Green Leasing: Legal Issues
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Green Leasing: Legal Issues

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Presentation given on February 23, 2010 regarding sustainability, green building and green leasing legal issues.

Presentation given on February 23, 2010 regarding sustainability, green building and green leasing legal issues.

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Green Leasing: Legal Issues Green Leasing: Legal Issues Presentation Transcript

  • Robert C. Newcomer [email_address] The Lang Legal Group LLC 404.320.0990
    • Commercial Litigation
    • Business, environmental and real estate law
    • LEED-AP (2008)
    • Sustainable Atlanta: Building Taskforce:
      • Sustainable Building Taskforce (2008)
    • Urban Land Institute:
      • Sustainability Committee –
      • Community Assistance, Co-chair
      • Technical Assistance Program
    • Green Chamber of the South:
      • Board Member and Officer
  • Commercial Landlord–Tenant Law Green Lease Agreements
    • Green Building:
      • Sustainability
      • Environmental impacts
      • Rating systems
    • Legal Issues:
      • Green Leases
      • Legislation
      • Development and Construction
      • Managing Risk
      • Marketing Green
      • Buying and Selling Green
  • Sustainability
    • “ To meet the needs of the present without compromising the ability of future generations to meet their own needs.”
    • Green building is the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's life-cycle from siting to design, construction, operation, maintenance, renovation and deconstruction.”
  • U.S. Building Impacts Test 13 % Water Use 39 % Greenhouse Gas Emissions (CO2) 60 % Total Waste (non-industrial) 72 % Electricity Consumption
  • GLOBAL CO 2 EMISSIONS ( BY SECTOR)
    • #1 Buildings
    • #2 Transportation
    • #3 Industry
  • Global Warming?
  • Scientific Basis
  • Carbon-based regulation . . . ?
    • Massachusetts v EPA (Sup. Ct., 2007)
    • EPA “Endangerment Finding” (April 2009)
    • Federal regulation . . . Waxman-Markey
      • Cap & trade, carbon tax, ???
    • Implications for real estate . . . ???
  • Sustainable Buildings: The Triple Bottom Line
    • Less environmental impact
    • Greater energy efficiency
    • Increased marketability
    • Higher lease rates
    • Improved cap rates
    • Improved productivity
    • Reduced absenteeism
    • Community connectivity
  • Green Building
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  • LEED-NC (v2.2)
    • Sustainable Sites
      • 14 total points (1 prerequisite + 14 credits)
    • Water Efficiency
      • 5 total points (no prerequisites + 5 credits)
    • Earth & Atmosphere
      • 17 total points (3 prerequisites + 6 credits)
    • Materials & Resources
      • 13 total points (1 prerequisite + 13 credits)
    • Indoor Environmental Air Quality
      • 15 total points (2 prerequisites + 15 credits)
    • Innovation in Design
      • 5 total points (no prerequisites + 5 credits)
    • _____________________________________________
      • 7 prerequisites + 58 credits (69 total points)
  • LEED: Project “Certification”
    • Register project
    • Complete online submittals and document compliance with
      • All prerequisites; and
      • Each (eligible) credit sought
    • Respond to questions and any requests for supplemental information
  • Four Levels of LEED Ratings: Green Buildings worldwide are certified with a voluntary, consensus-based rating system. USGBC has four levels of LEED.
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  • LEED EB: O&M (projected 2009 – 2013) 2006 2007 2008 2009 2010 2011 2012 2013 <50 <100 <1,000 <5,000 10,000 22,000 30,000 50,000 50,000 - 45,000 - 40,000 - 30,000 - 25,000 - 20,000 - 15,000 - 10,000 - 5,000 - 1,000 -
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  • Cost of Green ?
  • By default, non-green buildings will be known as BROWN buildings
        • Less demand
        • Lower rents
        • Higher operating cost
        • Decreased value
    • Go GREEN or go home
  • U.S. Office Rental Rates: “Green” v. “Brown” Performance
    • Market Bifurcation Starts in 2009?
    Average Rents PSF 2009 | 2010 | 2011 | 2012 | 2013 | 2002 | 2003 | 2004 | 2005 | 2007 | 2008 | CLASS A CLASS B
  • Green Building Legal Issues
    • GREEN Lease Agreements
    • Legislative Mandates and Incentives
    • Development and Construction
    • Marketing Green
    • Buying and Selling Green Buildings
  • Green Leases: Economic structure
    • Gross lease:
      • Rent (includes fixed share of operating costs)
