Jenner & Block: Evolving Model Leases: Comparison of BOMA & REALpac Green Leases

In this Emerging Issues Commentary, Ronald B. Grais and Kristen M. Boike of Jenner & Block compare the form and major "green" provisions of two new model leases: the Building Owner and Managers Association (BOMA) Internationals "Guide to Writing a Commercial Real Estate Lease, Including Green Lease Language" and the Real Property Association of Canadas (REALpac) "National Standard Green Office Lease for Single Building Projects -- 1.01 -- 2008." The authors write:

     In addition to including the amortized costs of installing, modifying and upgrading energy and water conservation equipment and systems or alterations intended to reduce operating costs, utility consumption, or greenhouse gas emissions, the REALpac Lease includes in the definition of operating costs those amortized costs associated with developing, modifying and operating the building to achieve the objectives of the Environmental Management Plan. Including the costs of achieving the objectives of the Environmental Management Plan in the definition of operating costs allows the landlord extreme flexibility in what costs may be passed on to the tenant. The objectives of the Environmental Management Plan are very broad: for example (1) to create a comfortable, productive and healthy indoor environment, (2) to reduce energy consumption, the use of potable water, waste, and high volatile organic compounds, and (3) to promote alternative transportation options. As a result of this broad language, the landlord under the REALpac Lease could pass through the costs of certification of a building, the commissioning or recommissioning of the building, or any other costs the landlord decides reasonably further the Environmental Management Plan.
     . . . .
     In most cases involving damage to or destruction of the building, the BOMA Lease obligates the landlord to repair or restore the building to the condition that existed prior to the damage or destruction and the REALpac Lease requires the landlord to rebuild the building to a similar standard as what existed before the destruction. The landlord and tenant, however, should consider if they want to rebuild the building pursuant to the then current green-building standards. The parties could agree that the building will be restored pursuant to a specific current green building rating, such as LEED, but in a long-term lease there is no guaranty that such certifications will be in use in the future or that standards will not have changed. As both the BOMA Lease and REALpac Lease are currently drafted, if an existing traditional (non-green) building is destroyed, the landlord may not be required to rebuild it as a green building because the landlord is obligated to rebuild to match, or use a similar standard to, the building that existed before the destruction.
     . . . .
     Once a building has obtained a green building certification or achieved other sustainable goals, future maintenance, repairs, or alterations shouldn’t jeopardize the building’s green features. As a result, the BOMA Lease requires that all tenant maintenance and repair, or alterations, comply with the landlord’s sustainability plan as well as any third party rating system in use. In addition, a tenant undertaking any tenant improvements or alterations must adhere to (and have the contractor adhere to) the Contractors Rules and Regulations, which have been significantly revised to protect and promote the sustainable features of the building, and must use a qualified third party environmental professional for the design and implementation of the alterations or improvements. The tenant also must attempt to obtain and maintain LEED for Commercial Interiors certification in connection with such work, although naming a specific certification in this instance will not allow the landlord or tenant flexibility if the standards for a certain certification change, or if the certification ceases to exist at all. A tenant might desire to request that the BOMA Lease be revised to require that the Landlord follow the same rules and procedures whenever conducting maintenance or completing improvements in, on or around the building and the other tenants follow the same sustainability rules, regulations and guidelines as the tenant.    
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