Climate clause

Sustainable and Circular Economy Principles in Leasing Arrangements for Repairs and Alterations

Aatmay's Clause

Sustainable and circular economy provisions for the repair, alteration, yielding up and decoration covenants in a lease, which encourage landlords and tenants to re-use goods and materials.

This is a net zero clause

This clause aligns with Paris Agreement goals, Race to Zero requirements and the Oxford Principles for Net Zero Aligned Carbon Offsetting. For tools and support to use this clause, use our toolkit or join one of our events.

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Why use this?

Aatmay’s Clause enables landlords and tenants to reduce unnecessary waste and purchase of new products (and the associated greenhouse gas emissions) by prompting them to follow circular economy principles in repair and alterations, prioritising the use of reclaimed, re-used or recycled goods or materials (and, where that is not possible, to use sustainable goods or materials).

How to use this clause

Aatmay’s Clause – Essential notes and guidance

Listen to S1E1 of TCLP’s Contracts for the Climate podcast about Aatmay’s Clause. For a discussion of what the clause does, skip to 09:23. For tips on how to negotiate this clause into a contract, go to 18:02.

Disclaimer - please read

The clauses on this website have been prepared in good faith on a pro bono basis and are free to download and use. The clauses have been drafted and edited by a variety of lawyers and, as such, the approaches to drafting may not conform to any particular drafting norms. We acknowledge this as a consequence of the collaborative drafting process.

The clauses on this website are provided on an ‘as is’ basis and without any representation or warranty as to accuracy or that the clauses will achieve the relevant climate goal or any other outcome.

This website do not comprise, constitute or provide personal, specific or individual recommendations or advice of any kind, and do not contain legal or financial advice. The clauses are precedents for legal professionals to use, amend and negotiate using their professional skill and judgement and at their own risk.

While care has been taken in the drafting of these clauses, neither The Chancery Lane Project nor any of its contributors owe a duty of care to any party in relation to their preparation and do not accept any liability for any errors or omissions, nor for any loss incurred by any person relying on or using these clauses or any other person. Users should use their own professional judgement in the application of these clauses to any particular circumstance or jurisdiction or seek independent legal advice.

At present, all the clauses are based on the laws of England and Wales. We encourage the conversion of these precedent clauses for use in other jurisdictions.

The clause

Additional Recitals

(A) The Landlord and Tenant [have signed up to the Race to Zero and] acknowledge their common intention to: 

(i) achieve their respective organisational net zero targets; and 

(ii) align with the objectives of the Paris Agreement (in particular pursuing efforts to limit global temperature increase to 1.5 degrees Celsius above pre-industrial levels and achieving net zero or net negative emissions by 2050 or sooner). 

(B) The Landlord and Tenant agree to pursue (A) in a manner that promotes a just transition to a low carbon economy and results in at least a 7%* reduction of greenhouse gas emissions year on year.

* [The ‘Carbon Law’; and  J. Rockström et al., A roadmap for rapid decarbonisation, Science 355.6331, 1269-1271 (2017).]

 

Additional Definitions

Adverse Climate Effect means an adverse effect on the climate, including but not limited to:

(a) an increase in GHG Emissions relating to the [Property][Premises];

(b) discarding stock that was created using Natural Capital without using it;

(c) wasting materials so that the Embedded Carbon of the [Premises] [Property][and/or Building] is increased; or     

(d) reduced Air Quality. 

Air Quality means the condition of air in and around the [Premises] [Property] [and/or Building], in particular the extent to which it is clean, clear and free from pollutants including smoke, industrial gases and dust. [Drafting note: See TCLP Glossary: Air Quality.]

