green leasing: legal issues
DESCRIPTION
Presentation given on February 23, 2010 regarding sustainability, green building and green leasing legal issues.TRANSCRIPT
Robert C. Newcomer [email protected] The Lang Legal Group LLC 404.320.0990
Commercial LitigationBusiness, environmental and real estate law
LEED-AP (2008)
Sustainable Atlanta: Building Taskforce: Sustainable Building Taskforce (2008)
Urban Land Institute: Sustainability Committee –
Community Assistance, Co-chair
Technical Assistance Program
Green Chamber of the South: Board Member and Officer
Commercial Landlord–Tenant Law Green Lease Agreements
Green Building: Sustainability Environmental impacts Rating systems
Legal Issues: Green Leases Legislation Development and Construction Managing Risk Marketing Green Buying and Selling Green
Sustainability
“To meet the needs of the present without compromising the ability of future generations to meet their own needs.”
Green building is the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's life-cycle from siting to design, construction, operation, maintenance, renovation and deconstruction.”
Test
13%Water Use
39%GreenhouseGas Emissions (CO2)
60%Total Waste(non-industrial)
72%ElectricityConsumption
U.S. Building Impacts
GLOBAL COGLOBAL CO22 EMISSIONS EMISSIONS ( (BY SECTOR)BY SECTOR)
#1 Buildings#2 Transportation#3 Industry
Global Warming?
Scientific Basis
Carbon-based regulation . . . ?
Massachusetts v EPA (Sup. Ct., 2007)
EPA “Endangerment Finding” (April 2009)
Federal regulation . . . Waxman-Markey Cap & trade, carbon tax, ???
Implications for real estate . . . ???
Sustainable Buildings: The Triple Bottom Line
Less environmental impact Greater energy efficiency
Increased marketability Higher lease rates Improved cap rates
Improved productivity Reduced absenteeism Community connectivity
Green Building
LEED-NC (v2.2)
Sustainable Sites 14 total points (1 prerequisite + 14 credits)
Water Efficiency 5 total points (no prerequisites + 5 credits)
Earth & Atmosphere 17 total points (3 prerequisites + 6 credits)
Materials & Resources 13 total points (1 prerequisite + 13 credits)
Indoor Environmental Air Quality 15 total points (2 prerequisites + 15 credits)
Innovation in Design 5 total points (no prerequisites + 5 credits)
_____________________________________________ 7 prerequisites + 58 credits (69 total points)
LEED: Project “Certification”
Register project Complete online submittals and
document compliance with All prerequisites; and Each (eligible) credit sought
Respond to questions and any requests for supplemental information
Four Levels of LEED Ratings:
Green Buildings worldwide are certified with a voluntary,consensus-based rating system.
USGBC has four levels of LEED.
LEED EB: O&M (projected 2009 – 2013)
2006 2007 2008 2009 2010 2011 2012 2013
<50 <100 <1,000<5,00010,00022,00030,00050,000
50,000 -
45,000 -
40,000 -
30,000 -
25,000 -
20,000 -
15,000 -
10,000 -
5,000 -
1,000 -
Cost of Green?
By default, non-green buildings will be known as BROWN buildings
Less demand
Lower rents
Higher operating cost
Decreased value
Go GREEN or go home
U.S. Office Rental Rates:“Green” v. “Brown” Performance
Market Bifurcation Starts in 2009?
2009 | 2010 | 2011 | 2012 | 2013|
2002 | 2003 | 2004 | 2005 | 2007 | 2008 |
CLASS ACLASS A
CLASS BCLASS B
Avera
ge R
en
ts
PS
F
Green Building Legal Issues GREEN Lease Agreements Legislative Mandates and Incentives Development and Construction Marketing Green Buying and Selling Green Buildings
Green Leases:Economic structure
Gross lease: Rent (includes fixed share of operating costs)
Gross lease with rent escalation provisions Net lease:
Rent (base) + some or all operating costs
“Split incentive” problem
Green Leases:Sharing energy cost savings
(a) LL will install, at LL’s sole cost, energy efficient features to reduce electricity usage as more particular described in Exhibit A.
(b) LL will deliver to T written certification from licensed engineer setting forth projected monthly energy savings (“Monthly Savings”).
(c) On the day T is first obligated to pay rent and continuing throughout the term of the Lease, T shall pay to LL, as additional rent, __ percent (__%) of the Monthly Savings.
Green Leases: Key Terms
Green features and sustainability/environmental standards Building requirements
Certification/Recertification Leasehold improvements
Work agreement Operating expenses
Relocation (if applicable) Use and occupancy Services and Utilities Maintenance and repair Parking Data collection and disclosure/reporting Allocation of sustainability incentives Compliance tools, remedies and damages
Green Leases: Repairs, alterations and improvements
Standard lease: LL consent based on type of work or cost
Green lease: LL retains consent without exceptions or
specify requirements for work Timing of work (Pre-) Approved contractors Reconstruction following casualty event
Green Leases: Proposed T work letter provisions Comply with LL requirements for construction waste
management and recycling Certify commissioning of all HVAC, lighting and
energy systems and provide data to LL Utilize:
Energy-efficient lighting fixtures and occupancy-based controls
Low-flow toilets, waterless urinals and sensor-controlled faucets
Wood shall be FSC-certified Paints, stains, sealants and adhesives shall be water-
based, low- or no-VOC Carpet systems shall be Green Label Plus
Green Leases: Green Cleaning Policy
Products must be: Environmentally safe, phosphate-free, non-corrosive, non-
flammable, low-VOC emitting, fully biodegradable “Green” (per Green Seal GS-37 Standard) Packaged ecologically
Paper products must be 100% recycled content Garbage bags must be biodegradable or compostable Vacuum cleaners must be capable of removing ___% of harmful
particles, including dust, mold spores and most microscopic respiratory irritants and allergens.
Tenant shall properly separate recycling material from trash Tenant shall provide MSDS to LL for all janitorial supplies
provided by T
Green Leases: Double-edged Sword?
T may have additional claims against LL under quiet enjoyment provision
LL may be held to a higher standard for building performance because of the green features
Legal Issues: Legislation
Chamblee Doraville City of Atlanta (proposed)
Legal Issues: Legislation
“Certified”? Register project Meet prerequisites Document compliance
with sufficient credits Supplement information
Certified
“Certifiable”? DEFINE?
What must be done?
Determine: Who decides? How is decision made?
???
Legal Issues: Development and construction risk management
Assemble experienced green project team Document responsibility and allocate risk For new green materials, products and technologies:
Review technical data and warranties Research product manufacturer Include representations, extended warranties and
guarantees when possible Certification consultant should review all change orders,
material substitutions and construction practice changes Request, collect and retain data and documentation
Failure to plan . . .
Legal Issues: Marketing green
Brokers, agents and marketing professionals Agree on proper message Address marketing message in contract
FTC “Green Guides” claim standards: Substantiated Clear and qualified Does not overstate benefits
Legal Issues: Buying and selling green buildings Data collection and disclosure:
LEED is no guarantee of performance - MPRs Mandated by government Demanded by tenants/buyers
Test
Robert C. Newcomer [email protected] The Lang Legal Group LLC 404.320.0990
QUESTIONS?