What landlords and tenants need to know about green clauses and leases

Posted Friday 11th July 2025

As the UK works towards its goal of becoming a clean energy country, the environmental performance of commercial property is under increasing scrutiny. With the built environment estimated to contribute around 37% of global greenhouse gas emissions, it’s no surprise that leases, the legal framework underpinning occupation, are being viewed as a key area for improvement.

One growing trend is the inclusion of so-called “green lease” clauses, provisions that encourage or require landlords and tenants to collaborate in improving a building’s environmental efficiency. While the aims are laudable, these clauses can have far-reaching legal and financial implications. Caution and clarity are essential.

What is a green lease?

A green lease isn’t a defined legal term but rather a commercial lease that incorporates clauses (commonly known as green clauses) promoting environmental performance. These can range from collaborative commitments to binding legal obligations, depending on how they’re drafted.

Benefits of green leases

Green leases can deliver real value to both landlords and tenants, including:

• Reduced operating costs – Lower energy use means lower bills, especially attractive to occupational tenants.
• ESG alignment – A clearer path to achieving corporate environmental, social and governance (ESG) goals.
• Asset future-proofing – Properties with higher environmental performance are more likely to retain value and comply with evolving regulation.

What do green clauses look like?

Green clauses vary depending on property type and use, but typically aim to reduce environmental impact. Broadly, they fall into two categories:

1. Non-binding commitments – Statements of intent that promote collaboration (e.g. pledges to reduce energy consumption or join environmental forums).
2. Legally binding obligations – Enforceable terms (e.g. requirements to use energy-efficient fixtures or provide energy consumption data).

Examples in Practice

• Energy data sharing – Tenants may be required to provide regular reports on utility usage. In such cases, tenants should consider confidentiality undertakings to protect commercially sensitive information.
• Fixture efficiency requirements – Some leases now require all new tenant-installed fixtures and fittings to meet top-tier energy efficiency standards. This could restrict tenant choice and increase maintenance costs, particularly where the landlord reserves the right to retain those items at lease end.
• Environmental forums – In multi-occupancy buildings, landlords may encourage or require tenants to participate in building-wide sustainability groups to foster shared responsibility and coordinated strategies.

While the aims of green leases are laudable, both landlords and tenants should be very clear about the practical and financial implications:

• Tenants should be wary of green clauses that transfer a disproportionate share of the cost or compliance burden, particularly where the benefits (e.g. capital improvements to the building) flow primarily to the landlord.
• Landlords should ensure that green clauses are commercially realistic and do not undermine lease negotiations or tenant appeal.

Conclusion

While green leases should be mutually beneficial, we are increasingly seeing clauses being used to gain a commercial edge under the banner of environmental responsibility.

Green leases represent a genuine opportunity to align environmental sustainability with commercial leasing but only when approached transparently and equitably.

Parties should seek legal advice early to ensure the lease strikes the right balance and avoids unintended cost or risk over the lease term.

If you’re a landlord looking to introduce green clauses, or a tenant negotiating new lease terms, please contact Charlotte White for a free introductory call.

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This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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