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It’s not always easy being green

Homebuyers, businesses, and residential and commercial tenants are all showing interest in “green” buildings these days – those designed to save energy, use sustainable materials and have less of an impact on the environment.

Many buyers and renters are willing to pay a little more for a green building – especially if they can recoup their money through energy savings.

But if you’re serious about going green, think carefully about the legal aspects. You’ll want to make sure the building really is as green as it claims, and that you get what you pay for.

Buying a home

Many homebuyers are willing to pay more for a green house, or are inclined to choose a green house if all other things are equal.

About 10% of all new homes are expected to feature environmentally friendly construction by 2010 – up from only 2% in 2007, according to the National Association of Home Builders.

Green features can include:

  • Energy-efficient appliances.
  • Extra insulation to reduce heating costs.
  • Solar panels or shingles.
  • Thicker or double-pane windows, or windows with a metallic coating to block the sun’s heat.
  • A rainwater-capture system.
  • Low-flow toilets.
  • Building materials that are recycled, or are produced locally to reduce transport costs.

If these things are important to you, then it might be worth specifically mentioning them in any contract with a seller or builder. If the seller has made specific promises about energy savings, it’s a good idea to get these in writing.

Green leases

In commercial leasing, there’s been a growing interest in so-called “green leases,” which are designed to reduce overall energy costs.

Traditionally, most commercial leases either include basic energy costs in the rent, or require the tenant to pay for its own heat, electricity, etc. Slightly more than half the commercial leases in the U.S. are “gross” leases, meaning the energy costs are included in the rent. The problem with this from a green perspective is that it creates no incentive for the tenant to reduce energy use, since the tenant doesn’t have to pay for it.

In a “net” lease, where the tenant pays for energy use, there’s an incentive for the tenant to save energy, but there’s no incentive for the landlord to adopt building-wide changes that will reduce energy consumption, such as better insulation, thicker windows, or roofs that reduce building heat in the summer.

So the idea of a green lease is to create an incentive for both parties to reduce energy costs. For instance, a tenant might agree to pay for its own heat and electricity, if the landlord will agree to improve the overall building’s energy efficiency. Or a landlord might agree to assume the energy costs if the tenant engages in certain practices or meets certain targets for reducing energy consumption.

There are many reasons why both parties might want a green lease. A landlord might want a tenant to pay for its own energy usage in return for retrofitting the building to be more environmentally friendly, because that will pay for changes that will make the building more attractive to other tenants. Or a commercial tenant might have a “green” reputation in the marketplace, and want the landlord’s help in creating a message about how the tenant engages in sustainable practices.

Taking the LEED

Many owners and builders are now applying for LEED certification for their buildings. LEED stands for “Leadership in Energy and Environmental Design.” It’s a rating system developed by the U.S. Green Building Council that awards points for various environmentally friendly ways in which a building is constructed.

A building must have at least 26 out of a possible 69 “points” in order to be LEED-certified. A building that has a higher number of points may be certified at a Silver, Gold, or Platinum level.

A building can get points for being sited near public transportation, reducing internal energy use, offering racks and changing areas for bicyclists, having water-efficient landscaping, using local or recycled construction materials, improving indoor air quality, etc.

LEED-certified buildings are often attractive to tenants because they reduce energy costs and improve tenants’ health and comfort.

Many building contracts now specify that a building must be certified at a certain LEED level. If this is important to you, you’ll want to be very clear in any contract exactly what level is required, when it must be accomplished, and what the consequences are if the building doesn’t get certified at the intended level.

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