Green Lease is not a new topic. Green Leases have been around for quite a while. 

It’s safe to say, however, that there has been significant movement to implement green lease (ESG) standards into leases in Germany, especially with the new sustainable finance legislation from the EU starting to kick in. 

In March 2024, the German Property Foundation Zentraler Immobilienausschuss (ZIA) published Green Lease 2.0. Vom grünen Mietvertrag zum ESG Lease (Green Lease 2.0. From the green lease agreement to the ESG Lease) for commercial leases, possibly giving the implementation of the green (or ESG) lease clauses another push. 

Context and development 

There seems to be a common understanding in the Real Estate market that a green lease includes the body of the lease that includes more or less the same provisions as other leases, adding some green or sustainable clauses. A key feature seems to be that the tenant uses and the landlord manages the premises sustainably. 

Legislation on green leases

Similarly to other jurisdictions, in Germany statutory law does not cover much of the green lease content. Only a small amount of regulations refer to this area. 

For example, rules relevant to green leases can be found in these regulations: 

• Rules obliging the tenant to tolerate the landlord’s modernization measures and a three-month freeze on rent-reduction rights (see Sections 555b et. seq. and 536 para. 1a of the Bürgerliches Gesetzbuch (German Civil Code (BGB)) 
• Rules obliging the landlord to accept structural changes to the leased property for improved accessibility for persons with disabilities and the charging of electrically powered vehicles (see Section 554, BGB)
• Rules requiring the landlord to provide an energy performance certificate (EPC) to the tenant (see Sections 79 et. seq. of the Gebäudeenergiegesetz (German Building Energy Act (GEG)), which transposes Articles 11 et. seq. of the Energy Performance of Buildings Directive (EBPD) into German national law. 

Market standards, ZIA green leases in this context

Since there are no rules on how to write green leases, and considering that the interests of landlords and tenants can vary, the parties develop their own standards on a case-by-case basis. 
Sample clauses, however, have been developed—in several instances on the basis of multidisciplinary dialogues. For example: 

• 2012 – greenLease Projektgruppe
• 2015 – Green Lease Agreements – German Market toolkit
• 2018 – ZIA Green Lease (1.0) 
• 2023 – Green Leases book
• 2024 – ZIA Green Lease 2.0 

The ZIA Green Lease is popular in Germany among tenants and landlords using green/ESG leases. It was developed as the result of a multidisciplinary dialogue that included real estate companies, advisors and associations that are ZIA members.

ZIA first published the ZIA Green Lease (1.0) in 2018, taking from prior publications in the German market, but also including initiatives introduced in other countries, such as the BBP Green Lease Toolkit. The bundle of sample clauses included in this guide was built on similar modular concepts.

ZIA Green Lease 2.0 – What stays? What goes? What’s new? Where’s the shift?

Version 2.0 of the ZIA Green Lease was published in March 2024. 

Structure

Version 2.0 keeps a very similar structure. 

• 1.0 – used a modular form including a toolkit of clauses to choose from, the order divided into basic clauses and the supplementary clauses.
• 2.0 – kept the modular form and divided the toolkit into basic clauses and supplementary clauses, and only formally included a separate section for implementation / enforcement. Several clauses are basically the same.

Definition of a Green Lease 

The definition of the green lease also basically stays the same, with one difference:

• 1.0 – The definition builds of the tenant using, the landlord operating the space sustainably. In addition, it looks like the decision whether the lease is a green lease is binary – it’s only a green lease if it covers at least one provision (each) of the basic green lease provisions of the toolkit (cf. ZIA Green Lease 1.0, p. 11):

"A green lease therefore contains at least one provision for

• sustainable use and management of the lease object in ongoing operations, 
• Reduction of waste, consumption and emissions and 
• ecologically sound implementation of maintenance, modernization and other construction measures" 

• 2.0 – same definition, except for the requirement to include one clause of each section of the basic green lease provisions (no longer binary). 

Understanding of “sustainability”

As there is not one definition of sustainability or CSR or ESG, there are multiple definitions. We have to take a conceptual approach. A green lease has to include various goals and interests. The versions of the green lease reflect the development of the concept.  

• 1.0 – „Sustainability” builds on the internationally recognized 3-pillar model (ZIA Green Lease 1.0, p. 9):

“This defines sustainability as the concept of a sustainable development of the economic, ecological and social dimensions of human existence, which interact with each other and require balanced coordination in the long term, namely

(i) economic sustainability, which is based on the idea that a society should not live beyond its means economically, as this would inevitably lead to losses for future generations;
(ii) ecological sustainability, which is primarily based on the idea of not overexploiting nature and only using natural resources to the extent that they regenerate; and
(iii) social sustainability, according to which a society (in the case of green leases: a contractual relationship) should be organized in such a way that social tensions are kept within limits and conflicts can be resolved peacefully and civilly."

