Don’t Get Stuck With Someone Else’s Bill
Challenge: The “split incentive disincentive” refers to the mechanism in most commercial leases that disincentivizes investments in green building improvements. The landlord often has to foot the whole bill, while the tenants reap the financial rewards. Solution: Restructure leases so that green building investments in tenant-occupied properties are financially incentivized.
Avoid the Quicksand of Green Building Regulations
Challenge: The green building regulatory landscape changes daily and compliance often requires third party cooperation. Don’t be caught off guard. Solution: Make sure that your leases, vendor contracts, third party management agreements and contracts of sale allocate responsibility for compliance with existing and soon-to-be-effective green building regulatory requirements.
Solar-Proofing Your Property
Challenge: A frequently encountered barrier to generating solar energy at tenant-occupied properties is the inability of the landlord to distribute the energy to the tenants. Solution: Plan for this opportunity in advance. Incorporate provisions into your leases that enable (but don't require) the landlord to distribute renewable energy to its tenants.
The Green Due Diligence Imperative
Challenge: Traditional due diligence is no longer enough. Failure to address the status of a property’s green “features” could have significant financial and legal implications. Solution: Investigate and assess the extent to which the subject property complies with third party green certifications, green lender and tenant obligations and evolving green regulatory requirements.
Protect Against Green Building Risks
Challenge: Traditional real estate relationships and standard operating procedures often fail to protect stakeholders and their assets from green building related risks, resulting in unexpected financial and legal exposure. Solution: Transition from existing stakeholder agreements and property operations to those that assess, address and allocate green building related risks.
Failure to Achieve Third Party Certifications
Challenge: The failure to achieve desired or promised levels of third party green building certification can have severe financial implications and legal ramifications. Solution: Allocate responsibility for achieving desired or promised levels of green building certification among design and development team members according to their areas of expertise and control, with adequate penalties and safeguards for failure to achieve the desired results.