The greening of property
THE GREENING OF PROPERTY
Sustainable development and ownership of property were again high on the agenda at MIPIM last month. But is there too much rhetoric and not enough action, asks Nigel Haynes, head of Freeth Cartwright LLP Nottingham real estate group.
“Clearly Government policy, regulation and legislation are focusing minds on the need to manage, occupy and own buildings in a more sustainable manner. The introduction of energy performance certificates this year is just one illustration of a measure requiring action and demonstrates the redundancy of a head in the sand approach.
“So what else is the property industry considering?
“Green leases have received some attention in recent months and have achieved a measure of market acceptance in Australia where some occupiers particularly in the public sector will now only take a building on the basis of a green lease.
“In essence a green lease will include provisions relating to the achievement of specific objectives in areas such as energy and water use, pollution and contaminants and waste management.
“The key areas to be negotiated in a green lease are alienation (assignment/underletting), outgoings, rent review, repair, reinstatement, service charges and user. Space does not permit a detailed examination of each but inevitably issues arise over, for example, demonstrating compliance, non-compliance penalties and recourse available to the parties.
“Fundamentally concerns have centred on the potentially negative impact on value of onerous provisions relating, for example in the repairing covenant to achieving specific standards or using sustainably-sourced materials. It has to be recognised that the market will need time to generate solutions to issues such as capital values and rental impact and willingness of different types of occupiers to accept such leases.
“For developers operating in a difficult market, delivering a building satisfying high green credentials may prove a significant competitive differentiation particularly to coveted public sector occupiers. For occupiers signing up, such leases can represent an important demonstration of their corporate responsibility credentials.
“Whilst the market has some way to go in delivering solutions, there can be no doubt there is now a serious engagement and greening is underway.”
ends - 7 May 2008