• 2.0 – intends to include a new set of rules, especially based on the EU Sustainable Finance regulations, most prominent the EU Taxonomy Regulation, the EU Disclosure Regulation and the EU Corporate Sustainability Reporting Directive (CSRD). This is reflected in the wording of the recommended clauses most prominently in the opening remarks / program clauses (ZIA Green Lease 2.0, Basic Clause 1.1, p. 25):

“It is therefore in particular the wish of the Parties to use resources and energy sparingly and economically in the management and use of the lease object, to avoid emissions and to work together constructively in order to also pursue innovative ways to make a [significant] contribution to achieving at least one of the environmental objectives set out in Art. 9 of Regulation EU 2020/852 ("Taxonomy Regulation"), not to significantly impair any of these objectives [within the meaning of Art. 17 Taxonomy Regulation] and at the same time to ensure the minimum protection set out in Art. 18 Taxonomy Regulation. In doing so, economic, ecological and social aspects should be taken into account (summarized as "sustainable use and management").”

Consumption and emissions; putting data first 

In line with the debate in the real estate industry and to reflect the need to reduce consumptions and emissions and be able to report on those savings  

• 1.0 – consumption and emissions (including exchange of data; promotion of sustainable energies; sustainable use and management in ongoing operations) was already part of the basic clauses of the ZIA Green Lease. 
• 2.0 – now consumption and emissions become more prominent in the document, still covering the same topics of (1) exchange of data; (2) promotion of sustainable energy; and (3) savings and reductions (energy / water / waste), with monitoring of energy savings based on EPC ratings.  
• 2.0 – includes a more extensive clause to provide data (see especially ZIA Green Lease 2.0, Basic Clause 2.1.1, p. 27).

Further sustainable use and management

Further provisions around sustainable use and management stay as part of the “Basic” green lease toolkit recommendations on requirements (1) for maintenance and construction measures (especially since circular economy principles and captured CO2 in construction have become more prominent); on (2) service charges requirements; (3) recommendations on cleaning and waste and targets for energy, reducing waste and water savings.

Additional clauses

The additional green lease clauses 2.0 still include clauses relating to rights and obligations for example relating to:

• Landlord’s energy modernization measures (ZIA Green Lease (1.0), Additional Clause I.5; p. 39; ZIA Green Lease 2.0, Additional Clause I.1.1–1.5, p. 39 et. seq.; see also measures to improve accessibility for persons with disabilities ZIA Green Lease 2.0, Additional Clause I.4.2, p. 44)
• For monitoring energy emissions, in the recast 2.0 including monitoring based on CRREM (ZIA Green Lease (1.0), Additional Clauses I.2–3; p. 37, 38 -> ZIA Green Lease 2.0, Additional Clause 2, p. 42)
• Building certification (within the meaning of LEED, BREEM, WELL, DGNB, etc., ZIA Green Lease (1.0), Additional Clauses II.1–3; p. 45; ZIA Green Lease 2.0, Additional Clauses II.1–3, p. 46 et. seq.)
• The dialogue between the parties including a reference to a contact person and sustainability committee / forum made way for just the sustainability dialogue (ZIA Green Lease (1.0), Basic Clause 1.7; p. 24; Additional Clause I.6; p. 43; ZIA Green Lease 2.0, Additional Clause I.3, p. 43)
• Mobility moved from part of the basic concept (ZIA Green Lease (1.0), Basic Clause 1.5) to a mere note after the additional clauses (ZIA Green Lease 2.0, III.1, p. 52).

Proposals for implementation / enforcement

Same as in other jurisdictions, there is a debate around the measure of commitment that the parties have to make relating to green lease provisions. Version 2.0 puts more weight on the discussion of enforcement of green leases by including this in a separate chapter. 

• 2.0 – In light of discussions in the market regarding “efforts” clauses (Bemühensklauseln), it made sense to include guidance and a definition of “efforts.” 
• 2.0 – Includes an example of a contract penalty and another for an incentive clause. 

Summary, proposals

There’s been a significant increase in the use of green leases, especially since the EU taxonomy regulation went live. In the real estate market there also seems to be an increase of users accepting (or even demanding) green lease clauses.

ZIA Green Lease 2.0 includes certain rather clever changes and can serve as a basic toolkit. It briefly refers to sustainable finance regulations and other changes in the law, which illustrates the accepted reference to the new regulatory landscape. It makes sense to stress the importance of consumption and emissions data and to add a reference to monitor emissions based on CRREM.

The ZIA Green Lease 2.0 toolkit is intended to serve as a basis for drafting green lease provisions, and in several instances, these provisions should be tweaked to serve the individual interests of the lease parties. For example, some companies might want to spell out clauses regarding mobility, given the significance of carbon emissions and the holistic view, which the regulator seems to lack in several events. Also, the clauses do not spell out the use of space for renewables. However, since we need a lot of movement from the legislators to simplify installation of renewables, in the ZIA Green Lease 2.0 toolkit, it is stated quite rightly that the process of implementing green leases has to be accompanied legally. 

We look forward to observing how the market reacts to the framework and to hear about the experience after using the clauses in the course of the next one to two years, for example whether EPC ratings will get the same importance as in other countries due to the requirements for minimum energy performance standards (MEPs) under the recast of the EPBD (for more information on the recast see Dentons – Proposed recast of the Energy Performance on Buildings Directive (EPBD) – what’s going on?).

Where Dentons can assist

Dentons can assist you on various aspects related to the topics covered, such as:

• Implementation of green (ESG) leases across various countries
• ESG and real estate investment
• Renewables and real estate 
• E-mobility
• Data protection