There is a definite ebb and flow in the popularity of the environment as a public issue. Presently it is in a state of flow, with the upcoming election bringing issues such as the Green Shift and Carbon Tax to the forefront. The Green Party's successful bid to be included in the leaders' debate has demonstrated that the environment is not taking a back seat in this election. But one environmental movement that we are seeing more of around our cities than on the campaign trail is the greening of real estate, through both green construction and green leasing.

Green construction and building standards

Third-party industry standards have been introduced in real estate in an effort to improve the energy efficiency and sustainability of buildings and homes. The most popular standard is the LEED (Leadership in Energy and Environmental Design) rating system, which is overseen by the Canadian Green Building Council and designed to reflect Canada's environment and economy. To obtain LEED certification, a building must have been reviewed and audited independently to obtain one of four levels of certification (certified, silver, gold or platinum). LEED certifications exist for a variety of buildings, including new construction, existing buildings, commercial interiors, and others. Currently there are 27 projects known to be registered with LEED certification in Ottawa; however, it is worth noting that not all projects have chosen to have their certification published.

BOMA BESt (formerly BOMA GO Green) is an environmental certification designed exclusively for commercial buildings by the Building Owners and Managers Association of Canada (BOMA). Like LEED, BOMA has four levels of "Building Environmental Standards (BESt)": 1 through 4, where level 4 demands the highest environmental standards. BOMA BESt aims to provide concrete measures for firms and their tenants to demonstrate their commitment to the environment and allows managers to distinguish their building from competitors in the tight commercial real estate market.

Green Lease

A Green Lease is a lease agreement that incorporates sustainable development and environmentally friendly principles into its provisions. A Green Lease can be used for Green buildings (LEED- and BOMA-certified) as well as for conventional (or non-Green) buildings to ensure that occupation and operation of the leased premises have minimal environmental impact.

Features of a Green Lease

The most significant difference between a Green Lease and a conventional lease is that a Green Lease will contain a schedule that establishes an "Environmental Management Plan" (EMP). It is up to the parties to determine the features of the EMP, however the main purpose of the EMP is to set out environmental objectives (both general and specific) for the premises.

A Green Lease provides incentives and penalties for compliance with or breach of its "green" provisions. Although provisions are strongly enforced, a breach of a green provision will generally not be considered a default under a lease. Instead, a Green Lease will usually only go as far as requiring that the parties use commercially reasonable efforts to remedy any breach that does occur.

Benefits

The benefits of building green are not limited to the environment; building green can be economically beneficial as well. In general, the cost of building green is an estimated five per cent greater than the cost of using conventional building techniques. However, the added expense is usually outweighed by a reduction in operating costs. The return on investment for building green is not immediate; the cost recovery from decreased operating costs improves over time. Green Leases also have the benefit of attracting tenants (particularly commercial tenants) who, for a variety of reasons, are seeking tenancies in Green buildings and are willing to pay a higher base rent for such tenancies. Increasingly, clients are choosing to take their business to firms that have demonstrated a commitment to the environment, meaning that being a tenant of a Green Lease or a Green building can attract clients (or at least prevent any potential loss of clients).

Things to consider if you are a tenant entering into a Green Lease

• Consider whether the landlord has promised a certain construction standard. If so, the lease should contain a provision setting out the landlord's obligation in that respect, as well as the remedies available to the tenant in the event that the building does not meet the promised standard.

• Consider whether the lease provides an ongoing obligation for the landlord to maintain the established standard, and ensure that any ongoing green obligations imposed on the tenant can be realistically obtained.

• Be aware of the costs of greening being passed on by the landlord and consider imposing a cap on the landlord's permitted annual greening expenditures.

Things to consider if you are a landlord entering into a Green Lease

• Any green construction standard that the landlord proposes to meet should be promised only to the extent that it can be obtained through "commercially reasonable" best efforts. Landlords should also ensure that the lease permits ongoing flexibility in the level of green rating that the building will maintain.

• Ensure that the lease contains provisions obliging the tenant to co-operate with the environmental initiatives taken by the landlord. Any renovation or improvement to a tenant's premises should require the landlord's approval in case it has an impact on the overall green rating of the building.

• The lease should provide that the landlord has the right to recover expenditures made towards the greening of the building, on an ongoing basis.

Regardless of whether you are a tenant or a landlord and whether your real estate is old or new, you are guaranteed to find something suitable for greening your premises either though LEED, BOMA or the negotiation of a Green Lease. Consider your available options and consult a professional for further advice.

Stephanie Hamilton

BrazeauSeller.LLP

www.brazeauseller.com

Stephanie Hamilton is an associate with BrazeauSeller.LLP. Stephanie can be reached at 613-237-4000 ext. 272, or at shamilton@brazeauseller.com. For more information about Stephanie, please visit www.brazeauseller.com.

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