Why Traditional Leases Don’t Measure Up And What We Need Instead

During the pandemic occupancy rates fell by as much as 95% yet whole-building energy use dropped only 10-20%. Notably 5% of buildings experienced whole-building energy reductions above 30% while 40% of buildings experienced reductions between 10-30%.

Performance-based lease can address challenges to building efficiency where traditional leases have fallen short. Traditional leases can lead to tenants consuming more energy than necessary and obligate landlords to expend unnecessary energy as some lease terms require landlords to hardwire lights to stay on all the time or to provide heating and cooling even if leased spaces are unoccupied.

Green leases can address misaligned incentives by reducing overall energy consumption on a voluntary basis and lowering operating costs for both landlords and tenants. Performance-based leases can lead to whole-building energy reductions with progress towards climate commitments and building standards.

Key Provisions include:

• Building performance standards established to meet carbon reduction goals
• Equitable distribution of landlord and tenant responsibilities to meet building performance standards
• Landlord-tenant transparency and accountability by tracking energy use and implementing building performance goals
• Penalties if either party fails to comply with standards and meet building performance goals