Commercial Leases and Greenhouse Gas Emission Reporting Requirements: Key Drafting Issues for Owners and Tenants

Description

Monetizing GHG emission data is creating a new revenue stream for tenants (and to a lesser extent, for landlords), in one modest example of how a decarbonized economy will look dramatically different than what exists today.

The SEC recently adopted a final rule that, although currently stayed, if implemented, will for the first time require public company tenants and landlords to report GHG emission data.

A growing number of states and municipalities, including California, Colorado, Maryland, Washington D.C., New York City, and Denver, are also for the first time regulating GHG emissions. GHG disclosure and reduction laws, including BEPS, will significantly impact commercial property owners who must comply with these standards or face serious legal and financial consequences.

This new space of regulation by governments requires existing buildings to reduce building GHG emissions to meet specified energy use intensity targets. Building owners will need the cooperation of their tenants and vice versa in exchanging utility and other data to comply with these standards, and each will want to understand their obligations and potential financial exposure for compliance related upgrades.

Counsel should understand how these new laws impact commercial lease terms to best advantage and mitigate risk for their clients, whether landlords or tenants. Considerations include defining new terms such as the GHG/BEPS standards that apply and what constitutes operating expenses where expenditures will be required for building retro-commissioning and ongoing compliance; how to allocate these additional expenses as well as any penalties that may be assessed; and addressing the sharing of GHG emissions data between the landlord and tenant where each may need specific information from the other to fulfill reporting obligations.

Listen as our expert panel provides an overview of notable federal, state ,and local GHG/BEPS laws and regulations, including how these are impacting commercial building owners and their tenants. The panel will address landlord and tenant considerations when negotiating the lease and offer best practices for incorporating the new laws' requirements into new and existing lease terms.