As area businesses seek to “go green,” there is an increasing interest in LEED (Leadership in Energy and Environmental Design) certified buildings. This raises important leasing issues for both landlords and tenants.

In general, LEED certification means that a building has met certain sustainability criteria. Under the LEED rating system for new construction and major renovations, upon completion of construction the building owner must apply to the U.S. Green Building Council for certification. Buildings are scored based on a system in which points are awarded based on the building’s achievement of certain sustainability goals. Categories include sustainable sites, water efficiency, materials and resources and indoor environmental quality. A building can achieve a rating of certified, silver, gold, or platinum.

Space leases within the LEED building must be drafted such that the tenant’s activities in the building are consistent with the building’s sustainability goals. Conversely, a tenant needs to be mindful that the tenant’s operations in the building may be made more difficult, and the tenant’s proposed alterations to the space may be more costly, due to the landlord’s green practices. This article will outline some of the key issues that landlords and tenants should consider when negotiating a space lease in a LEED-certified building.

Examples of matters a landlord should consider before entering into a lease for a LEED-certified or other green building are as follows:

1. Who pays for the cost of capital improvements? The costs of capital improvements in a LEED-certified building may be significantly higher than in a conventional building. As a result, the tenant may be less willing to take on the additional cost. On the other hand, the tenant may be benefitting from a reputational advantage from locating in a LEED building, and, therefore, the additional cost may be justified.
2. For a long-term lease, the landlord should be careful not to guarantee that the building will maintain its LEED certification status throughout the term. The landlord does not want the loss of certification to be a default under the lease.
3. The landlord should pay special attention to improvements made to the space by the tenant as part of the initial build-out and throughout the term. Inefficient water or electrical improvements, or the use of non-renewable materials, could negatively impact the building’s LEED certification. 
4. The landlord should pay special attention to the “standard form” rules and regulations of the building. The rules and regulations should be carefully drafted such that the tenant’s activities maintain the sustainable nature of the building. 
5. Assignment and subleasing provisions should be drafted such that a subtenant or an assignee of the lease is also bound by the sustainability provisions of the lease.
6. Lastly, the lease should allow the landlord to show the premises to inspectors and other authorities who may need to view the tenant’s space to confirm or audit the building’s certification.

Examples of matters a tenant should consider before entering into a lease for a LEED-certified or other green building are as follows:

1. In some cases, the tenant may require that the landlord’s building maintain a LEED-certified standard as a condition of the lease. If this is the case, then the lease should require that the landlord maintain the required LEED standard throughout the term of the lease and take such steps as are necessary to maintain the standard during the term.
2. In a LEED-certified building, the lease or the landlord’s rules and regulations may specify the compliance standards that the tenant must meet with respect to the tenant’s energy and utility consumption, materials used, etc. Prior to signing the lease, the tenant must have a good understanding of these rules and understand how the tenant will modify its existing operations to conform to them.
3. In some instances, the landlord may receive a benefit in terms of tax or other incentives with respect to maintaining a green building. If the tenant’s sustainable activities are a direct cause of the landlord’s tax benefit, then the tenant should consider whether some of the benefit should be passed along to the tenant.
4. HVAC issues are a common point of contention between landlords and tenants. The tenant should consider whether the HVAC system in the green building is adequate to keep the tenant’s employees and customers comfortable during the heating and cooling seasons. 
5. Most leases contain a force majeure provision that allows the landlord a grace period for performing maintenance and repairs if materials and equipment are not available. This may be of a particular concern in a green building where specialized products and materials might take a significant longer period of time to obtain than standard products and materials. The tenant should seek to control the length of the force majeure delay.
6. If the tenant entered into the lease specifically because the building maintains a particular green standard, then the tenant should insist that the tenant may use the green standard in its advertising and promotional materials. 

Todd Helwig is a partner in Mirick O’Connell’s land use and environmental law group.