    • Gross lease with rent escalation provisions
    • Net lease:
      • Rent (base) + some or all operating costs
    • “Split incentive” problem
  • Green Leases: Sharing energy cost savings
    • LL will install, at LL’s sole cost, energy efficient features to reduce electricity usage as more particular described in Exhibit A.
    • LL will deliver to T written certification from licensed engineer setting forth projected monthly energy savings (“Monthly Savings”).
    • On the day T is first obligated to pay rent and continuing throughout the term of the Lease, T shall pay to LL, as additional rent, __ percent (__%) of the Monthly Savings.
  • Green Leases: Key Terms
    • Green features and sustainability/environmental standards
    • Building requirements
      • Certification/Recertification
      • Leasehold improvements
        • Work agreement
        • Operating expenses
      • Relocation (if applicable)
    • Use and occupancy
    • Services and Utilities
    • Maintenance and repair
    • Parking
    • Data collection and disclosure/reporting
    • Allocation of sustainability incentives
    • Compliance tools, remedies and damages
  • Green Leases: Repairs, alterations and improvements
    • Standard lease:
      • LL consent based on type of work or cost
    • Green lease:
      • LL retains consent without exceptions or specify requirements for work
      • Timing of work
      • (Pre-) Approved contractors
      • Reconstruction following casualty event
  • Green Leases: Proposed T work letter provisions
    • Comply with LL requirements for construction waste management and recycling
    • Certify commissioning of all HVAC, lighting and energy systems and provide data to LL
    • Utilize:
      • Energy-efficient lighting fixtures and occupancy-based controls
      • Low-flow toilets, waterless urinals and sensor-controlled faucets
    • Wood shall be FSC-certified
    • Paints, stains, sealants and adhesives shall be water-based, low- or no-VOC
    • Carpet systems shall be Green Label Plus
  • Green Leases: Green Cleaning Policy
    • Products must be:
      • Environmentally safe, phosphate-free, non-corrosive, non-flammable, low-VOC emitting, fully biodegradable
      • “ Green” (per Green Seal GS-37 Standard)
      • Packaged ecologically
    • Paper products must be 100% recycled content
    • Garbage bags must be biodegradable or compostable
    • Vacuum cleaners must be capable of removing ___% of harmful particles, including dust, mold spores and most microscopic respiratory irritants and allergens.
    • Tenant shall properly separate recycling material from trash
    • Tenant shall provide MSDS to LL for all janitorial supplies provided by T
  • Green Leases: Double-edged Sword?
    • T may have additional claims against LL under quiet enjoyment provision
    • LL may be held to a higher standard for building performance because of the green features
  • Legal Issues: Legislation
    • Chamblee
    • Doraville
    • City of Atlanta (proposed)
  • Legal Issues: Legislation
    • “ Certified”?
    • Register project
    • Meet prerequisites
    • Document compliance with sufficient credits
    • Supplement information
    • Certified
    • “ Certifiable”?
    • DEFINE?
      • What must be done?
    • Determine:
      • Who decides?
      • How is decision made?
    • ???
  • Legal Issues : Development and construction risk management
    • Assemble experienced green project team
    • Document responsibility and allocate risk
    • For new green materials, products and technologies:
      • Review technical data and warranties
      • Research product manufacturer
      • Include representations, extended warranties and guarantees when possible
    • Certification consultant should review all change orders, material substitutions and construction practice changes
    • Request, collect and retain data and documentation
  • Failure to plan . . .
  • Legal Issues: Marketing green
    • Brokers, agents and marketing professionals
    • Agree on proper message
    • Address marketing message in contract
    • FTC “ Green Guides ” claim standards:
      • Substantiated
      • Clear and qualified
      • Does not overstate benefits
  • Legal Issues: Buying and selling green buildings
    • Data collection and disclosure:
      • LEED is no guarantee of performance - MPRs
      • Mandated by government
      • Demanded by tenants/buyers
  • Test
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  • Robert C. Newcomer [email_address] The Lang Legal Group LLC 404.320.0990
    • QUESTIONS?