Publication Date: May 6, 2013
“When it comes to financing green initiatives, building owners and tenants often perceive the negotiation process as a zero-sum game of winners and losers, where one party pays while the other benefits. Traditional leasing agreements often create a condition known as “split incentives” between owner and tenant, in which capital improvements that yield energy savings result in one party paying for improvements while the other party receives the benefits of reduced utility costs. (Commonly, building owners pay for retrofits while tenants enjoy the decreased utility costs.) This phenomenon is a major barrier to improvements in the energy efficiency sector: according to a New York City Mayor’s Office survey of commercial property owners, over half of the respondents felt that this problem prohibited them from investing in energy saving retrofits [1]. Green leases – sometimes referred to as aligned leases, high performance leases, or energy efficient leases – are tools to address the asymmetries in the relationships between building owners and tenants to remove this barrier to going green.”
Consortium Member(s): The Pennsylvania State University
Project contact: CBEI