France - Le “Bail vert”: un concept innovant et vaste

The 1st Grenelle roundtable law of 3 August 2009 mentions various objectives to be conveyed in the 2nd Grenelle roundtable law to be enacted this year. Two main principles are laid down in this law:

- new buildings for which the planning permit application file is lodged as from 1st January 2011, for public buildings and for buildings of the service industry, and as from 1st January 2012 for all other buildings, must have a primary energy consumption inferior to a threshold of 50 kwh per square metre and per annum;

- for existing buildings, an objective for the progressive reduction of consumption between 2012 and 2020 by at least 38% has been set with an effective obligation to perform works during this period for buildings of the service industry.

On account of the objectives set by the Grenelle Environment Round Table process, tenant/landlord relations must change. Thought will need to be given to the terms according to which responsibility will be assumed with respect to the works concerning the improvement of the building’s energy performance.

It is in this context that the concept of the “green lease” has come to light in France over recent months, in parallel to the same concept which already exists in Anglo-Saxon countries.

The “green lease” is a standard commercial lease including specific clauses designed to improve environmental performances of buildings.

The “green lease” has become a major concern for real estate professionals. Thus over recent months green leases have “sprouted”, containing environmental parameters in their schedules.

Due to the fact that there are currently no rules regarding this matter, the contents of green leases can be drafted freely. To this extent, there are several ways of integrating environmental considerations into a “green lease”. Thus, provision may be made for various clauses related to the reduction of the consumption of electricity, of domestic fuel and of water, to the reduction of greenhouse gas emissions, to waste minimisation and recycling, to the use of non-pollutant products or materials, to air quality, to the installation of sensing devices measuring energy performance of the various areas of consumption, to the adoption by the building occupants of environmentally friendly behaviour, to the setting up of an annual audit by a specialized agency in order to check whether all parties are in line with their commitments, to the maintaining of a certification or an environmental label.

The “green lease” can also make provision for obligations at the expense of the landlord in terms of improvement of the building or the determination of a system for the adjustment of service charge provisions penalizing those tenants who do not achieve the energy consumption objectives contemplated under the lease.

The only restriction on the parties’ contractual freedom is for the “green lease” to not contain any clauses which are contrary to the rules of public order under the mandatory regime governing commercial leases, such as in particular the tenant’s right to renewal or the triennial revision of rent. Any clause that should infringe a rule of public order under the mandatory regime governing commercial leases would be null and void.

To this extent, one should avoid transposing in an identical manner, without giving any prior thought to the matter, “green lease” templates as drafted by Anglo-Saxon lawyers in accordance with foreign rules which are strictly alien to the mandatory regime governing commercial leases.

This article has been published in the CMS Bureau Francis Lefebvre Real Estate newsletter/ Option Finance of March 2010.