Thursday, December 16, 2010

Not Every Lease Is a Green Lease!

This week’s Little Rock Downtown Partnership Weekly Update contained the following item:
“The K-Lofts at 315 Main are coming along and Scott Reed expects to turn the space downstairs over to Porter’s Jazz Café in March 2011. He has a waiting list of 24 for the apartments above!”
If all goes as planned, the building at 315 Main in downtown Little Rock will be a combination of historical preservation, LEED-certification, and commercial and residential use.

In addition to being a sustainable showcase, 315 Main showcases another problem unique to “green buildings”: the lease. A green building, by definition, is sustainably constructed and sustainably operated. Likewise, the lease for a green building needs to be careful written to preserve and advance the sustainable nature of the building.

In this sense, a traditional lease falls woefully short. Consider:

  • The tenant who wishes to make “improvements” or “alterations” to a LEED-certified building;
  • The landlord of a sustainable building who needs special access rights to leased units to be sure that tenants are observing sustainable building operations and waste management practices; 
  • The need to allocate operating expenses and credits – such as additional insurance and taxes and the benefits of green tax credits – between landlord and tenant;
  • The tenant who contracts to lease a unit in a LEED-certified building that is subsequently decertified; and,
  • The landlord of a sustainable building who is confronted with a tenant whose business or use of the leased premises threatens the building’s green certification.

These are just a few of the areas where a traditional lease is going to fail a green building. I expect that as green and sustainable buildings become more common in Arkansas, these lease issues will become less novel. But make no mistake about it: right now they are novel, and they are important. Developers, financers, landlords, and tenants should all take notice.

(Department of Shameless Self-Promotion: So, am I suggesting that you need to hire a lawyer (like the author of this blawg) to draft that new and unique green lease? Absolutely.)


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