Frequently Asked Questions
Green Leasing Overview
What are green leases or performance-based leases?
A green lease includes smart, energy-aligned clauses that unlock win-win investments in energy efficiency and sustainability. By greening a lease, landlords and tenants collaboratively transform buildings into higher-performing ones by identifying priorities both parties support such as health, wellness, and energy efficiency; defining how building and tenant spaces will operate; and establishing data sharing and clear channels of communication.
High-performance leases build upon green leases and expand upon the fundamentals to incorporate terms that mandate compliance with increasingly stringent energy and carbon requirements. Performance-based leasing seeks to set a goal (Environmental, Social, and/or Governance), outline how both parties will work towards that goal, sets metrics to track progress and mitigation strategies to ensure the goal can be met.
What is the difference between a green lease and a performance-based lease?
A green lease is the original term for a lease that establishes clauses and operational procedures that advance efficient and carbon neutral buildings. An increase in companies pursuing environmental, social, and governance goals, as well as new building performance standard policies passing in cities has led to a new type of green leasing, called performance-based leasing. Performance-based leasing indicates that the lease has a defined whole-building carbon reduction or energy use goal with defined roles and responsibilities in meeting such goals for both tenant and landlord, and sets metrics to track progress and mitigation strategies to ensure the goal can be met.
What are the benefits of green leases or performance-based leases?
Green leases can reduce an office building’s utility costs by 22%, and up to $0.51 per square foot in commercial buildings. When executed, green leases have the potential to provide the leased U.S. office market $3.3 billion in annual cost savings. Performance-based leases can take the energy savings even farther by setting continual performance targets with the tenant.
Green leases also improve a company’s environmental, social, and governance (ESG) scores through its energy and water management best practices, management of tenant sustainability impacts, and climate change and adaptation strategies included in the lease (GRESB Real Estate Sustainability Disclosure Topics & Accounting Metrics 2018). The new Platinum level green lease incorporates social impact metrics into the lease, improving a company’s “S” scores as well.
Most importantly, green leases lead to stronger landlord-tenant relationships. Greater trust and familiarity between parties enables new possibilities for collaboration, including reaching net-zero emissions or incorporating social equity goals into your building space and operations.
Why are performance-based leases important for building owners or tenants in cities with building performance policies?
Building performance policies seek to help cities accomplish their decarbonization goals by setting limits on the energy use or carbon emissions of buildings above a certain size threshold. Building owners will meet increasing energy use targets every couple of years, until reaching the City’s final building performance goals. Some cities do require the payment of a fee if the building does not meet the energy or performance targets by the compliance deadline. To view the cities and states with current building performance standards visit imt.org/bps.
Performance requirements can be a concern for building owners who do not control the energy use of a building, or who cannot share the cost of retrofitting or improving their building with the tenant. Performance-based leases help owners meet the building performance standards by including provisions that:
- Set building performance standards to meet carbon reduction goals;
- Equitably distribute landlord and tenant responsibilities to meet building performance standards;
- Ensure landlord-tenant transparency and accountability by tracking energy use and implementing building performance goals;
- Offer continuous monitoring via periodic recommissioning studies, and mitigating plans where necessary; and
- Present remedies should either party fail to meet building performance goals.
As building performance policies continue to be passed across the country, performance-based leases will become a standard practice.
Recognition Program Overview
How do I apply for Green Lease Leaders recognition?
When is the application deadline?
Applications open October 1, 2022 and will close February 24, 2023.
How long does the Green Lease Leader designation last?
The Green Lease Leaders designation is valid for three years, after which recipients are invited to reapply.
It will be years before our leases come due for renewal. Can my organization still be recognized?
Yes. Participants are not required to renegotiate existing leases to meet their new green leasing policies before the renewal date. Revised policies and lease language should be the “going-in” offer in lease negotiations in new leases and lease renewals as they occur. The leasing process is a negotiation.
