By J. Cullen Howe, Environmental Law Specialist, Arnold & Porter LLP
On April 5, 2011, New York City announced that the law firm of WilmerHale signed a commercial office space lease with the developer of the World Trade Center reconstruction project that incorporates language for sharing the costs and benefits of energy-saving measures. The “green lease” language was developed by real estate industry leaders, environmentalists, and others working with the Mayor’s Office of Long-Term Planning and Sustainability. According to the city, it will be used by the Department of Citywide Administrative Services as a model when the city leases building space.
Most standard leases have a “split incentive” problem, where owners pay for building energy upgrades while tenants reap the savings. However, in this instance, the lease incorporates language requiring tenants to share owner’s capital improvement costs. Although traditional commercial office space leases allow tenants to share this cost, the language is rarely used because the period for recouping the costs is too long. The new language counts savings over the length of a projected payback period instead of the useful life of the improvements, thereby shortening the amount of time it takes for the owner to recoup the savings.
According to the city, the green lease project grew out of a Natural Resources Defense Council forum bringing together landlords, tenants, and energy and real estate experts, and is part of a broader green buildings policy pursued by the city that includes, among other things, the Greener, Greater Buildings plan for existing buildings, and the Greening the Codes project, which is looking at ways to green the city’s building code.
Reprinted with permission from Green Building Law Update Service.
The Green Building Law Update Service is a 2011 LexisNexis Top 50 Blogs for Environmental Law & Climate Change nominee.
J. Cullen Howe is an environmental law specialist at Arnold & Porter LLP. Much of Cullen's work focuses on climate change, where he attempts to educate lawyers and the public at large on the enormous cooperation necessary to adequately address this problem. In addition to his work on climate change, Cullen is the managing editor of Environmental Law in New York, edits the Environmental Law Practice Guide, Brownfields Law and Practice, the Environmental Impact Review in New York, and has drafted chapters in the Environmental Law Practice Guide on climate change and green building. Mr. Howe is a graduate of Vermont Law School, where he was the managing editor of the Vermont Law Review, and a graduate of DePauw University, where he was a member of Phi Beta Kappa.
These publications can be purchased at the Store by clicking on the above links. Lexis.com subscribers may also access them at the following links: Environmental Law in New York; Environmental Law Practice Guide; Brownfields Law and Practice; Environmental Impact Review in New York.
J. Cullen Howe is the author of Green Financing: Governmental and Private Programs Concerning Financing of Green Buildings, Ch. 2M, in Real Estate Financing (Lexis treatise), and will be discussing this development in his next update for the treatise.
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