It is now almost three months since the launch of the BBP's excellent Green Lease Toolkit.  Many have now had the chance to digest and benchmark their current green lease positioning - take for example, Daniel Mead, Head of Asset Management at Bywater Properties, in this excellent blog, identifying work in progress.  

As someone heavily involved in green leases here at Forsters, across a varied client and asset base, here are my quick fire, instinctive reflections on the state of play. 

1. Mutuality: The toolkit, notably, looks to move the dial in terms of mutual green commitments e.g. carrying out works in a sustainable manner, procuring renewable energy etc. Surely fair enough? However, for landlords, often only committing to limited, institutionally standard quiet enjoyment, insurance and service charge obligations in an FRI/ IRI leases, this can feel like uncomfortable territory. I sense a significant mentality shift is still needed but it will come. 
2. Costs: For now, the BBP acknowledge that if a tenant benefits from improvement works with costs savings (e.g. utility costs), it is reasonable for the tenant to contribute to the landlord's cost. However it has not, as yet, drafted for this, rather offering some examples from across the globe. I am a firm believer that whilst the “split incentive” is a negotiating challenge, the next iteration of the toolkit should look to hit this head on. The challenge is not insurmountable, as we are seeing across landlord/ tenant conversations.   
3. Practicalities: As Mead says in his blog: “Starting with a precedent Green Lease and agreeing one with your tenant is one thing, however its more important to deliver on the clauses set out in the documents!” I couldn't agree more. The wording may say one thing, but what really matters is that which is happening on the ground, no doubt typically the result of far more nuanced conversations with occupiers. For much of the toolkit, enforcement options in a lease feel draconian (e.g. forfeiture). On this note a couple of observations from the toolkit: (1) exploring specific dispute resolution mechanisms; and (2) squirreled away in the rent review section of the toolkit, the reference to rewarding a tenant for hitting specific green KPIs (in the context of index linked rent review). As landlords increasingly commit to sustainability linked loans, with the potential to benefit financially from achieving sustainability targets, should/ can a similar scenario play out at the landlord/ tenant level? 

Will the latest iteration of the toolkit steadily become boilerplate? This is an excellent industry resource and definitely points the industry in the right direction. To accelerate progress, my sense is that the City of London Law Society - Certificate of Title needs to move more quickly with the times. At the moment, on a simple level, it only demands data sharing provision and restrictions on alterations that impact on EPC ratings. As soon as something becomes a “must” in here, toolkit clauses will inevitably becomes more commonplace. 

And then of course, there is the Landlord and Tenant Act 1954. Whilst the toolkit is driving much needed modernisation, there is an obstacle on the statute books…the regulatory approach needs to change too in order to realise demonstrable change.