by Thomas S. Onder, Esq. and Vincent J. Mangini, Esq.

In this newly invigorated economic climate, some landlords of commercial property may be reevaluating the potential long-term benefits of "greening" their space, like adding wind, solar, or bio-mass facilities and/or renovating or building new structures pursuant to protocols like the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Green Building Rating System. Since generous government incentives continue to abound, there is no time like the present for constructing renewable energy facilities and/or undertaking energy-efficient improvements on-site.

Issues to Consider in ‘Greening’ Commercial Space

In undertaking "green" improvements, care should be taken to anticipate and address both business and legal issues relative to the procurement of:

1.) financing;

2.) tax incentives;

3.) construction agreements; and

4.) leases with commercial tenants.

Financial Incentives to Green Commercial Space

The Board of Public Utilities (BPU) through its Office of Clean Energy offers a host of financial incentives through the New Jersey Clean Energy Program. Among these is the Pay for Performance Program, which is funded by the societal benefits charge authorized by the New Jersey Electric Discount and Energy Competition Act. Under this program, a qualifying utility customer may receive for the improvement of an existing building up to 50% of a facility’s annual energy cost (subject to a maximum of $50,000) to offset the cost an energy reduction plan and up to 50% of total project costs (subject to a maximum of $1 million per gas and electric account per building) provided that the implementation of the approved energy-efficient measures will achieve an energy savings of at least 15%.

In the realm of renewable energy, the BPU offers New Jersey utility customers who pay the societal benefits charge access to the renewable energy certificate market and rebates for the installation of renewable energy systems, such as wind and sustainable biomass facilities at existing buildings and in connection with new construction located in Smart Growth areas (i.e. Planning Areas 1 and 2 and designated centers).

Planning is Key to Ensuring Profitability with Tenants

It is important to have a solid "green" plan in place, before seeking tenants to fill spaces in a renovated or newly constructed facility. For example, a landlord may need to prepare and implement interior fit-out guidelines for incoming tenants to achieve and sustain energy efficiency goals and preserve building integrity. Guidelines, such as these, might specify that construction in tenant spaces shall conform to the LEED protocols, contain product and material specifications, or require that tenants employ a construction manager who is a LEED accredited professional.

To maximize your commercial "green" project, proper planning and counsel is essential. Whatever your legal and business "green" project issues are, Stark & Stark’s Real Estate, Zoning and Land Use group is well-situated to assist commercial landlords with going "green."

If you are interested in discussing the "green" improvements, contact either Thomas Onder (ICSC member) at tonder@stark-stark.com or Vincent Mangini (LEED Accredited Professional) vmangini@stark-stark.com. We would be happy to discuss the business and legal issues that may pertain to your project.

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