It is important to understand the base building’s existing HVAC, thermal controls, and lighting systems, as these systems may not be under the tenant’s direct control and upgrades may be prohibitively expensive. Inefficient systems have higher operating costs, which are ultimately passed through to the tenant.  Split Incentives further discourage upgrades. If all tenant spaces have sub-metering in place, an individual tenant will have better control of energy consumption and expenses.

*See the Green Sheet Check-List for additional related considerations.

Split incentives are common barriers between commercial building owners and tenants that inhibit improvements to environmental performance. In a gross lease, for example, most commonly used for office spaces, the landlord pays for all services, including utilities, so the tenant has no motivation to limit energy consumption.  Another example of a split incentive is found in a triple net lease, common in the retail and industrial sectors. In these arrangements, the building owner is rarely motivated to pay for energy efficiency upgrades because the savings accrue to the tenant. Tenants have little incentive to install efficiency upgrades if the payback period is longer than the lease term.