Green Lease Library

Department of Energy Launches Its Green Lease Library

New building regulations and market demand for energy efficient office space have had a significant impact upon new construction; but, they have had little impact on the renovation of the existing commercial building inventory which makes up the vast bulk of office space on the market today. If a noticeable reduction in the overall energy consumption of commercial buildings is going to occur, existing buildings need to be retrofitted to bring their energy efficiencies within noise levels of those achieved by newly constructed buildings.

Building owners and tenants both benefit from the energy efficiencies achieved by a retrofitted building. Unfortunately, existing building retrofits on income producing properties have been obstructed by the “split incentive” problem. The split incentive dilemma occurs when the party responsible for paying for the building retrofit is different than the party that benefits from the retrofit. For example, the split incentive problem occurs under traditional “net” lease structures where the building owner is responsible for the cost of capital improvements to their building, but the tenant is responsible for the energy bills and benefits from the reduction in energy consumption. This split incentive problem is common in most traditional commercial lease structures and is further aggravated in multi-tenant buildings.

Recognizing the need to educate and guide stakeholders on the issues involved in green leasing, the Department of Energy recently launched its Green Leasing Library Website. The website is designed to be “a centralized resource for commercial green lease resources”, and provide guidance to landlords, tenants, brokers and attorneys as they negotiate effective green leases.