My company is not currently eligible for recognition. How else can we be involved?
Organizations that are committed to green leasing, yet have not been able to meet program requirements, are able to join as participants and receive guidance from IMT and the Better Buildings Alliance on steps to take to implement green leasing best practices and work towards becoming a Green Lease Leader.
What is a portfolio?
A portfolio is the group of buildings or leased spaces to which the participant’s green leasing practices apply. Participants should strive to define the portfolio as all owned buildings or leased spaces in the United States. However, since this broad definition is not always feasible, participants may choose to define their Green Lease Leader portfolio as a subset of their U.S. portfolio. Examples include a regional portfolio or all buildings within an investment fund. Green Lease Leader portfolios which do not include the participant’s entire U.S. portfolio will be considered on a case-by-case basis.
Why does the Platinum level of green leasing include social goals and not other sustainability goals?
Investors, customers, and other key stakeholders are, increasingly, holding real estate accountable for both their carbon emissions and social impact. This is seen most clearly through mounting investor and public pressure on companies’ Environmental, Social, and Governance (ESG) transparency. Consumers are investing in companies and buildings that have a social and environmental return in addition to a financial one. Companies that lead in these areas have a competitive advantage and are better positioned for market change as this trend continues.
The Platinum lease integrates both environmental and social priorities into the lease and corporate policies. This level of leasing adds 1) Health, 2) Resilience, 3) Economic Inclusion, 4) Social Justice and Racial Equity, and 5) Scope 3 Emission Reduction and/or Embodied Carbon to green leasing.
There is intentionally a good deal of flexibility in meeting the Platinum requirements because every building and every community is different, and the program aims to provide guidance to the broadest possible array of commercial spaces. These practices, when incorporated into the lease, have the potential to positively impact communities and transform the standard operations of real estate.To learn more about why Green Lease Leaders chose these 5 markers of social action, check out our blog summary of the Platinum levels.
What documents can I include in the Green Lease Leaders application?
The language and clauses of any document included in the lease package, including appendices, exhibits, and tenant guides, can be used for in the Green Lease Leaders application.
What if I’m not able to get every green leasing clause into every lease I sign?
That’s OK. It is understood that some green lease requests may be denied or changed during the lease negotiation process. However, starting lease negotiations with these requests ensures that both parties will at least discuss the intent of green leasing clauses. Many Green Lease Leaders have found that energy and water-related clauses and requests are easily negotiated into the final lease.
How can I submit a lease and maintain privacy for my tenant or landlord?
When applying as a landlord, you’re able to redact all tenant information, including the tenant’s name and signature. Similarly, when applying as a tenant, while you must keep your own name on the lease, you can redact all landlord information. In general, as long as it is clear that your organization has signed a lease, and the green lease language is not redacted, your application should be accepted.
For Gold-level recognition, must my organization meet all prerequisites and credits in a single executed lease?
Yes. While it is not required that every executed lease to contain each prerequisite and credit pursued, at least one lease provided for documentation purposes must show that all elements were executed.
For Silver-level recognition, do I need to provide an executed lease?
No, an executed lease is required for Gold and Platinum level recognition.
If I am unable to put our sustainability contact information into the lease, would a welcome letter be sufficient?
Yes, as long as it is made clear to the tenant who they should contact regarding sustainability issues.
What can I do to show compliance with a credit, if it is not formally enforced as a corporate guideline?
Some type of documentation is needed; we are flexible on the form it takes. For example, a spreadsheet tracking water use would meet that requirement. Contact IMT regarding a specific credit at email@example.com.
Can I qualify for the submetering credit if no size threshold is specified in the green lease?
You will need to provide some documentation showing that these spaces are submetered, and confirming that the data is shared for non-metered spaces.
Is the Transaction Management Team on the landlord or tenants side?
Tenant. They determine where the tenant will open an office or store and execute leases with landlords. Brokers are engaged by landlords to find tenants to lease out their spaces.