Green Leases and Green Travel Plans – The Future is Green
The commercial property world is changing fast. Whilst sustainability has been a buzz word for number of years now, we are finally seeing concrete measures to try to achieve sustainable development. Two areas in particular are becoming ever more familiar to those granting and those taking leases of commercial buildings – green leases and green travel plans.
Why is the UK going Green and Do We Have to Take Part?
The Climate Change Bill imposes a requirement on the UK to cut carbon emissions by 60% by 2050 and if Lord Stern has his way this commitment will be raised to 80%. In addition the European Commission is currently consulting on draft laws which, if passed would impose a target of reducing carbon emissions by 20% by 2020 across the European Union, with individual targets for each country.
In order to achieve these ambitious goals, the Government will have to ensure that the commercial property world plays its part and this is likely to be done through a mixture of incentives and stricter regulation. This is already starting to happen. We saw changes to building regulations introduced in 2006 by the Energy Performance of Buildings Directive which requires all commercial buildings to produce 27% less carbon than before. We have also seen the introduction of Energy Performance Certificates for existing buildings to raise awareness of the green credentials of a building. In addition the new Companies Act 2006 makes the green agenda personal by imposing an obligation on directors to “have regard to the impact of the company’s operations on the community and the environment”.
On the purely financial side, as fuel prices increase at alarming rates, it makes sense for a business to try to reduce the energy consumption of its premises in order to save money, although this will always need to be set against the cost of implementing green measures. There has been some debate within the industry as to whether financial penalties should be imposed if environmental targets, such as energy efficiency, are not met, however there is concern that this would discourage the inclusion of green lease terms.
Green Leases
This new green agenda is finding its way into negotiations between landlords and tenants when granting a lease of a building as both sides want to be absolutely clear who is responsible for which green initiatives, what targets are being set and how the landlord and tenant can work together to achieve those targets.
Tenants want to fully understand how efficient the building is and what landlord run initiatives are in place to help them meet other targets for example recycling. As part of the pre-lease negotiations therefore tenants will increasingly want to see some, if not all, of the following information:
- The energy performance rating of the building or demise;
- Environmental management policies for the building – targets for energy, water and waste reduction;
- Metering and monitoring data;
- Performance details of the air conditioning and heating systems;
- An environmental policy for the common areas and for the areas to be let which commits to employing efficient management techniques (eg the use of energy efficient light bulbs and keeping the air conditioning on for less time at a more efficient temperature);
- Audits and reports for the building;
- Information on waste recycling schemes, central collection as well as waste disposal; and
- An asbestos management file.
Ideally, the landlord should provide the information in a way that prompts feedback and suggestions on how improvements could be made by the tenants. A website for the building is a good way to do this.
The landlord should also formulate an environmental policy which the lease, or supplemental “management regulations” linked to the lease, oblige tenants to follow. The policy can contain:
- Energy reduction targets;
- Environmental policies and awareness;
- Staff awareness campaigns eg “switch off” campaigns;
- Energy monitoring eg half hourly meter readings;
- PIR sensors in corridors;
- An obligation on contractors to comply with the environmental policies – which in turn could require the use of materials from renewable sources;
- Building management systems; and
- Collective waste recycling.
More information can be found in The Carbon Trust’s Good Practice Guide 376: A strategic approach to energy and environmental management 2004.
Green Travel Plans
Green travel plans are increasingly being required by local planning authorities when planning permission is granted for new commercial buildings.
Both developers and local authorities are still feeling their way when it comes to how a green travel plan should operate, so it is well worth checking whether there is a green travel plan for a building that your client is interested in and who is responsible for which elements of it to make sure that your client is comfortable that it can comply with its responsibilities. Ultimately on some sites the local planning authority can prevent occupation of the building if the green travel plan is not complied with.
If there is a requirement for a green travel plan, the details will usually be found in the section 106 planning agreement for the building or the development. Often a green travel plan, or a framework for one, is appended to the section 106 agreement. The local search for the property will reveal whether there is a section 106 agreement.
The aim of a green travel plan is to try to encourage a reduction in car journeys to the site in order to promote more sustainable travel. There are numerous ways in which this can be done, for example:
- Encouraging car sharing;
- Providing cycling facilities;
- Providing shower facilities for employees who walk or cycle;
- Providing a dedicated bus service;
- Restricting car parking space allocations;
- Financial incentives for employees who do not require a car parking space (eg season ticket loans); or
- Promoting flexible working practices eg flexi-time or home working.
Usually there will either be one green travel plan per building or site which all occupiers must then comply with, or (as is becoming more common and which is more sophisticated) to have each occupier having to prepare their own travel plan so that they can tailor it to the practicalities of their business. These plans normally have to be approved by the local planning authority and they should allow for flexibility as the occupiers increase or decrease their use of the building or change its use.
There are numerous transport consultancy firms who will prepare the green travel plan for an occupier but the cost of this should be taken into account when deciding to take a lease.
On sites where there is more than one occupier, the local authority sometimes requires there to be a “travel plan coordinator” whose role is to make sure that the green travel plan measures that each occupier is putting in place complement each other and where possible work together to form synergies. For example, it may not be viable for each occupier to run a bus service to the local train station, but if it is run across the whole site then the number of people involved may make it worthwhile. It is important to be clear whether it is the landlord or the tenant who is responsible for fulfilling that role as there are clearly time, resource and cost implications. This may also be something which impacts on the service charge.
More information on green travel plans can be found on the Department for Transport website and many local planning authorities have their own advice on measures that they are seeking within green travel plans.
Into the Future
While green lease clauses and green travel plans are still sufficiently novel to warrant articles such as this, in future years they are likely to be as common as a rent review clause. We will all be forced to get to grips with green issues as sustainable development becomes the norm rather than merely an interesting concept.
This article was first published in the November/December 2008 issue of The Commercial Property Journal by RICS
