As all office tenants signing a new lease with Legal & General in the UK will now have to agree to ‘green’ terms with their commercial rental agreement.
Legal & General Property (LGP) managing director Bill Hughes, said: “As one of the UK’s largest property fund managers, we recognise our responsibility to minimise the environmental impacts of our assets and believe that, by working closely with our occupiers, we can take these changes to the next level.”
Mr Hughes, is also Chairman of the Green Property Alliance, a trade body representing a collection of leading property organisations that include BCO, CoreNET, RICS and British Property Federation. This week LGP issued a memo outlining the principles of a green lease, which are soon to be inserted within all standard office leases. LGP has £10.3 billion ($16.1 billion) of property assets under management, and is a subsidiary of Legal & General Investment Management, which has over £353bn. under management.
Katherine Laurenson, senior solicitor at the commercial property fund manager, explained that: “This memorandum seeks to provide full, clear guidelines to our lawyers as to issues that we consider key, so that they can effectively liaise with our tenants’ representatives to find a lease structure that accommodates both parties’ needs and responds to the fundamentals of the building.”
According to LGP’s guidelines, both the landlord and the tenants for office space will be required to meet regularly to discuss energy consumption and the re-use of grey water. The new office rental contracts are likely to also include targets for reduction of energy use, key performance indicators for overall sustainability and “other green initiatives in relation to the estate”.
Having outlined this objective, it was not immediately clear how the green provisions of the property leases will actually be enforced.
A LGP spokesperson has indicated that the emphasis will be place on persuasion and not be charging financial penalties for tenants that fall short of meeting the terms of the office rental agreement.
Laurenson said: “We work from a principle that encouragement and flexibility is the most effective way to deal with green issues in leases, rather than enforcement provisions with penalties for tenants who fail to comply.”