Green Clauses in Tenancy Agreements

In these times of pending climate catastrophe, it behoves us all to do what we can.  For some time I have been wondering if ‘green’ tenancy agreement clauses would help and if so what they could be.

So I was interested to hear from the Chancery Lane Project about some ‘green’ AST clauses (Toryn’s clauses) that had been drafted up and were available as model clauses.

The clauses did two things:

• Promise tenants a modest rebate for ‘green’ household management (eg using a green electricity supplier, using LED light bulbs, recycling and minimising water use), and
• Including a clause requiring tenants to grant their landlord access for ‘green’ improvements.

Or as The Chancery Lane Project put it:

Tenants are not incentivised to occupy their rental property in a sustainable way and landlords have no ability to install renewable energy solutions whilst the property is occupied by virtue of the protections afforded to tenants under ASTs.  …

By utilising the Green AST clauses, private landlords can incentivise their tenants to live more sustainably by offering them the “Green Rent Rebate”. The “Green Rent Rebate” encourages tenants to choose a renewable energy tariff at the start of the tenancy and maintain it for their period of occupation.

Further, by including the ability to re-enter their properties to investigate, and if possible, undertake the installation of renewable energy solutions, in their AST, private landlords have the option to invest in their properties – for the benefit of themselves (in terms of the properties long-term value, making the property more attractive to tenants, lowering turnover and reducing potential problems such as damp) and their tenant (who will have the opportunity to live in a more energy-efficient home which is cheaper to run, thus reducing the risk of fuel poverty) – rather than having to wait until the property is unoccupied to undertake such works at a time when they are not receiving rent.

Before doing anything I decided to seek some feedback from my Landlord Law members and over the summer I set up a Survey Monkey and asked them what they thought.  Note first though that

• All Chancery Lane clauses are subject to a disclaimer which you can read here by clicking the disclaimer box part way down the page, and
• The clause numbers would need to be adapted according to the agreement where they are used
• There are some user notes available here provided by the Chancery Lane project

Offering a green rent rebate for green occupation undertakings

The clause

1. Rent

1.1 Subject to clause 1.2, the Tenant shall pay rent at an initial rate of £[AMOUNT] per calendar month (Rent) in advance on or before the [DAY] day in each calendar month (Rent Payment Date) to the Landlord.

1.2 The Landlord hereby agrees to reduce the Rent by £[AMOUNT] per calendar month (Green Rent Rebate) in reliance on the following Tenant undertakings (Green Occupation Undertakings):

(a) to purchase electricity and, if available, gas from a renewable/green tariff[, install a smart meter and smart heating controls to monitor their energy use] and minimise energy use as far as possible (for example by turning appliances off standby mode);

(b) to replace existing LED light bulbs with new LED light bulbs as required from time to time;

(c) to recycle as much as possible and otherwise minimise household waste as far as possible;

(d) to minimise water use as far as possible [for example by installing water-efficient shower heads)].

1.3 The Landlord reserves the right to require the Tenant to provide reasonable evidence (for example, copies of recent utility bills) to demonstrate its compliance with the Green Occupation Undertakings.

1.4 If, in the Landlord’s reasonable opinion, it does not believe that the Tenant has been complying with the letter and/or spirit of the Green Occupation Undertakings, the Landlord may withdraw the Green Rent Rebate at its discretion. In this event, the Rent shall return to the amount stated in clause 1.1 with effect from the next Rent Payment Date

The notes say ‘the clauses are reliant on the landlord not artificially inflating the rent to offer a discount’.  However I know that many landlords have had to reduce their rent, sometimes substantially, to help tenants during the pandemic, so I suggested to my landlords that if this clause were used it could be in conjunction with a (genuine) rent increase.

The survey results

The first question was a general one

Q: As a general principle, do you like the idea of including ‘green’ clauses in your tenancy agreements?

The response was

• Yes – 33%
• No 42%
• Maybe – 25%

The next two questions were on the clause

Q: Would you be willing to give your tenants a discount  (it does not have to be a large discount) for complying with the ‘green occupation undertakings’ as set out in the rent clauses?

The response was

• Yes – 16%
• No – 50%
• Maybe – 34%

The main objection to the principle of this clause was the difficulty in enforcing it.  Here are some of the comments:

I think it’s a nice idea but I don’t think it’s possible to know for sure what the tenants decide to do ongoing. Having to keep checking that they haven’t changed energy supplier, or changed light bulbs back to non-energy efficient just isn’t practical and could cause awkwardness and bad feeling between landlord/agent and tenant.

I think it will cause a lot of awkward conversations and I don’t want to be big brother checking up on tenants. I think ultimately tenants I deal with want to do the right thing but cost savings are more important. If I’ve given them the discount and then find out they’ve changed energy supplier back to a non green company because it was cheaper, how can I say to them I’m going to increase their rent back to the previous level, when they’re telling me they need to save money. I have a great relationship with my tenants, and I feel that these clauses could jeopardise that.

Clause 1 is too complicated to administer and could lead to ill will. Most of my tenants are on low incomes and many work anti-social hours or do overtime to improve their earnings.They just want to rent without any additional hassle. Their utility bills tend to be quite low as we have installed energy saving measures or put them on economic tariffs which they can continue with if they wish. We also install low energy lighting before they move in.

In principle it sounds good but the monitoring is problematic and I can just see it leading to additional disputes. Also a large % of tenants (in my experience) do not have high standards of house pride so if they can’t keep the place clean for their own benefit, I can’t see them adopting “green standards” for everyone’s.

Wouldn’t work in hmo properties, they turn heating up and then open windows sadly. They are not responsible for bills, so don’t care. Plus you couldn’t establish who was being green and who not.

