Climate Contract Playbook Edition 3
172
[Emma’s clause]
The Origin Story
Child’s name
Emma’s clause
Full name
Green Residential Lease Clauses
Practice Area / Sector
Real Estate
New build flats may be built in a sustainable way using sustainable materials (e.g. with BREEAM rating excellent, Passivhaus or Energy Performance Certificate (EPC) A rating). However, the way they are operated (i.e. used) by purchasers/ tenants can erode the design intent and carbon savings made during the construction process.
Issue
Covenants in the leasehold agreement or lease to require the flat purchaser/ tenant to operate the flat to its maximum energy efficiency and abide by rules concerning waste recycling/ composting/ maintenance of green roofs and spaces.
Solution
Property developers have long recognised that even green developments can be run sub-optimally from an environmental perspective. For example, renewables may be installed but then not used. Buildings management systems may not be commissioned or may be operated incorrectly, meaning energy efficient equipment is not used to the maximum efficiency. Owner’s may replace LED bulbs with normal bulbs. The difficulty is educating and incentivising purchasers and tenants to use the building in the way that the designers intended. Most improvements in building management that have occurred in the last twenty years have resulted from education and collaborative measures 92 . To date, buyers and sellers and landlords and tenants, may have not been aware of the potential, or have not been encouraged to include, wording in leasehold agreements to impose obligations on buyers and tenants to use the building in an environmentally conscious way. Some mortgage providers are starting to offer mortgage incentives to homeowners who buy greener homes 93 . Similarly, some developments are leading the way and successfully using these kinds of environmental obligations in the market 94 . Homes in the UK are responsible for about 27% of the UK’s total CO2 emissions. Even with ever improving building design and construction, the energy consumption of new homes has not fallen dramatically. This is due partly to increasing consumption (people own more electrical goods even though all products have become more energy efficient). How owners and occupiers use flats (and other buildings) can have a dramatic effect on their energy consumption. Currently, there are education and incentive programmes, run by government agencies (for example, see The Energy Saving Trust ) to encourage more climate conscious behaviour and use of buildings but there is nothing to require this in a residential setting. Adding covenants (and other terms) to leasehold agreements and leases requiring leaseholders and tenants to use their flats in a more environmentally conscious way (or even to meet targets to reduce their energy consumption) will focus people’s minds and reinforce the educational approach taken by government policy to date. The covenants will make flat owners and tenants aware of what is required to use a building efficiently and make such behaviour mainstream.
Context
Impact
92 https://www.carbontrust.com/ https://www.betterbuildingspartnership.co.uk/ 93 https://www.businessgreen.com/news/4016056/saffron-building-society-debuts-green-mortgage-offer 94 https://www.stmargaretsresidences.co.uk/
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