Page 304 - The Green Building Bottom Line The Real Cost of Sustainable Building

282 CHAPTER 9

Lease Provision for Sharing Energy Cost Savings (continued)

tion of the calculated savings resulting from the tenant’s installation of such
equipment.

COSTS OF OPERATING THE BUILDING
In leases using a modified gross or net rent structure, the definition of “operating
costs” is typically fairly broad. Usually, it encompasses all costs incurred by the land-
lord to operate, maintain, repair, and manage the building. In some cases, there are
negotiated limitations on the landlord’s ability to pass through certain costs incurred
by the landlord as operating costs. In the green lease, landlords must be very careful
to both ensure that the definition of operating costs is sufficiently broad to encompass
additional or unique costs associated with the green building and avoid limitations
which may limit or prohibit the landlord’s ability to pass these costs through to ten-
ants. Some specific examples include the costs of maintaining a green roof, mainte-
nance and repair of pervious paving systems, maintenance and repair of water
management and collection systems, costs associated with on-site and off-site access
to and use of public transportation (bus shelters, walkways, underground tunnels, light-
ing, discount programs for users of public transportation, etc.), specific products and
procedures associated with green cleaning, operation of recycling programs together
with the costs associated with storage of recyclable materials as a part of these pro-
grams, and the costs associated with on-site power generation systems. Further, the
operating costs provisions of a green lease should be sufficiently broad to allow the
landlord to amortize the costs of operational enhancements made to the building over
the life of the lease that are designed to enhance the energy or water efficiency of the
building, improve indoor environmental quality, etc., as a component of operating
costs. Without the ability to pass through the cost of such enhancements to the tenants
of the building (who will directly benefit from the same), there is little economic incen-
tive for the landlord to make such investments.

TENANT OPERATIONS

The form of any lease agreement contains certain provisions regulating the operations
of the tenant in the leased premises, as well as on the balance of the landlord’s prop-
erty. Along these lines, the cost of utilities such as electricity, water, sewer, and waste
removal are usually included in the definition of operating costs or dealt with through
specific provisions in the lease. In the green lease these provisions must specifically
address issues like the energy management system for the building, energy conserva-
tion measures such as occupancy-controlled lighting, building operating hours, limita-
tions on the tenants’ ability to control the temperature in their spaces, as well as