This document summarizes key points from a presentation on green legal matters for real estate practices: 1. It discusses sustainability ratings systems like LEED and how they create legal opportunities. It also covers government mandates and emerging model green building codes. 2. Buildings have major impacts on water use, emissions, waste and energy consumption. Green building aims to reduce these impacts through sustainable siting, design, construction and operations. 3. Transitioning to green practices creates issues around retrofitting existing buildings and leases, allocating green costs and responsibilities, and ensuring benefits of green investments are properly allocated between landlords and tenants.

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Green Legal Matters Conference
New Orleans, LA
Green Law for the Real Estate Practice
Jon F. “Chip” Leyens, Jr.
Steeg Law Firm, LLC
New Orleans, LA
jleyens@steeglaw.com
504.582.1231
Robert C. Newcomer
The Lang Legal Group LLC
Atlanta, GA
rnewcomer@langlegal.com
404.320.0990

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Green Legal Matters Conference
New Orleans, LA
Green Law for the Real Estate Practice
 Green Building:
 Sustainability
 Environmental impact and economic
opportunity
 Rating systems and legal opportunity
 Government Mandates and Policy:
 Local
 State
 Federal
 Model Green Building Codes:
 Standard 189.1
 International Green Construction Code

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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.”

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13%
Water Use
39%
Greenhouse
Gas Emissions (CO2)
60%
Total Waste
(non-industrial)
72%
Electricity
Consumption
U.S. Building Impacts

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GLOBAL COGLOBAL CO22 EMISSIONSEMISSIONS
((BY SECTOR)BY SECTOR)
#1 Buildings
#2 Transportation
#3 Industry

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Global Warming?

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Scientific Basis

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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 . . . ???

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Green Building

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LEED-NC (v3)
 Sustainable Sites
 1 prerequisite + 14 credits = 26 possible points
 Water Efficiency
 1 prerequisite + 3 credits = 10 possible points
 Energy & Atmosphere
 3 prerequisites + 6 credits = 35 possible points
 Materials & Resources
 1 prerequisite + 8 credits = 14 possible points
 Indoor Environmental Air Quality
 2 prerequisites + 15 credits = 15 possible points
 Innovation in Design
 6 (bonus) points
 + REGIONAL PRIORITY
 4 (bonus) points
__________________________________________
8 prerequisites and 110 possible points

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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: “Certification” Process
 Register project
 Prepare/Submit application:
 “LEED Online”
 Prerequisites and each (eligible) credit
 Regional Priority Credits
 Credit interpretations and rulings (CIRs)
 Respond to questions and submit any
supplemental information requested
 Certification (or Denial with Appeal Review)

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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?

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U.S. Office Rental Rates:
“Green” v. “Brown” Performance
Market Bifurcation in 2010 . . . ?
2009 | 2010 | 2011 | 2012 | 2013
|
2002 | 2003 | 2004 | 2005 | 2007 | 2008 |
CLASS A
CLASS B
AverageRentsPSF

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By default, “non-green” buildings will
become known as BROWN buildings
 Less demand
 Lower rents
 Higher operating cost
_______________________________________
= Decreased value
Go GREEN or go home

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Green Law for the Real Estate Practice
 Government Mandates and Policy:
 Local
 City of Atlanta (proposed)
 State
 Federal

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Green Law for the Real Estate Practice
Green Legislative Mandates:
“Certified”
 Register project
 Pay fees
 Document compliance
 Prerequisites
 Sufficient Credits
 Supplement information
= Certified
“Certifiable”
 Define:
 What must be done?
 Determine:
 Who decides?
 How is decision made?
= ???

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Green Law for the Real Estate Practice
Model Green Building Codes:
 Standard 189.1
 January 2010
 USGBC, ASHRAE and IES
 International Green Construction Code
 March 2010 (v. 1.0)
 v. 2.0 comment period open (Nov. 2010 release?)
Movement toward integration

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Integrated Design
 Each system affects the functioning of the
others and all systems must be harmonized
to perform together effectively.
 Optimize performance and minimize cost.
 Integrated design teams meet early and
often during design and construction.
Legal issue: Allocate and document
responsibility for all tasks and
manage YOUR client’s risk.

