If you operate in the commercial property arena, references to green leases and green leasing are becoming ever more prevalent, down to the fact that according to the UK Green Building Council, 40% of the UK’s total greenhouse gas emissions come from the built environment.
Building operations are reported to be responsible for 28% of global greenhouse gas emissions, and building materials and construction contribute a further 11%. Nearly 39% of global emissions are therefore produced from buildings alone.
Over the last decade, there has been a concerted effort to reduce the environmental impact of the property and construction industries and a move towards green leasing.
What is a green lease?
This has nothing to do with the lease being printed on green paper or recycled paper but, in fact, refers to a lease that contains commitments on the part of the landlord and tenant regarding environmental factors.
How does a lease become a green lease?
There isn’t a specific type of lease or a set checklist that makes a lease green, but a lease will be considered green if it contains obligations on the part of the landlord and tenant that are intended to improve the sustainability of a building or to lessen its environmental impact.
Are there different types of green leases?
The answer is yes. It is now common in the market to see light green, medium green, or dark green leases. The difference is in relation to the commitments that landlords and tenants make and how onerous those obligations are.
What is a light green lease?
A light green lease is unlikely to have legally binding environmental obligations and is more akin to a memorandum of understanding. It will usually impose very limited commitments regarding the environment and improving energy efficiencies.
What is a medium green lease?
In a medium green lease, clauses would oblige the parties to pay attention to environmental or energy efficiency considerations. The obligations might be in a building policy or estate regulations. A medium green lease is likely to give one party a legal remedy if the other party breaches those obligations.
What is a dark green lease?
This is the most onerous form of lease and is likely to contain legally binding obligations and a significant level of commitment from the landlord or the tenant regarding a wide range of environmental issues.
What is a green lease clause?
This is a provision in a lease that specifically outlines obligations within the lease that relate to energy efficiency, sustainability, or the building.
Can you provide some examples of green clauses?
Examples are set out below. They could include:
- An obligation on the tenant to undertake repairs and alterations to equipment and to the building using sustainable materials;
- Obligation preventing the tenant from conducting any works that would negatively impact the property’s EPC rating;
- Giving the tenant a right to install charging facilities for electric vehicles;
- An obligation on the part of the landlord to have regard to good environmental practices in relation to managing and carrying out works on the building.
Where can I find examples of green leases or green lease clauses?
There is a Model Commercial Lease suite of documents that includes various templates. The clauses include a wide variety, with light, medium, and dark versions for many of them.
EPC Regulations and property lettings
There have been very few reported Tribunal decisions in relation to landlords being fined for letting properties in breach of the EPC Regulations, but recently, there have been a plethora of cases that have been reported. The EPC Regulations 2015 were enacted to improve the energy efficiency of certain private rented properties. Part 3 of those regulations governs the minimal level of energy efficiency and provides that subject to certain exemptions, a landlord of a domestic private rented property must not grant a tenancy after 1 April 2018 and must not continue to let after 1 April 2020, where the energy performance does not fall within or above band E.
Regulation 23(1) of the 2015 Regulations provides that a landlord of a substandard domestic PR property must not let the property on an assured tenancy for the purposes of the Housing Act 1988 unless certain exemptions apply.
Regulation 38(1) of the 2015 Regulations allows a local authority to serve a penalty notice on a person who is a landlord, in any case where it is satisfied that the person is or has been at any time in the previous 18 months, in breach of Regulation 23 or 37(4)(a).
A penalty notice can impose a financial penalty, a publication penalty or both of those penalties. A publication penalty means publishing information about the landlord’s breach of the PRS exemptions register for a year period.
Where a landlord has failed to comply with a compliance notice any financial penalty imposed for that breach may not exceed £2,000.
Under regulation 40, if a landlord has breached regulation 23 and has been in breach for three months or more at the time the notice is served, the penalties are a financial penalty not exceeding £4,000 and the publication penalty.
Where the landlord has been in breach for less than three months the penalties are a financial penalty not exceeding £2,000 and the publication penalty.
An appeal to the Tribunal can be made on the grounds that:
- The issue of the penalty notice was based on an error of fact;
- The issue of the penalty notice was based on an error of law;
- The penalty notice did not comply with the requirement imposed by the 2015 Regulations;
- In the circumstances of the case it was inappropriate for the penalty notice to be served.
The Tribunal has the power to quash a penalty notice or to confirm it whether in its original format or with such modifications as the Tribunal sees fit.
Examples of some recent cases involving penalty notices include:
Neveed -v- City of Bradford Metropolitan District Council UK NTT (2025)
Here, the building owner appealed a decision ordering him to pay £4,000 for a breach of regulation 23 of the EPC Regulations 2015.
The notice alleged that Mr Neveed had let a domestic property to a tenant from at least 2 June 2023 onwards and that the property had an EPC rating of F which fell below the required rating standard of E. The £4,000 maximum penalty was imposed as the property was let with a substandard rating for more than three months. He also faced a publication penalty for failing to comply with the regulations. His name and details of his breach were published on the PRS exemption register for 12 months. He was also required to carry out necessary work to make sure that the property complied with the 2015 regulations.
He argued that an individual living at the premises was carrying out the required work, but they had been inefficient, and he had subsequently evicted them from the property, which led to the delay. He also alleged he hadn’t received any notice or final notice that required him to obtain a higher EPC rating and that being away from the UK for two weeks in December had impacted his ability to resolve the issues. However, the Council provided a certificate of service from November 2023, and the Tribunal found that his absence from the UK was irrelevant in terms of mitigation.
The Court held that the notice had been validly served on Mr Neveed and that the maximum penalty imposed was reasonable and proportionate. He was found to be an experienced landlord who knew he needed to renovate the property and always tried to do as little as he could, as cheaply as possible.
Kenyon -v- London Borough of Islington (2025)
Here, the building owner appealed against the decision to pay £2,000 for breaching the regulations.
On 22 March 2016, an EPC rating the property as a G was issued. On 6 July 2016, the landlord let the property. On 1 April 2023, the regulations were amended so that non-domestic properties could not be let or continued to be let unless the EPC had an E rating or above.
On 28 July 2024, the property was assessed for an EPC and given a C rating. It became apparent that it had been let with an EPC grade G from 1 April 2023 to 27 July 2024, breaching the regulations. The landlord disagreed with the amount of the fine that was imposed.
The Court decided that the Council had followed the correct processes and that the approach was reasonable and proportionate in the circumstances.
Soor -v- Luton Borough Council
In May 2023, Mr Soor was issued with numerous penalty notices, which required him to pay revised penalty charges of £333.33 in respect of 19 lettings owned by him, totalling £6,336.50, because he had let substandard properties between 8 December 2022 and 15 March 2024 and had no valid EPC certificates.
He had been issued with a warning letter on 30 January 2023, a notice of an intention to issue a financial penalty on 13 February 2023, and then a financial penalty notice on 15 March 2023, equating to £500 per property and £9,500 in total. After considering matters such as financial and marital difficulties, the Council ordered Mr Soor to pay a reduced fine of £6,336.50. He argued that this was excessive given his circumstances and appealed.
The Court decided that the Council had properly served the penalty notice and set an appropriate amount and that the adjustment of £333 per property was actually generous.
This information is for guidance purposes only and does not constitute legal advice. We recommend you seek legal advice before acting on any information given.
