Green leases: debt has started to talk
The “green lease” evolution continues.
The Certificate of Title, which is the typical bedrock that lenders insist on in any real estate finance transaction, now includes a tentative step towards green lease requirements, notably: (1) a tenant obligation that it cannot make any alterations which adversely affect the EPC rating; and (2) a mutual obligation to share environmental performance data, subject to both landlord and tenant keeping this confidential. This is not set to reflect a lender’s minimum expectations for occupational leases.
Whilst these provisions, or a variation of them, are relatively common already, they are now set to have more permanence in occupational leases (plus lawyers will be reporting on the presence/ absence of these provisions on any investment acquisition). Interestingly, the data sharing provision is mutual, so that landlords can expect tenants to lean on this in any negotiation around data sharing provisions (e.g. utility data in respect of the common parts of a multi let asset). Arguably, this reflects an increasing move to mutuality in green lease obligations.
Clearly, this is just the start. As minimum energy letting restrictions already apply, and given the value that landlords place in environmental performance data, it is no surprise to see these changes to the standard certificate. However, typically, new green lease provisions go much further. Market expectations are only set to move one way, and it will not be any surprise to see much more extensive certificate requirements in the near future.
Subcribe to news and viewsThe certificate’s provisions for climate change are not more extensive, since that would not reflect most current leases on which the certificate reports. If in future it is generally considered that the certificate needs to address climate change issues in a more extensive way, the committee will consider further change as an update to the eighth edition.
https://www.egi.co.uk/legal/a-new-chapter-in-the-clls-certificate-of-title/
