LPDD Model Law: Green Commercial Lease Legislation

This model state legislation is intended to assist commercial landlords, tenants and other parties-in-interest in drafting green lease provisions that comply with state green building code requirements, compliance with Third Party Rating Systems, and support energy and water efficiency and sustainability in the commercial building sector, including office buildings, shopping centers, retail, and other large commercial properties.  The provisions are recommended as voluntary to assist with compliance, energy, water, and sustainability objectives, not to regulate commercial leases among states. 

Green leasing, sometimes known as “energy-aligned, energy-efficient, or high performance” leasing, has been described as a “practice of realigning the financial incentives of sustainability or energy measures in lease documents.” It has been defined as a “legal agreement between owner and tenant outlining the obligations each party will undertake under the lease to promote energy efficiency and sustainability.” Many landlords, tenants and leasing teams have voluntarily incorporated green leasing provisions into commercial leases for various reasons, including in response to market demands, such as tenant demands for more energy efficient spaces and sustainable practices, or to take advantage of cost savings from a decrease in utility costs and the ability to charge higher rents (which can offset the upfront costs of creating a sustainable environment).

There are various challenges and barriers discussed herein to revamping current lease terms and addressing new lease terms incorporating green lease provisions.  But as the United States shifts toward achieving net-zero emissions by 2050, including promoting the use of construction materials with lower embodied carbon, green leasing is likely to play a pivotal role in decarbonization efforts in the coming decades.  Now is the time to address legislation promoting recommended green lease provisions.

This model was drafted by Jessica M. Simon, of Counsel at the Los Angeles office of Ballard Spahr LLP.  It was peer reviewed by Richard J. Sobelsohn, who is an LEED Accredited Professional and Green Globes Professional and who is an adjunct faculty member at Columbia Law School.