green Star or NABERS level.
  2. While initial costs of constructing a green building may be higher than for a conventional building, ongoing operating costs will be lower. A green lease will address how these costs and benefits will be allocated to both the tenant and the building owner.
  3. Green building systems have detailed operating and maintenance requirements, so the tenant and landlord must negotiate how the ongoing upkeep of the building will be ensured.

For commercial tenants

While there is no single right way to draft a green lease, there are some questions you can ask your real estate agent to ensure your company gets the best value from going green.

Below are several questions to ask when reviewing or revising a commercial office lease with green requirements in mind:

  • Does the building have a Green Star or NABERS rating of 4 stars or above?
  • How will the landlord ensure any certification is retained?
  • - Will your company be compensated if the building fails to comply with green standards?
  • Who bears the burden of any penalty if the building fails to meet any mandatory recycling requirements?
  • Does the lease provisions allow the landlord to enter the leased premises to retrofit water fixtures with new, more efficient models?
  • Will your company, when renovating or altering space, agree to comply with Green Star requirements, such as using only low VOC paints and floor coverings or installing energy-efficient appliances?
  • Who will receive the benefit of lower operating costs resulting from green practices?
  • What part of capital investment costs (such as new, more efficient building systems) will be passed through to your business under the lease?

The Green Lease Guide for commercial office tenants provides easy-to-understand and useful information on what to look for when choosing a green building. It also provides checklists of aspects to consider when designing your office fitout and choosing equipment.

For government tenants

The Australian Government has developed the Green Lease Schedule (GLS), a new type of leasing arrangement for federal government agencies. It contains mutual obligations for tenants and owners of office buildings to achieve efficiency targets and improve energy efficiency. Download a GLS or read more.