Robert C. Newcomer rnewcomer@langlegal.com The Lang Legal Group LLC 404.320.0990

Commercial LitigationBusiness, environmental and real estate law

LEED-AP (2008)

Sustainable Atlanta: Building Taskforce: Sustainable Building Taskforce (2008)

Urban Land Institute: Sustainability Committee –

Community Assistance, Co-chair

Technical Assistance Program

Green Chamber of the South: Board Member and Officer

Commercial Landlord–Tenant Law Green Lease Agreements

Green Building: Sustainability Environmental impacts Rating systems

Legal Issues: Green Leases Legislation Development and Construction Managing Risk Marketing Green Buying and Selling Green

Sustainability

“To meet the needs of the present without compromising the ability of future generations to meet their own needs.”

Green building is the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's life-cycle from siting to design, construction, operation, maintenance, renovation and deconstruction.”

Test

13%Water Use

39%GreenhouseGas Emissions (CO2)

60%Total Waste(non-industrial)

72%ElectricityConsumption

U.S. Building Impacts

GLOBAL COGLOBAL CO22 EMISSIONS EMISSIONS ( (BY SECTOR)BY SECTOR)

#1 Buildings#2 Transportation#3 Industry

Global Warming?

Scientific Basis

Carbon-based regulation . . . ?

Massachusetts v EPA (Sup. Ct., 2007)

EPA “Endangerment Finding” (April 2009)

Federal regulation . . . Waxman-Markey Cap & trade, carbon tax, ???

Implications for real estate . . . ???

Sustainable Buildings: The Triple Bottom Line

Less environmental impact Greater energy efficiency

Increased marketability Higher lease rates Improved cap rates

Improved productivity Reduced absenteeism Community connectivity

Green Building

LEED-NC (v2.2)

Sustainable Sites 14 total points (1 prerequisite + 14 credits)

Water Efficiency 5 total points (no prerequisites + 5 credits)

Earth & Atmosphere 17 total points (3 prerequisites + 6 credits)

Materials & Resources 13 total points (1 prerequisite + 13 credits)

Indoor Environmental Air Quality 15 total points (2 prerequisites + 15 credits)

Innovation in Design 5 total points (no prerequisites + 5 credits)

_____________________________________________ 7 prerequisites + 58 credits (69 total points)

LEED: Project “Certification”

Register project Complete online submittals and

document compliance with All prerequisites; and Each (eligible) credit sought

Respond to questions and any requests for supplemental information

Four Levels of LEED Ratings:

Green Buildings worldwide are certified with a voluntary,consensus-based rating system.

USGBC has four levels of LEED.

LEED EB: O&M (projected 2009 – 2013)

2006 2007 2008 2009 2010 2011 2012 2013

<50 <100 <1,000<5,00010,00022,00030,00050,000

50,000 -

45,000 -

40,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000 -

5,000 -

1,000 -

Cost of Green?

By default, non-green buildings will be known as BROWN buildings

Less demand

Lower rents

Higher operating cost

Decreased value

Go GREEN or go home

U.S. Office Rental Rates:“Green” v. “Brown” Performance

Market Bifurcation Starts in 2009?

2009 | 2010 | 2011 | 2012 | 2013|

2002 | 2003 | 2004 | 2005 | 2007 | 2008 |

CLASS ACLASS A

CLASS BCLASS B

Avera

ge R

en

ts

PS

F

Green Building Legal Issues GREEN Lease Agreements Legislative Mandates and Incentives Development and Construction Marketing Green Buying and Selling Green Buildings

Green Leases:Economic structure

Gross lease: Rent (includes fixed share of operating costs)

Gross lease with rent escalation provisions Net lease:

Rent (base) + some or all operating costs

“Split incentive” problem

Green Leases:Sharing energy cost savings

(a) LL will install, at LL’s sole cost, energy efficient features to reduce electricity usage as more particular described in Exhibit A.

(b) LL will deliver to T written certification from licensed engineer setting forth projected monthly energy savings (“Monthly Savings”).

(c) On the day T is first obligated to pay rent and continuing throughout the term of the Lease, T shall pay to LL, as additional rent, __ percent (__%) of the Monthly Savings.

Green Leases: Key Terms

Green features and sustainability/environmental standards Building requirements

Certification/Recertification Leasehold improvements

Work agreement Operating expenses

Relocation (if applicable) Use and occupancy Services and Utilities Maintenance and repair Parking Data collection and disclosure/reporting Allocation of sustainability incentives Compliance tools, remedies and damages

Green Leases: Repairs, alterations and improvements

Standard lease: LL consent based on type of work or cost

Green lease: LL retains consent without exceptions or

specify requirements for work Timing of work (Pre-) Approved contractors Reconstruction following casualty event

Green Leases: Proposed T work letter provisions Comply with LL requirements for construction waste

management and recycling Certify commissioning of all HVAC, lighting and

energy systems and provide data to LL Utilize:

Energy-efficient lighting fixtures and occupancy-based controls

Low-flow toilets, waterless urinals and sensor-controlled faucets

Wood shall be FSC-certified Paints, stains, sealants and adhesives shall be water-

based, low- or no-VOC Carpet systems shall be Green Label Plus

Green Leases: Green Cleaning Policy

Products must be: Environmentally safe, phosphate-free, non-corrosive, non-

flammable, low-VOC emitting, fully biodegradable “Green” (per Green Seal GS-37 Standard) Packaged ecologically

Paper products must be 100% recycled content Garbage bags must be biodegradable or compostable Vacuum cleaners must be capable of removing ___% of harmful

particles, including dust, mold spores and most microscopic respiratory irritants and allergens.

Tenant shall properly separate recycling material from trash Tenant shall provide MSDS to LL for all janitorial supplies

provided by T

Green Leases: Double-edged Sword?

T may have additional claims against LL under quiet enjoyment provision

LL may be held to a higher standard for building performance because of the green features

Legal Issues: Legislation

Chamblee Doraville City of Atlanta (proposed)

Legal Issues: Legislation

“Certified”? Register project Meet prerequisites Document compliance

with sufficient credits Supplement information

Certified

“Certifiable”? DEFINE?

What must be done?

Determine: Who decides? How is decision made?

???

Legal Issues: Development and construction risk management

Assemble experienced green project team Document responsibility and allocate risk For new green materials, products and technologies:

Review technical data and warranties Research product manufacturer Include representations, extended warranties and

guarantees when possible Certification consultant should review all change orders,

material substitutions and construction practice changes Request, collect and retain data and documentation

Failure to plan . . .

Legal Issues: Marketing green

Brokers, agents and marketing professionals Agree on proper message Address marketing message in contract

FTC “Green Guides” claim standards: Substantiated Clear and qualified Does not overstate benefits

Legal Issues: Buying and selling green buildings Data collection and disclosure:

LEED is no guarantee of performance - MPRs Mandated by government Demanded by tenants/buyers

Test

Robert C. Newcomer rnewcomer@langlegal.com The Lang Legal Group LLC 404.320.0990

QUESTIONS?