Efficiency Objective means that, in relation to the occupation, operation and use of the [Property][Premises], the parties will work together to:

(a) maximise energy efficiency in the [Property][Premises];

(b) achieve the sustainability performance targets of the [Landlord’s][Tenant’s] sustainability linked loan;]

(c) reduce the GHG Emissions associated with the [Property][Premises] to help the parties achieve their Net Zero Targets;

(d) [Offset any Residual Emissions related to the[Property][Premises];]

(e) use sustainable materials and avoid the use of materials that increase the Embedded Carbon;

(f) reuse and recycle materials to ensure that they are salvaged or otherwise saved from landfill;

(g) adopt environmentally friendly working methods, including minimising energy use through plant and site services;

(h) protect and enhance existing ecological features on site;

(i) minimise air (dust and fumes) and noise pollution;

(j) minimise water use;

(k) use local suppliers; [and]

(l) promote green travel to and from the site (including walking, cycling or using public transport).

Efficiency Standard means that design, supply, construction, installation, commissioning and repair practices are carried out:

(a) responsibly, sustainably, ethically and in accordance with all applicable laws and good business practice;

[(b) using best endeavours to ensure that the materials and goods are sourced from manufacturers and suppliers located as close to the [Property][Premises] as reasonably practicable;] and

(c) in a manner which maximises the prospects of achieving the Efficiency Objective. 

Embedded Carbon means:

(a) In relation to building materials, the GHG Emissions that occur through their extraction, manufacture and transportation.

(b) In relation to the [Property][Premises], the GHG Emissions that occur when it is built, repaired, renovated, deconstructed and disposed of. 

Environmental Performance means all or any of the following in relation to the Premises][Property][and/or Building]]:

(a) energy consumption;

(b) water consumption and discharge;

(c) waste generation and management;

(d) generation and/or emission of Greenhouse Gases; and/or

(e) other adverse environmental impacts. [Drafting note: See TCLP Glossary: Adverse Climate Outcome.]

EPC Obligation means an EPC rating of [A or the highest rating achievable under any equivalent or successor rating system/ B].

GHG Emissions means emissions of GHGs from all sources, categorised as scope 1, 2 and 3 emissions by The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition 2015 as updated from time to time.

Greenhouse Gases (GHGs) means the gases that trap thermal radiation in the earth’s atmosphere. They are specified by the United Nations Framework Convention on Climate Change (UNFCCC) in Annex A to the Kyoto Protocol and may be updated periodically.

Materials means: 

(a) Reused Materials or Reclaimed Materials, but where these are not available or appropriate then;

(b) Sustainable Materials, but where these are not available or appropriate then; 

(c) Recycled Materials, but where these are not available or appropriate then; 

(d) Recyclable Materials, but where these are not available or appropriate then;

(e) materials or products.

Natural Capital means those elements of the natural environment which provide valuable goods and services to people, such as stock of forests, water, land, minerals and oceans. 

Net Zero Target means a target to reduce and remove GHG Emissions, including by offsetting Residual Emissions, to achieve a balance between the [Landlord] [and Tenant]’s sources and sinks of GHGs. The target must be achieved by [2050/ Insert earlier date] [and align with the goals of the Paris Agreement].

Offset means buying carbon credits from a project:

(a) that has been verified by [insert name of voluntary standard] or the UNFCCC clean development mechanism (CDM) [or successor UNFCCC mechanism]; [Drafting note: Article 6.4 of the Paris Agreement replaces the CDM by 2026. New rules implementing this were agreed at COP26. More detailed guidance will be released.]

(b) where the emissions of GHG avoided, reduced or removed by the project are additional;

(c) [that prioritises removing GHGs from the atmosphere rather than avoiding or reducing third party emissions of GHG;]* 

(d) that, for GHG removals, uses storage methods with a low risk of reversal over millennia; and

(e) that takes account of a just transition and addresses wider social and environmental goals. 

* [Drafting note: The Oxford Principles for Net Zero Aligned Carbon Offsetting 2020 state that “an immediate transition to 100% carbon removals is not necessary, nor is it currently feasible, but organisations must commit to gradually increase the percentage of carbon removal offsets they procure with a view to exclusively sourcing carbon removals by mid-century. Most offsets available today are emission reductions, which are necessary but not sufficient to maintain net zero in the long run. Carbon removals scrub carbon directly from the atmosphere. This counteracts ongoing emissions after net zero is achieved and creates the possibility of net removal for actors choosing to remove more carbon than they emit.”]

Reclaimed Materials means materials that have been removed from another building or site, which can be reused in the [Premises][Property][and/or Building] without substantial modification. 

