Automating green leases: uniting owners and occupiers on sustainability – find out more with Clarilis
The commercial real estate sector has a long way to go on its voyage to net zero. By adding the Better Buildings Partnership’s ‘green lease’ clauses into our Real Estate automations, we are giving landlords and occupiers a quick win for their decarbonisation strategy and delivery.
The Intergovernmental Panel on Climate Change (IPCC) has set the target for greenhouse gas emissions to halve by 2030 and reach net-zero by 2050.[1] That first deadline is now only six years away. As a major contributor to climate change, the commercial real estate sector has a big role to play in achieving these targets. For context, buildings are responsible for 23% of all UK carbon emissions, 30% of which comes from non-domestic buildings.[2] That provides a sizeable dose of motivation for both owners and occupiers to start taking action on their environmental performance as a matter of urgency.
Real estate decarbonisation is a collective endeavour
The owner-occupier relationship is a crucial part of decarbonising the commercial real estate sector. On the one hand, the owner needs to commit to investing in sustainable improvements. While on the other hand, the occupier must agree to be accountable for utilising the building in a responsible manner. Taking action on emissions therefore largely boils down to collaboration between building owners and occupiers. Fortunately, sustainability is an area where owners’ and occupiers’ objectives are often aligned, so in many respects, getting the right wording into agreements could be seen as ‘low hanging fruit’. BUT this relies on there being an easy way to access industry-agreed clauses and incorporate them into agreements. For this, there is now a solution.
Standardised ‘green clauses’
In January 2024, the Better Buildings Partnership (“BBP”) launched its updated Green Lease Toolkit. Containing legal clauses in nearly 20 key areas, it is designed to empower property owners, occupiers, letting agents, lawyers, managing agents, investors and analysts with standardised green clauses.
“Our Green Lease Toolkit has been one of the BBP’s most widely utilised tools, helping to inform leading thinking on how leases can support owners’ and occupiers’ sustainability ambitions,” says Sarah Ratcliffe, CEO, Better Buildings Partnership. “We hope that this significant update of the toolkit will enable the whole industry to realise the potential for positive and open dialogue, ultimately driving the delivery of better buildings.”
As well as spanning everything from building management and circular economy to waste and renewables, the clauses also come in three ‘shades of green’ to address wide-ranging levels of sustainability across the property market.
“Green leases are an opportunity for owners and occupiers to collaborate to deliver on their sustainability targets for commercial buildings.” says Sarah Ratcliffe, CEO, Better Buildings Partnership. “The diverse range of assets, leasing models and sustainability ambitions of owners and occupiers led us to take a more nuanced approach in this latest version of the Toolkit. In addition to ‘Green Lease Essentials’ (those clauses that should be in a lease to claim it is ‘green’), by introducing ‘shades of green’, we’ve provided different options for owners and occupiers so that owners and occupiers can find relevant and workable common ground.”
The automation opportunity
The introduction of ‘shades of green’ is just one example of the painstaking approach taken by the partnership’s Green Lease Working Group to develop this latest wave of updates. Over the 2023 review cycle, the BBPs experienced team of lawyers worked together to ensure all the new clauses translated the vision of the Green Lease Steering Committee and to increase usability, placed them in the context of the Model Commercial Lease (lease of part of an office building) . This creates a collection of clauses that are not only technically viable and relevant to the market but can also be incorporated into the most widely used forms of commercial leases. At Clarilis, we spotted an opportunity to use our automations to take this one step further by incorporating the BBP’s updated clauses into our real estate solutions, including Real Estate Plus.
“At Clarilis, we’re huge advocates of utilising high-quality content to make automation accessible to law firms of all types and sizes – Real Estate Plus is a great example of this,” says James Quinn, CEO and co-founder of Clarilis. “We created Real Estate Plus because the market asked us for a pre-automated real estate solution that covered all of the most common types of commercial property agreements. In 2024, it makes sense to include the BBP’s Green Lease Toolkit provisions.”
Applying experience gained from working with the MCL drafting committee and the PSG committee in Scotland to automate standardised documents, and with the full support of the BBP, Clarilis has included the new green lease provisions within its real estate solutions. This means that a user of Clarilis’ off-the-shelf real estate automation solutions may now select between the MCL and BBP’s green clauses in their automated lease documentation.
A united effort for real estate decarbonisation
While it’s evident that the commercial property sector is working harder than ever to hit net-zero goals, the scale of progress is still falling short. A potential reason for this is landlords and occupiers are approaching it in siloes – each waiting for the other to move first, rather than working collectively. The addition of the new green lease toolkit provisions further supports landlords and occupiers to work in unison, aligning real estate practices with sustainability goals in a more collaborative way. To find out more, book a demonstration with a Clarilis innovation specialist.
[1] https://www.ipcc.ch/2022/04/04/ipcc-ar6-wgiii-pressrelease/
[2] HSBC: Towards Net Zero in UK Commercial Real Estate – https://www.business.hsbc.uk/-/media/media/uk/pdfs/campaigns/ucl-corporate-real-estate-introductory-guide.pdf
