Page 303 - The Green Building Bottom Line The Real Cost of Sustainable Building

THE FINE PRINT: LEGAL ISSUES IN GREEN BUILDING PROJECTS 281

Lease Provision for Sharing Energy Cost Savings

The following provision is designed to allow a landlord and tenant to share
the cost savings of energy-efficient features installed by the landlord where
the tenant either pays the landlord for utility costs or pays the utility provider
directly. The landlord’s portion of the savings would allow it to recoup the
initial cost of such features, while the remaining savings make the economic
terms of the lease more attractive to a potential tenant.

Energy-Efficient Features
(a) Landlord will install, at Landlord’s sole cost and expense, energy-efficient lighting
and HVAC systems, daylighting, and other measures designed to reduce the elec-
tricity usage of the building, all as more particularly described on Exhibit C
attached hereto.
(b) Landlord will deliver to Tenant, on or before the first date Tenant occupies the
Premises, a certification from a licensed professional engineer setting forth the pro-
jected monthly energy savings (the “Monthly Savings”) as a result of Landlord’s
installation of the features described in subsection (a) above. Such savings shall be
calculated based on the standard method of calculating energy savings in the met-
ropolitan area in which the Premises is located.
(c) On the day that Tenant is first obligated to pay rent, and continuing throughout the
remainder of the term of the Lease, Tenant shall pay to Landlord, as additional rent,
____ percent (___%) of the Monthly Savings in equal monthly installments.

With respect to calculating the savings from energy-efficient features, a
tenant might insist that at least two engineers (one of which could be selected
by the tenant) calculate such savings, with the calculations of the two engi-
neers being averaged to compute the actual amount that the tenant will pay
to the landlord.
Basing the amount the tenant must pay the landlord on actual energy sav-
ings may be problematic. Not all of a tenant’s energy usage will be as a result
of fixtures installed by a landlord. Much energy usage will relate to the ten-
ant’s own equipment and habits, and a tenant would have less incentive to use
energy efficiently if energy savings would mean increased payments to the
landlord under a cost-sharing arrangement.
Where the landlord of a multi-tenant building charges all tenants in the
building a set amount for electricity usage, a tenant that installs energy-
efficient equipment may have difficulty recovering its investment. Such a
tenant may wish to negotiate a provision similar to the provision above but
which, instead of requiring the tenant to pay an additional amount to the
landlord, would give the tenant a monthly rental credit equal to all or a por-