When our friends at WilmerHale recently touched base with The Sustainable Lawyer to let us know they signed the first ever “Green Lease” for commercial office space at their new digs at 7 World Trade Center in NYC, we knew this was a big deal. But we found ourselves asking: What’s a green lease? During the pomp and circumstance of a press conference that included New York’s Mayor Michael Bloomberg, real estate giant Larry Silverstein (the developer of the World Trade Center towers) and WilmerHale Managing partner William J. Perlstein, phrases like “groundbreaking language,” “first of its kind,” and “incentivizing energy efficiency” all sounded great. When we took a step back, however, we realized we weren’t exactly sure what constituted a “Green Lease,” (or why everyone wasn’t signing “Green Leases”) and concluded that a lot of other people might be in the same boat as The Sustainable Lawyer.
Let’s break it down:
The major hang-up for landlords and tenants under a Green Lease is tension over the issue of who will bear the cost of energy saving upgrades to building systems. Under traditional leases, building owners are responsible for upfront cost of energy efficiency improvements. The problem? Building owners don’t see the immediate benefit. But tenants do, in the form of reduced energy costs. This means that many building owners are less likely to invest in energy upgrades because it costs money up front and they don’t see the benefits until years later. A group of real estate and energy efficiency experts in NYC got together and developed new language that allows both tenants (like WilmerHale) and owners (like Silverstein Properties) to share the cost and benefits of energy efficiency improvements. Want the specifics? See the prototype clause here.
“In theory, the ‘Green Lease’ is a win-win-win” said WilmerHale partner Paul Jakubowski. “The tenant gets lower operating expenses in the long run because the landlord is now incentivized to make sensible capital improvements; the landlord gets faster recapture of expenses than it would under the conventional strong tenant clause, and a more competitive building with respect to operating expenses; and the building consumes less energy and produces fewer emissions, leaving the world better off.”
So Boston lawyers, if you’re listening, maybe it’s time to start the conversation about green leases in the Hub. How about a press conference featuring your managing partner, Mayor Menino and one of Boston’s A-list developers praising your commitment to green initiatives? Sounds pretty good to us.