Currently I would not be keen to offer a discount, we have already given rent reductions and other things (payment dates) to our tenants due to covid, however I think this has some merit and would consider it further down the line but it would need to be something that can be proven and maintained.

The issue is one of implementation/checks. With student lets – these clauses don’t really apply. With family lets, particularly ones that are fairly trouble-free lets where we won’t be inspecting the house so regularly – how would we know if meters or light bulbs have been changed? Most of us will just probably end up giving the discount on the tenants’ word that they have done their bit to recycle, install efficient shower heads etc.

As a landlord I already put in LED lamps in every fitting, efficient heating/shower facilities, sufficient recycling bins but to go further to try and discount rent for tenants to not change out the stuff I’ve done… From my perspective as a clinician, I’m skeptical that a discount on rent encourages tenants to be green (change out lamps, minimise water use). Those who are conscious about saving energy just will. Those who aren’t will carry on doing what they do anyway. A small change in rent that’s not tied to effective checks will not result in changes in behaviour.

We have recycle and green bins already.

So basically that’s a ‘no’!  

Q; Are there any other undertakings you would like to see included in clause 1.2 – ie things tenants need to do as part of their ‘green occupation undertakings?

There was only one suggestion here which was

Less use of wet wipes and cooking fat. We regularly have to unblock drains full of it and on the odd occasion renew pipework within flats.

Which although very sensible is not particularly green related.

My thoughts

My view, on reflection, is that the landlords are right, this clause would be impossible to monitor properly and could cause bad feeling. 

It would probably be better to introduce energy-saving features in the property and to provide guidance (and even training) to tenants to help them use them and save money that way.  Or as one of my landlords said:

I totally get the drive to be green. Low carbon is one thing, but I think we need to also educate tenants about ensuring that the house is adequately heated/ventilated – as a balance. No point trying to save energy and being green while having a house where the extractor fan is switched off, or heating is turned down – only for there to be increased mould and condensation (which is the main problem we keep facing).

Let’s take a look at the second clause:

Including a clause providing for the landlord to have the right to enter to carry out ‘green’ improvements

The clause

2.1 Subject to clause 2.2, the Landlord reserves the right for the Landlord, or any person acting on behalf of the Landlord, to enter the Property on giving reasonable prior notice to the Tenant to investigate the possibility of installing renewable energy or energy efficiency solutions (for example installing a more efficient boiler, loft insulation, solar panels on the Property’s roof, a home battery or an electric vehicle charging point) and, if deemed suitable, undertake any such installations.

2.2 The Landlord, or any person acting on behalf of the Landlord, shall take reasonable steps to ensure that the Tenant’s right to quiet enjoyment of the Property is not unduly interrupted by, and make good any damage caused by, the investigations or the undertaking of the installations referred to in clause 2.1.

2.3 Subject to the Landlord’s compliance with clauses 2.1 and 2.2, the Tenant shall use its reasonable endeavours to co-operate with the Landlord to assist it with the investigations or the undertaking of the installations referred to in clause 2.1.

From a drafting point of view, I would like clause 2.1 to be amended:

• ‘on giving reasonable prior notice’ to be replaced with ‘after giving not less than 24 hours prior written notice to the Tenant ‘ and 
• the bit in brackets to be amended to ‘for example but not limited to …’

The survey results

Q; Do you think that the ‘landlords right to enter’ to carry out green improvements would in reality be helpful for you?

• Yes – 17%
• No – 75%
• Maybe – 8 %

The landlords who gave comments seemed to be more receptive to this clause, but the response was generally negative.  For example

I’ve never had a problem with my tenants, who have accepted “green” improvements I’ve done as being good for them and are appreciative.

Not applicable to date really. We have tended to do the improvements between lets, unless they are very minor e.g. changing lamps.

Two other comments made the point that the Landlord Law tenancy agreement already provides for access for improvements (true) and that if this clause were used as drafted it would give tenants an expectation that all the improvements mentioned were going to be carried out!

My thoughts

I think that when I next amend our Landlord Law agreement I may re-word the access clause to make it clearer that it covers’ green’ improvements.  As time goes by landlords are going to be required to do more and more ‘green’ improvements – as otherwise, we (i.e. the UK) will not be able to meet our climate /carbon commitments.  If the tenants are long term residents, landlords will inevitably need access to do the works.

However, I suspect that many tenants will be unwilling to permit this as they will suspect (probably quite rightly) that it will lead inevitably to a rent increase so the landlord can recoup his expenses.  Particularly where tenants are protected under the Rent Act 1977.  So access may well become a problem in many cases. 

No clause, however well-drafted, will entitle a landlord to enter a property and do works if the tenant objects.  Either the tenant allows access or the landlord must go to court.

If it becomes necessary for landlords to obtain an injunction in order to gain access – a tenancy agreement clause that specifically refers to green improvements (maybe without specifying what they are) may help the proceedings.  

And finally

Although these clauses are interesting as a talking point, I suspect few landlords if any will use them as drafted – apart from amending their existing access clause to provide for access to do green improvements.

But I (and no doubt, the Chancery Lane Project) would be very interested to hear YOUR comments!  

• If you are a landlord – would you be willing to give a modest discount to tenants in exchange for a ‘green occupation undertaking’?
• If you are a tenant – would a discount incentivise you to behave differently or would you do what you can do reduce your carbon anyway? And
• Would you be more willing to allow your landlord access for green improvements if this was more clearly set out in your tenancy agreement?
• Landlords and tenants both – do you have any other thoughts, suggestions?

You will find the comments section if you scroll down.  Note that comments close after 3 months.