Recyclable Materials means materials which can go through a recovery operation by which waste materials are reprocessed into products, materials or substances whether for the original or other purposes. [Drafting note: Definition has been partially taken from the Waste Framework Directive 2008.]

Recycled Materials means materials which, through a recovery operation, have been reprocessed into products, materials or substances whether for the original or other purposes. [Drafting note: Definition has been partially taken from the Waste Framework Directive 2008.]

Residual Emissions means the GHG Emissions that are emitted after all reasonable efforts have been made by the [Landlord] [and Tenant] to reduce GHG Emissions.

Reused Materials means materials, products or components that are not waste and are used again for the same purpose for which they were conceived. [Drafting note: Definition has been partially taken from the Waste Framework Directive 2008.]

Sustainable Materials means products or materials:

(a) which are extracted, produced and made in a way that minimises the Embedded Carbon;

(a) which are extracted, produced and made without depleting non-renewable resources and without disrupting the established steady-state equilibrium of the environment and key natural resource systems; and

(c) which are recyclable or reusable. 

Waste means spoil, waste, rubbish, debris, materials or goods or surplus materials generated by or used in undertaking the Works which are not incorporated into the Works at practical completion. [Drafting note: From Francis’ Clause (Climate Aligned Construction Waste Management).]

Waste Management Plan means [an up to date][the] site waste management plan [attached at Schedule [●] and] produced by the Tenant or the Contractor following consultation with the Landlord, which seeks to ensure materials are managed efficiently and to reduce Waste. [Drafting note: For examples, look to the Site Waste Management Plans Regulations 2008, which are now revoked.]

[Drafting note: Words with a capital letter which are not defined here are assumed to be defined elsewhere in the Lease/ Licence/ Agreement.]

 

LEASE 

Additional Clauses

1. Tenant and Landlord Covenants 

The Parties acknowledge that in complying with their obligations under this Lease, each will use [best/ [all] reasonable] endeavours to act at all times in a manner which maximises the prospect of achieving the Efficiency Objective.

2. Tenant Covenants – Repair

To keep the [Premises][Property] in good and substantial repair and condition and when necessary to replace and renew [any Landlord’s fixtures and fittings] with Materials of an equivalent quality [and value] [to the reasonable satisfaction of the Landlord].  

3. Tenant Covenants – Decoration 

To carry out all decoration in a proper and workmanlike manner using good quality Materials [to the reasonable satisfaction of the Landlord].  

4. Tenant Covenants – Yielding Up 

4.1 The Tenant shall not be required to reinstate any alterations carried out in accordance with clause [●] of this Lease where each of the following applies at the expiry or sooner determination of the Term:

4.1.1 any such reinstatement is not reasonably required by the Landlord having regard to the Landlord’s intention in respect of the use or re-letting of the [Premises][Property][and/or Building] and the Landlord has notified the Tenant to that effect [no later than [three] months] prior to the date of expiry or sooner determination of the Term; and 

4.1.2 any such reinstatement would [materially] adversely affect the [Environmental Performance] of the [Premises][Property][and/or Building] [and/or the EPC rating of the [Premises][Property][and/or Building]].

5. Services and Service Charge

In carrying out the Services, the Landlord shall use [best/ [all] reasonable] endeavours to use Materials of an equivalent quality [and value].  


LICENCE FOR ALTERATIONS  

Additional Recitals

(A) The Parties acknowledge that a priority for the design, carrying out and reinstatement of the Works is to ensure, as far as reasonably practicable, that the materials used in the Works can at the end of their life be:

(i) reused and/or recycled in whole or, where this is not possible, in part; and/or

(ii) salvaged or otherwise saved from landfill in whole or, where this is not possible, in part.

(B) The Parties acknowledge that in complying with their obligations under this Licence, each will use [best/ [all] reasonable] endeavours to act at all times in a manner which maximises the prospect of achieving the Efficiency Objective and minimises any Adverse Climate Effect.

