The Green Lease Schedule

Lloyd Woodford, Australia Government, Department of the Environment and Water Resources

Keywords

energy efficiency measures, commercial office buildings, the Green Lease Schedule

Abstract

“The development of green leases appears likely to be a relatively low cost initiative that has the potential to improve the cost effectiveness of government operations … Green leases may also change market conditions for the private sector by lowering transaction costs and thus helping to overcome the split incentives between landlords and tenants.” – Australian Government’s Productivity Commission, The private cost effectiveness of improving energy efficiency, Page 163

The Australian Government has developed the Green Lease Schedule (GLS), which is a legal instrument that creates new contractual obligations for tenants and landlords. A GLS is an additional set of clauses to a “normal” building lease contract, A GLS provides for mutual contractual lease obligations for tenants and owners to achieve energy efficiency targets (and potentially other environmental obligations if agreed). This ensures that buildings operate at agreed levels through regular monitoring and addressing issues as they arise. The GLS has been made feasible due to massive reductions in meter costs and changes in digital metering technology that pinpoints, to the minute, energy consumption in both the tenancy and building services. Tenants can now make owners accountable for their buildings’ energy performance. Building owners, using the same technology can also make tenants accountable for their energy use.

A GLS has five standard clauses to promote uniformity, consistency and market acceptance, and to minimise the need for legal advice on individual lease agreements. The five standards clauses cover: