First, although Michael Brooks of REALpac (who participated in last month’s green leasing panel at the Urban Green Expo here in New York City) is quoted in one of the articles, it is not clear that Mr. Malbranck’s lease is derived from any of the forms which were discussed during that panel, including REALpac’s, the Model Green Lease, or the BOMA Green Lease Guide. As Mr. Brooks notes, “it’s impossible to say how many commercial buildings in Canada are using green leases because no one, including REALpac, tracks that at the moment.” It’s certainly a relatively small number, but as an increasing number of landlords attempt to implement green leasing practices, questions about the uniformity of green lease provisions could become an issue. I’m also intrigued about the idea of tracking green leases and whether any other organizations have attempted to do so (none have, to my knowledge).

In terms of other landlords applying similar blanket green lease requirements across available space in their buildings, I thought it was interesting to note that Mr. Malbranck admits that “a number of leasing agents and prospective tenants have inquired about the space, but backed off when they found out about the green leases. ‘They didn’t come right out and say it, but you got the sense it was an issue with them.’” However, the lone tenant that has signed up to date with Mr. Malbranck was attracted by the green lease concept; the owner of Lux for Sprouts, a children’s clothing and toy store, states that she specifically selected 4100 square feet of space on the first floor based on (1) the image that occupancy in a green building should create for her company; and (2) her belief that green buildings make it easier to attract and retain employees. Here, I would suggest again the importance for landlords to closely scrutinize broad, aspirational representations in green leases about green building benefits or performance, particularly if such representations are overstated or ultimately unrealized by tenants.

I was also reminded of Mr. Brooks’ remarks on our panel about enforcement of green lease provisions; although the articles reporting on 1735 Corydon Avenue did not get into this level of detail, I do think it’s worth repeating what Mr. Brooks noted about green leasing practices in Australia (where he had met a landlord whose form lease included a variety of green provisions which- if breached- entitled it to terminate the lease and evict the offending tenant). If more landlords apply mandatory blanket green leases, it will be curious to see what types of specific enforcement mechanisms (if any) are included in those documents. Given that Mr. Malbranck has only signed up a single tenant, I would be surprised if he ultimately exercised any right to terminate based on the breach of any green lease provisions, but the fact that potential tenants have balked at his requirements may suggest that such enforcement mechanisms are included in the scope of his green lease.

Finally, I also think that 1735 Corydon Avenue suggests it’s not unreasonable to consider the possibility that, eventually, the LEED system (or some other third-party green building rating system) will require owners to exclusively negotiate and execute green leases in order to earn certification, whether as an individual credit, for example, under LEED’s New Construction or Core and Shell rating systems, or perhaps even as a mandatory Minimum Program Requirement that serves as a prerequisite to formal LEED certification. For example, USGBC recently released its Green Office Guide: Integrating LEED Into Your Leasing Process and, although I have yet to review it, it’s clear that USGBC is beginning to pay closer attention to the intersection of green leasing and LEED.

We’ll try to flesh out more details about 1735 Corydon Avenue and follow up here at GRELJ as appropriate.

• Green Leases Give Building Manitoba First (Winnipeg Sun)
• Green Leases Seen as Wave of Future (Winnipeg Free Press)

However, I think it’s important to look at the specific language that provides for decertification in LEED 2009, which reads (in part) as follows: “certification may be revoked from any LEED project upon gaining knowledge of non-compliance with any applicable MPR.” (emphasis added). The way I read this language, USGBC/GBCI is not obligated to revoke certification upon learning of non-compliance, but it is not restricted from receiving information regarding non-compliance from any third party. The question then becomes what, if any, obligations USGBC/GBCI may have to use that information and pursue a decertification proceeding, either conferred elsewhere in the LEED rating system itself or otherwise imposed by law. I don’t know the answer to that question, but perhaps Ujjval or others could chime in below in the comments. I think this is an absolutely critical point to dissect.

Also of import in the ENR article with respect to the MPR requiring access to building performance data (which has been the MPR driving much of the risk discussion here at GRELJ and elswhere), Duane Morris construction attorney Ed Gentilcore emphasizes that “[w]hat was once an initial project-performance milestone now has ongoing tail responsibilities that could create extended obligations for the owner itself and possibly, in turn, design and construction teams.” In addition, Scot Horst told ENR in the same article that the organization is “still developing the best and easiest ways to help owners do this. This is a new requirement and there is a lot to work out over time.” He declined to tell ENR when any addenda to the MPRs might be released.

I think it’s clear that the contract challenges and corresponding risks associated with the new LEED 2009 MPRs are just begin to emerge, particularly if USGBC and GBCI release a second addenda to a document that was just released a few months ago.

• Building Rating System Requirement Raises Concerns (ENR)