World Environment Day provides a timely reminder to consider how our workspaces and daily operations can support improved environmental performance in the built environment.
In the past few years, it has rapidly become market-standard for commercial leases to include some form of “green lease” clauses, whether of the “light green” flexible and non-binding variety, or more stringent and specific “dark green” provisions. A common theme, and of particular importance for institutional landlords with large portfolios, is the requirement for environmental performance data sharing.
The Model Commercial Office Lease provides for data sharing on a regular basis, both between landlords and tenants and with any third parties they believe need the data for reporting or advice. This is subject to a requirement to keep the shared data confidential, save that the parties can use the data for specified purposes. In brief, these purposes cover monitoring and improving performance, measuring against targets and for reporting purposes, subject in the case of reporting use to anonymising data collected. The drafting also allows the landlord to obtain consumption data directly from utility suppliers.
Collection of tenant data enables landlords to build a picture of environmental performance across multiple tenants and buildings within a portfolio. A variety of platform options for aggregating such data (for example from meters, including real time data) are available, which can be used to produce reports to assist with tracking against landlords’ sustainability targets. Landlords may also use data to input into the GRESB Assessments, by which data is scored to generate a benchmark for the industry.
Whilst there are clear benefits for landlords in collating data across their portfolios to better understand their own environmental performance and meet reporting requirements, the benefits for individual tenants are less immediately obvious. However, a collaborative approach can enable both parties to identify building inefficiencies, better informing landlord decisions on equipment upgrades which can lead to lower operating costs for tenants.
There are a variety of reasons why tenants may be reluctant to share data with landlords. The information may be commercially sensitive, potentially revealing details about business activity levels or performance against sustainability targets, and the tenant may wish to control how such information becomes public. Further, tenants may be wary that the data could be used by landlords to support increased rents on review by arguing that building efficiency enhances rental value, or to increase service charges to fund remedial works where energy usage is higher. Data sharing imposes an additional administrative burden on tenants, and they may lack sufficient internal resources to comply. There may be further concerns regarding liability for inaccurate data reporting.
Given data sharing is rapidly becoming a key requirement for some landlords and wholesale rejection of these clauses may not be an option, there are some practical queries tenants can raise to help alleviate the above concerns. Tenants could ask how the landlord will use and aggregate their data to ensure anonymity, with details of any external platforms the landlord is using to better understand how and on what terms data is shared and processed. To reduce administrative burden, it may be that the landlord can obtain information directly from metering equipment at the property or from suppliers. These points can be supported by lease drafting setting out clear restrictions on how data can be used and requiring anonymisation when uploading to third party platforms, together with clear parameters for reporting requirements and limitations on liability for inaccuracies. There may also be scope for a rent review disregard of the tenant’s environmental data shared with the landlord, albeit this would need to be carefully considered in the wider context of how building environmental performance could impact on rental value during the lease term.
What is clear is that data sharing requirements are here to stay, and will grow in relevance as platforms for data aggregation become more sophisticated. With thoughtful drafting, tenant concerns can be addressed, and a collaborative approach to both the initial data sharing and its subsequent use to inform building management decisions can deliver mutually beneficial sustainability outcomes for all parties.
