Low carbon buildings: a solution to landlord-tenant problems?

Date01 July 2014
Published date01 July 2014
AuthorRichard Greenough,Paolo Tosoratti
Subject MatterProperty management & built environment,Real estate & property,Property valuation & finance
Low carbon buildings: a solution
to landlord-tenant problems?
Richard Greenough
Institute of Energy and Sustainable Development,
De Montfort University, Leicester, UK, and
Paolo Tosoratti
DG Communications Networks, Content and Technology,
European Commission, Brussels, Belgium
Purpose – The purpose of this paper is to identify the factors present in successful energy efficiency
investments that might indicate how to resolve the landlord-tenant dilemma in existing and new
commercial property.
Design/methodology/approach – The paper reviews literature to indicate the importance of
energy efficiency in buildings and to explore the barriers to such investments, including problematic
landlord-tenant relationships. Such relationships have been investigated by the International Energy
Agency, and a similar approach is used here in two case studies in new and existing buildings. These
studies explore the nature of landlord-tenant relationships and the importance of policy and standards
of building performance.
Findings – In neither case did landlord-tenant issues constitute barriers to investments in energy
efficiency, however, these investments were made for other reasons than simple cost savings.
Construction of new commercial property to Passivhaus standards ensures a high-build quality and a
comfortable building with low-energy costs. The added value to tenants may justify the cost of
construction. The cost of investments in energy efficient buildings can also be justified by the
enhanced reputation of landlords which may be more valuable than a DEC rating. In neither case was
the commercial Green Deal felt to be an attractive funding mechanism.
Practical implications – Conclusions based on these case studies must be regarded as tentative, so
future studies of successful energy efficient buildings should be undertaken to explore the motivation
to invest, particularly the relative importance of indirect benefits of energy efficiency.
Originality/value – One ofthe case study buildings is exceptionallyenergyefficient and is the resultof
a particularlyopen and effectivecontractual relationship.Further study ofsuch cases may suggest a new
approach to landlord-tenant problems of energy efficiency, even in refurbishment of existing buildings.
Keywords Energy efficiency, Green Deal, Landlord-tenant, Passivhaus, Principal-agent
Paper type Research p aper
The ‘landlord-tenant dilemma’ refers to a situation where the contractual relationship
between the landlord and tenant results in energy outcomes that are unsatisfactory for
both. This paper describes the dilemma as one of many related barriers to investment
in energy efficient commercial properties and uses two case studies to explore ways in
which such barriers might be overcome.
Energy use and non-domestic buildings
Energy efficient buildings provide the most effective solution to high-energy costs and
climate change (Bird and Herna
`ndez, 2012). Investments in building renovation could
The current issue and full text archive of this journal is available at
Received September 2013
Accepted March 2014
Journal of Property Investment &
Vol.32 No. 4, 2014
pp. 415-423
rEmeraldGroup Publishing Limited
DOI 10.1108/JPIF-09-2013-0060
The authors gratefully acknowledge the help of Interserve Construction in prep aring this paper.
Low carbon

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