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Robert C. Newcomer The Lang Legal Group LLC
rnewcomer@langlegal.com Atlanta, Georgia
http://www.linkedin.com/in/robertnewcomer 404.320.0990
Commercial Litigation
Business, environmental and real estate law
LEED-AP (since 2008)
Sustainable Building Taskforce (since 2008)
Urban Land Institute:
 Technical Assistance Program, Co-Chair
 Sustainability Committee
(former Co-chair, Community Assistance)
Green Chamber of the South:
 Inaugural Director, Board Secretary
EduKalb, Inc.
 Inaugural Director, Board Treasurer

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Construction
 Negotiation of green requirements in
contract documents with architect and
contractor
 AIA, DBIA & ConsensusDocs all have green riders
&/or clauses
 Be careful that design professional does not warrant
green certification; warranties not covered by
professional liability insurance
 Coordination among consultant pursuing
certification and all other parties involved in
the design, engineering and construction
process

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Insurance
 Property Insurance
 Additional coverage for builder’s risk and
completed structure policies
 Increased cost of certain green systems and
building commissioning costs
 Liability
 Some coverage available if building does not
meet green certification requirement

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What is a “green” lease?
 No single answer
 Is a “green lease” a “red herring”?
 Depends on:
 What is a “green” building
 What does each party want to achieve by
entering into a “green” lease
 Cost Savings
 Image
 Corp. requirement
 Government or contract requirements

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Lease Basics
 Premises (that’s the easy part?)
Hard Part
 Who does what?
 How is it paid for?
 What happens if you don’t do what
you’re supposed to do?

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Some Provisions to Consider in a
Green Lease
 Applicable Law (and applicable rating system?)
 Operating Expenses
 Maintenance & Repairs
 Alterations
 Use Clause
 Operating Hours
 Landlord Services
 Utilities
 Casualty
 Default
 Work Letter
 Rules & Regs

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You have to be Gross to be Green?
 Difference between a gross lease and a net
lease
 The argument that only a gross lease can
be green
 Problems with the argument
 Market considerations: If landlord can’t recover $,
landlord won’t spend $
 Net lease gives landlord way to pay for
improvements
 Tenants look at triple net costs when evaluating
space – landlord still has incentive to reduce
operating costs
 Triple net leases are not perfectly efficient – landlords
don’t pass through all operating costs

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How to “green” a lease
 Current approaches to “greening” a
lease
 Add green language to existing lease clauses
 Use of a green rider

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Green Issues Under Existing Leases
 Significant portion of green issues for
next few years will be dealt with
through existing leases (or extensions
of existing leases)

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Existing Lease Issues
 Applicable laws
 If a new law mandates green standards,
who bears the cost - can landlord pass
through to tenant?
 What if a new law mandates energy
conservation measures, but tenant has 24/7
operations or other high energy
consumption use?

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Existing lease issues (cont’d)
 Operating expenses and capital
expenditures
 Landlord decides to install a roof-top garden
 Nice amenity and might save energy costs, reduce
stormwater run-off or produce water for irrigation
 Justified in charging tenants for capex?
 Consider the nature of a “green” expenditure and
thus whether it can it be passed through to tenants:
 Is it capital?
 Is it routine O&M? Can increased costs or “green”
materials be passed through?
 Marketing expense in touting green measures?
 What is effect of “comparable building” standard?

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Existing lease issues (cont’d)
 Utilities
 How is consumption measured/paid for?
 Who pays if going green requires metering?
 Can the landlord impose charges for above (or
above-“green”) average consumption?
 Alterations
 Manner of performance (ventilation, disposal, etc.)
and materials, fixtures, equipment can be important
for green rating
 LEED, Energy Star or similar criteria may apply to
alterations, though not to original
 Additional cost to tenant, and if so what can it do?

