LPDD Model Law: State Green Leases Legislation

Green leasing is an opportunity for owners and tenants to work together in going green.  Specifically, a green lease outlines the way in which a building will be occupied, managed, and operated to achieve energy efficiency. In a green lease, a tenant shares the cost burden and benefits of sustainability upgrades and practices with the building owner, resulting in financial and sustainability gains for both parties.

Despite the benefits of green leasing, adoption of green leases is more often observable in the commercial sector, and less so in multi-family residences.  Due to the short-term nature of residential leases, these lease agreements generally do not include cost recovery clauses allowing amortization and recovery of costs.  Therefore, the split-incentive barrier is difficult to overcome in this market.

This model legislation recognizes the importance of greening multi-family residential spaces and attempts to encourage the adoption of green leases in this market by 1) addressing the problem of split incentives by encouraging/requiring owners to implement efficiency upgrades when units are vacant between residents and 2) affecting owner and tenant behavior towards energy conservation through education, standard setting, and transparency.

This piece of model legislation was drafted by Nkasi Okafor Wilken (Director of Legal Services, Teach For All) and was peer reviewed by Warren Lavey (Adjunct Associate Professor, University of Illinois, Urbana-Champaign, IL.). Warren Lavey works on climate change and other environmental projects with the World Commission on Environmental Law, Union of Concerned Scientists, and Sierra Club.