 

Additional Clauses

1. Carrying out and Completing the Works

1.1 The Tenant must carry out and complete the Works (and ensure that the Works are carried out and completed):

1.1.1 using (to the extent reasonably practicable) good quality Materials that are fit for the purpose for which they will be used and to the reasonable satisfaction of the Landlord;

1.1.2 in accordance with a Waste Management Plan* and using [best/ [all] reasonable] endeavours to minimise Waste;

1.1.3 in accordance with Efficiency Standards to mitigate against any Adverse Climate Effect; and

1.1.4 at all times in a manner which maximises the prospect of achieving the Efficiency Objective on Practical Completion [and during the operating life] of the Works.**

* [See drafting note in ‘Notes for Users’ section of Aatmay’s Clause – Essential notes and guidance regarding Francis’ Clause (Climate Aligned Construction Waste Management).]

** [See drafting note in ‘Notes for Users’ section of Aatmay’s Clause – Essential notes and guidance regarding Estelle’s Clause (Climate Standard of Care (Construction)).]

1.2 For the purpose of assessing whether practical completion of the Works has been achieved, the [Employer/ Employer’s Agent/ Architect/ Contract Administrator] shall not issue any certificate to that effect until such time as the EPC Obligation has been met.

1.3 The failure of the Tenant to comply or procure compliance with the provisions of clause [1.1] will constitute a [substantial] breach of this Licence. [Drafting note: There should be a standard provision on forfeiture linking back to the lease in the licence. A breach of the licence terms is a breach of the lease covenants.]

2. Reinstatement 

2.1 The Tenant shall not be required to reinstate any alterations carried out in accordance with this Licence where each of the following apply at the expiry or sooner determination of the Term:

2.1.1 any such reinstatement is not reasonably required by the Landlord [not less than three months prior to the end of the Term having regard to the Landlord’s intention in respect of the use or re-letting of the [Premises][Property][and/or Building]]; and 

2.1.2 any such reinstatement would [materially] adversely affect the [Environmental Performance] of the [Premises][Property][and/or Building] [and/or the EPC rating of the [Premises][Property][and/or Building]].


AGREEMENT FOR LEASE (WITH DEVELOPMENT/ WORKS OBLIGATIONS) OR DEVELOPMENT AGREEMENT  

Additional Recitals

(A) The Parties acknowledge that a priority for the design, carrying out and reinstatement of the [Works][Development] is to ensure, as far as reasonably practicable, that Waste will be minimised and that the [Works][Development] can at the end of their life be:

(i) reused and/or recycled in whole or, where this is not possible, in part; and/or

(ii) salvaged or otherwise saved from landfill in whole or, where this is not possible, in part.

(B) The Parties acknowledge that in complying with their obligations under this Agreement, each will use [best/ all reasonable] endeavours to act at all times in a manner which maximises the prospect of achieving the Efficiency Objective and minimises any Adverse Climate Effect.


Additional Clause

1. [Landlord Works][Tenant Works][Development Obligations]

1.1 The [Landlord][Tenant][Developer] shall use [best OR [all] reasonable endeavours to procure that the [[Landlord’s][Tenant’s] Works are] [Development is] carried out:

1.1.1 using (to the extent reasonably practicable) good quality Materials that are fit for the purpose for which they will be used and to the reasonable satisfaction of the Landlord;

1.1.2 in accordance with a Waste Management Plan* and using [best/ all reasonable] endeavours to minimise Waste;

1.1.3 in accordance with Efficiency Standards to mitigate against any Adverse Climate Effect; and

1.1.4 at all times in a manner which maximises the prospect of achieving the Efficiency Objective on Practical Completion [and during the operating life] of the Works.**

* [See drafting note in ‘Notes for Users’ section of Aatmay’s Clause – Essential notes and guidance regarding Francis’ Clause (Climate Aligned Construction Waste Management).]

** [See drafting note in ‘Notes for Users’ section of Aatmay’s Clause – Essential notes and guidance regarding Estelle’s Clause (Climate Standard of Care (Construction)).]

 

[Schedule [●]: Waste Management Plan]

[Drafting note: Insert Schedule [​​●] if using, pursuant to the definition of Waste Management Plan.]

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