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Existing lease issues (cont’d)
 Maintenance
 Can the landlord impose new “green”
requirements with regard to the tenant’s
space?
 What if the landlord’s new green program
materially increases the cost to maintain
common areas – can the increase be passed
through to the tenant?
 Rules and Regulations
 Can the landlord amend to impose green
operating requirements on tenants; if so,
what are remedies for a violation?

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Some Hypotheticals
 Tenant in a multi-tenant office building installs
waterless urinals and low flow toilets in its bathrooms.
Who gets the benefit?
 The building owner wants to install a roof-top garden.
What happens?
 The brokers entered into an LOI that promises the
tenant that the new building to be constructed will be
green. What do you do?
 The local jurisdiction enacts a green retro-fit code.
Do you have to retro-fit your form lease (e.g., in
order to “properly” allocate costs between landlord
and tenant)? Is the new retro-fit code an
“environmental law”?

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Some Hypotheticals
 The tenant wants to install solar panels on
the roof. What do you do?
 Your client tells you that they need a green
lease form. What do you do?
 Your client tells you that they have to start
leasing green space. What do you do?
 Your client wants to use its renewal
allowance to do a green retrofit of its
existing space. How do you make sure that
your client gets the full benefit of any cost
savings (operating costs, tax credits, etc.)
attributable to the retrofit?

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Additional Sources
 ADDITIONAL SOURCES
 Brooks, S. Michael. “Green Leases and Green Buildings.” American Bar
Association Section of Real Property and Trust and Estate Law, Probate &
Property Magazine (November/December 2008): 22-26.
 California Sustainability Alliance, Green Leases Toolkit, www.sustainca.org
 Connall Jr., Desmond D., Jeffrey A. Moerdler, and Eric Mullen. “Get Your
Tenants to Comply with Your Building’s ‘Green’ Standards.” Commercial
Lease Law Insider. www.commericalleaselawinsider.com, June 1, 2003.
 Costa, Anthony E., Samuel J. Morris, III, and Sam Hunter. “Green Lease
Policies and Procedures for Lease Acquisition.” Memorandum to Assistant
Regional Administrators, PBS, Regional Realty Service Officers, December
27, 2007. (GSA Green Building Requirements)
 http://159.142.162.71/gsa/cm_attachments/GSA_DOCUMENT/RSL2007-
12_R2-y08-l_0Z5RDZ-i34K-pR.pdf
 EPA’s Green Buildings. http://
www.epa.gov/greeningepa/projects/index.htm (website regarding United
States Environmental Protection Agency’s green leasing initiatives).

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Additional Sources
 Grais, Ronald B. and Kristen M. Boike. “Evolving Model Leases – A
Comparison of the BOMA and REALpac Green Leases.” Emerging Issues
Commentary, Lexis Nexis Database, October 2008.
 Grais, Ronald B. and Kristen M. Boike. “Green Leasing – The Changing
Environment of Leasing.” Emerging Issues Commentary, Lexis Nexis
Database, June 2008.
 Green Lease Guide for Commercial Office Tenants,
http://www.investa.com.au/Common/Pdf/Sustainability/GreenLeaseGuide.pdf
 Milian, Rudolph E. The Retail Green Agenda: Sustainable Practices for
Retailers and Shopping Centers. New York: International Council of
Shopping Centers, 2008.
 Natural Resources Defense Council (lease energy-saving work product
expected Spring 2009).
 Real Property Association of Canada. http://www.realpac.ca
 Teitelbaum, Steven A. BOMA’s Guide to Writing a Commercial Real Estate
Lease, Including Green Lease Language. Washington, D.C.: Building
Owners and Managers Association International, 2008. www.boma.org
 U.S. Green Building Council. http://www.usgbc.org