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RFP Considerations for Tenants Considering Certification Under LEED 2009 for Commercial Interiors

USGBC’s LEED 2009 for Commercial Interiors rating system includes a significant number of points which tenants can earn towards their LEED-CI certification simply by choosing to lease space in qualifying base buildings. For the tenant considering a move into space for which it intends to seek LEED-CI certification, working with its broker to perform due diligence by pre-qualifying existing buildings through a carefully drafted Request for Proposal process will assist it in narrowing the available pool of buildings, particularly in a soft commercial leasing market where landlords are more inclined to make accommodations for prospective tenants.

21 of  the available LEED-CI 2009 points are available under the Sustainable Sites Credit Category (40-49 total points earn a project LEED Certified status, 50-59 Silver, 60-79 Gold, and 80-110 Platinum); points available on account of base building features are as follows:

  • SS Credit 1: Site Selection. 1 to 5 points are available. In addition to earning 5 points for leasing space in a LEED-certified building, tenants can also earn up to 5 points for leasing space in non-LEED-certified buildings if they satisfy one or more of 12 compliance Paths, including brownfield redevelopment, stormwater runoff management, and light pollution reduction. Tenants will want to incorporate pointed questions within their RFP (i.e., is the building developed on a site documented as contaminated by an ASTM E1903-97 Phase II Environmental Site Assessment or a local voluntary cleanup program?) that tracks the specific language set forth in each of SS-1′s 12 Paths if the prospective building is not LEED-certified. Moreover, they will also want to perform sufficient due diligence to ensure that landlords are not giving them lip service with respect to their building’s LEED certification status; as we have noted frequently here at GRELJ, these types of misrepresentations (whether innocent or not) remain a persistent problem across the real estate industry.
  • SS Credit 2: Development Density and Community Connectivity. 6 points are available under two different options. Option 1, Development Density, requires the tenant to select space in a building located in an area with a minimum density of 60,000 square feet per acre net. Option 2, Community Connectivity, requires that the building is (i) located within 1/2-mile of a residential area or neighborhood with an average density of 10 units per acre net; ii within 1/2 mile of at least 10 basic services (as described within SS-2); and (iii) offers pedestrian access between the building and the services.
  • SS Credit 3.1: Alternative Transportation – Public Transportation Access. Again, 6 points are available under two different options. Option 1, Rail Station Proximity, requires the building to be within a 1/2 mile walking distance of an existing (or planned or funded) commuter rail, light rail, or subway station. Option 2, Bus Stop Proximity, requires the building to be within 1/4-mile walking distance of 1 more stops for 2 or more public campus or private bus lines that the tenant’s employees or occupants can utilize.
  • SS Credit 3.2: Alternative Transportation – Bicycle Storage and Changing Rooms. 2 points are available. In order to earn these points, the base building must provide secure bicycle racks and/or storage within 200 yards of a main entrance for 5 percent or more of the tenant’s employees or occupants as measured at peak periods. In addition, the base building must also provide shower and changing facilities in the building or, again, within 200 yards of a main entrance, for 0.5 percent of occupants.
  • SS Credit 3.3: Alternative Transportation – Parking Availability. 2 points are available. For projects with an area less than 75 percent of the total base building area, the parking spaces provided to the tenant must meet – but not exceed – the minimum number required by local legislation, and preferred parking must be provided for carpools or vanpools capable of serving 5 percent or more of tenant occupants. Alternatively, the base building must not provide or subsidize any parking for tenant occupants. (Note that the text of LEED-CI suggests tenants include “limited parking” provisions in their leases as a potential strategy for achieving SS-3.3). For projects with an area greater than 75 percent of the total building area, parking capacity must meet – but not exceed – the minimum required by local legislation and preferred parking must be provided for carpools or vanpools capable of serving 5 percent of the base building’s total occupants. Alternatively, no new parking can be added for rehabilitation projects and preferred parking must be provided for carpools or vanpools capable of serving 5 percent of the base building’s total occupants.

USGBC’s Green Office Guide suggests that these considerations, among others that relate more specifically to the prospective tenant space that the base building is offering, be built into a questionnaire which the tenant – or its broker – should forward to the building’s property manager or leasing agent in advance of – or as a part of – the RFP process. In addition, tenants should also request – to the extent the building will make the data available – information that will allow it to assess the base building’s ability to earn 5 points from the 12 Paths under SS-1 (i.e., does the building meet the 30 reduction in water use requirement for the entire building under Path 10 for 1 point, or does it employ on-site renewable energy systems under Path 11 for up to 2 points?)

The significant number of points available under the Sustainable Sites category that are purely a function of the base building make the RFP process – and working concurrently with knowledgeable brokers and counsel – an imperative for tenants who intend to seek Commercial Interiors certification under LEED 2009.

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2 Responses to RFP Considerations for Tenants Considering Certification Under LEED 2009 for Commercial Interiors

  1. Brian Anderson February 19, 2010 at 3:43 pm #

    Thanks very much for your usual shrewd analysis. A couple thoughts on due diligence, reps/warranties and drafting the lease.

    I understand the need for the rfp and due diligence. But due diligence isn’t worth much of anything unless you get reps and warranties from the landlord. In the context of an asset purchase, for example, even with an -as-as purchase, you get reps/warranties that the landlord has given you all the information it has. But that’s not true with an unsigned rfp or non-binding LOI. As a tenant in this market, I would dial down the due diligence and instead just put the onus on landlord to give us some strong reps and warranties in the lease itself. They’d include reps/warranties that 1. they’ve given tenant all of the documents and will continue to provide all documents/letters/notices related to such Obligations (defined term which includes any amendments to such Obligations) and 2. that they’ll continue to comply with such Obligations throughout the term of the lease. Then you deal with damages and remedies–a liquidated rent reduction and/or a self-help/rent holdback remedy and/or default. You also try, from tenant’s perspective to carve these damages out of the usual landlord hold harmless and damage limitation provisions as necessary. Finally, the lease recitals should include a statement that tenant has invested significant resources in _________ certification or green practices, that it has made public statements to its customers, clients and shareholders regarding such practices and that it would suffer damages as a result of landlord to fulfill its Obligations, etc.

    From a practical drafting perspective, I generally disfavor substantive terms in an addendum–whether green or otherwise. Clients will willy nilly attach them to various leases in the future, with the result that the defined terms won’t line up, the definitions will become dated and the provisions will likely conflict with other lease terms. Instead, I would put these provisions directly into the lease. A convenient place to insert these sorts of reps/warranties is the environmental section of the lease. The enviro section typically contain a definitions section on “Environmental Law”s and “Hazardous Materials”, and then also contain a series of reps/warranties and indemnities. Of course, green lease provisions are not “environmental” per se. However, putting it there makes common sense to many clients and is sensible from a pragmatic draftsmanship perspective. But more importantly, the “green” terms we’d likely need (from landlord or tenant’s perspective) are very similar –definitions, reps/warranties, mutual indemnities and possible survival after term for any ongoing damages.

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  1. Green Leasing: Owners, Brokers Must Carefully Consider Interplay of LEED-EB:OM and LEED-CI | Green Real Estate Law Journal - October 1, 2010

    [...] with one another – when presenting certification alternatives to their clients. For example, we wrote previously here at GRELJ about how a base building’s green features can offer tenants up to 21 points for tenants [...]

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