The commercial property landscape is evolving, with most leases now containing “green clauses” that encourage – or even require – landlords and tenants to adopt sustainable practices. For retailers, these green clauses present both opportunities and challenges.
Green clauses vary but often include:
- Data Sharing: Both parties agree to share environmental data, such as water and electricity usage.
- Alterations: Tenants cannot make changes that would reduce the Energy Performance Certificate (EPC) rating.
- Service Charges: Contributions towards energy efficiency improvements are factored into service charges.
Historically, these clauses were often symbolic and allowed retailers to tick the ESG (Environmental, Social, and Governance) box without major commitments. However, they now deliver tangible financial and operational benefits, including reduced operating costs, making them more than just a compliance requirement.
The Power of Collaboration
Green clauses are strengthening communication and fostering stronger partnerships between tenants and landlords. Instead of a landlord imposing sustainability measures, both parties work together to align on cost-effective improvements and achieve the sustainability goals outlined in the lease.
Regular discussions are driving real-world changes— such as installing energy-efficient lighting, upgrading heating systems, or improving waste management. This collaborative approach helps minimise business disruption and fairly distribute costs, turning green clauses from a potential friction point into a shared advantage.
Who Pays? Balancing the Costs and Benefits
One of the key considerations is who covers the cost of implementing green clauses.
If landlords have a legal duty to comply with sustainability regulations, tenants will want this reflected in the lease. If landlords incur additional costs, they often seek to recover them through service charges.
However, retailers are increasingly recognising the long-term savings from energy-efficient upgrades. By incorporating energy-efficient systems, such as LED lighting, smart thermostats, or using Environmental Protection Agency accredited appliances, tenants can achieve lower utility bills and maintenance costs. In turn, tenants are more willing to shoulder energy improvement costs through the service charge where there is an identifiable benefit to them.
Looking ahead: The next 5-10 years
Sustainability pressures will only increase. In England and Wales, Minimum Energy Efficiency Standards (MEES) currently require buildings to have an EPC rating of E, rising to C by 2027 and B by 2030.
While Northern Ireland has no equivalent legislation, many landlords and tenants are voluntarily adopting green clauses to cut costs and reduce environmental impact.
The future of leasing isn’t just about compliance—it’s about smart, cost-effective, and sustainable collaboration that benefits both retailers and landlords. As sustainability expectations rise, those who embrace green clauses strategically will be well-placed to thrive.
This piece was co-authored by associate, Emma McCammon and director, Tomás McLaughlin, of DWF's real estate team in Belfast and originally appeared on Retail NI's website.
As green clauses become a standard feature in commercial leases, understanding their implications is essential for landlords and tenants alike. Contact DWF’s real estate team today to navigate sustainable leasing strategies
