Green leases: top 5 negotiating tips for commercial landlords

Our partner, TLT LLP, advises on five things landlords of commercial buildings can address when negotiating leases, in order to make their buildings greener.


Landlords are increasingly thinking about the energy efficiency of their properties, and sustainability more generally.

Here, Alexandra Holsgrove Jones, senior knowledge lawyer at UK law firm TLT, highlights five things landlords can consider when negotiating leases

Drivers of change

For some landlords, the push towards offering more sustainable buildings may be the impending prohibition on continuing to let a property with an EPC rating of below E, which comes into force on 1 April 2023, and the likely rise in the minimum energy efficiency standard to C in 2027 and then B in 2030. Others may be spurred on by a desire to reduce the percentage of greenhouse gas emissions for which the UK built environment is currently responsible – 25%.

Whilst the EPC will set out recommendations as to how you can improve the energy performance of the building, the EPC is not the whole story and you need to look beyond it. Even a property with a good energy performance rating can be used inefficiently, and unsustainably. 


Five tops tips for landlords

Below are some points that you can discuss with prospective tenants, at Heads of Terms stage, when negotiating a new lease.

Drafting for net zero is now freely available from The Chancery Lane Project (TCLP) and other sources, such as the Better Buildings Partnership’s Green Lease Toolkit. TLT is heavily involved in TCLP, which is a collaborative effort of lawyers from across the world to create net zero drafting for businesses to incorporate in their contracts.


1) Would it be useful to collect data on matters such as utilities consumption?

If so, do you have the technology available to do this? If you don’t have it now, could you future-proof the lease to give you the right to install it in the future? Who would pay for the cost of installing this monitoring equipment? Will the tenant agree to sharing environmental performance data?


2) Could electricity be obtained from a renewable source?

This will be attractive to many tenants, and will also reduce your scope 3 emissions. See TCLP’s Lotta’s clause for suggested drafting.


3) When carrying out alterations, repairs or decoration, think about what kind of materials could be used.

Is there actually a need to use new materials, or could the parties re-use materials, or use reclaimed or recycled materials? Circular economy principles enable the parties to reduce unnecessary waste, thus reducing the amount of embedded carbon in the property.

You could require the tenant to follow circular economy principles when it carries out alterations or decorates the premises, or you could do this if you’re providing services (for example, in the common parts). If you’re concerned about the quality of materials that may be used, the drafting could specify that the materials must be to your reasonable satisfaction. See TCLP’s Aatmay’s clause for suggested drafting.


4) Does the tenant actually need to remove alterations at the end of the term?

For example, if the tenant has installed partitioning in its office premises, is the incoming tenant going to require something similar? If so, it doesn’t make sense to require one tenant to remove something that the next tenant could use.

Not only is this a practical solution, saving time and cost, it reduces waste and will reduce the embedded carbon in the building. See TCLP’s Aatmay’s clause and BBP’s Green Lease Toolkit for suggested drafting.


5) Using a building more sustainably requires collaboration between the parties.

However, you should consider whether you want more than just an obligation to cooperate. Much of the ‘green’ drafting currently being used in the market does not actually oblige the parties to do much at all and, whilst a step in the right direction, if one party does not cooperate, there are no sanctions.

You should consider just how far you would want to take things if the tenant does not comply with net zero obligations. Would you be prepared to forfeit the lease, for example?