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Legal Problems With Green Real Estate Clauses

Stephen Del Percio at the Green Real Estate Law Journal wrote an interesting article about environmental objective clauses in leasing agreements. I know what many of you are pondering.  What exactly is an "environmental objective clause?"  Environmental objective clauses are clauses that require both landlord and tenant to operate the demised premises pursuant to a set of very general, aspirational green building objectives.  In essence, these are obligations that both a landlord and new tenant voluntarily become subject to in an effort to aid the environment.

The obligations contained within these new type of agreements cover such areas as (i) direct and indirect energy consumption and greenhouse gas emissions; (ii) water consumption; (iii) the amount of material entering the waste stream; (iv) negative impacts upon the indoor air quality of the Building and the Premises. 

The problem that Mr. Del Percio finds with these agreement is that the vague nature of the language leaves landlords open to possible unexpected liability.  What exactly is excessive water consumption?  If this is not clearly outlined that the tenant may have a suit against a landlord because of using too much water on landscaping.  Or what is an excessive amount of material entering the waste stream?  Will this also cover other tenant lodgings on the same property?

I have to agree that the general nature of these clauses could be a problem, but is not insurmountable.  For example, how many contracts include definitions?  Nearly all.  So, why can't an inclusion of definitions work in this case?  It can.  Also, landlords can use limitation of liability clauses to prevent being overexposed for any litigation from tenants.  This seems to remedy the problems and allow for the continued use of environmental objective clauses.



Green Real Estate Education is a key.

As one originated education in the "green" real estate arena 2 years ago, and one who teaches "green" to the real estate industry in our Level One awareness level, we've only just begun the dialogue of disclosures and disclaimers. Both in commercial and residential transactions, the clients will offer the escape "why wasn't this disclosed?" So education is a key to bringing these issues to the profession, to even know how to disclose and disclaim. In my opinion, after having completed 400 residential transactions without being sued which is a miracle in itself, I see misrepresentation as a huge issue to be addressed with in the next year to come where a disclosure should become a mandatory and a necessity. All contracts need to include criteria to address this. No matter what, humans are involved so a clear cut case for all will never exist, but I do agree, it needs to begin now.

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