Green leases: the green years of leasing

Legal practice and the ESG paradigm move hand in hand, and tend to generate legal expressions that reach the market before they reach the legislature. Although green leases are not classified as a new purpose of lease agreements, they can be defined as an end in themselves: a lease agreement that has gained environmental awareness.

The expression has become progressively familiar in the real estate market, especially in non-residential leasing, including offices, retail, logistics and other properties used for professional purposes. Although the Portuguese Civil Code and the New Urban Lease Regime define the architecture of the relationship between landlord and tenant, obligations and mechanisms related to energy efficiency, rational resource use, data collection, improvement works and the environmental performance of buildings remain scattered across separate pieces of Portuguese legislation.

Decree-Law No. 101-D/2020, in its current wording as amended by Decree-Law No. 11/2025, sets the requirements applicable to buildings for improving their energy performance and regulates the Building Energy Certification System, focusing on energy certification and building performance in the legal circuit of construction, sale and leasing. This means that leased property can no longer be legally understood only as a thing over which the tenant exercises a right of use. It also becomes an object of regulation according to its energy performance - and this is precisely where green leases find their place.

The contract as an instrument for allocating environmental risk

Legislation establishes objective requirements for buildings, but it does not, by itself, resolve all internal relationships between landlord and tenant:

• Who should bear the investment needed to improve energy performance?
• Who should ensure the maintenance of certain equipment?
• Who has access to consumption data?
• Who is obliged to allow works to be carried out?
• Who assumes the risk if a consumption reduction target is not met?
• And, perhaps most importantly, who keeps the economic benefit resulting from efficiency?

These are questions that legislation cannot necessarily answer in full, leaving the necessary response to the good faith, and willingness, of the parties. It is at the intersection of lease law, energy law and contract law that lease agreements take on another colour - green.

Through green leases it is possible, for example, to agree that the landlord will carry out certain interventions in the building envelope or central systems; maintain a certain class or level of performance; provide certain data; or allow audits or technical assessments. On the tenant side, obligations may be established regarding the rational use of heating, cooling, lighting and equipment systems, waste management, the adoption of energy-efficient equipment, or the periodic communication of consumption data. Between both parties, common obligations of cooperation, monitoring and continuous improvement may also exist.

The topic becomes even more significant when we consider that, in energy efficiency, incentives are often misaligned: the party investing in the property may not be the one who directly benefits from lower consumption. Consider two examples: a landlord bears the cost of works while the tenant benefits from a lower energy bill; in another case, the tenant bears certain operating costs while the structural investment needed to reduce them remains with the owner. Without suitable contractual discipline, energy efficiency can become an inefficient allocation of costs.

Portugal and the essentially contractual solution

The Portuguese case is particular not because energy regulation does not exist - it does, and it is increasingly extensive - but because environmental sustainability has not yet become an autonomous category in a way comparable to some other legal systems.

One exceptional example is the SCE regime: energy certification is mandatory in legally defined situations and must be reflected in the advertising of properties for sale or lease. However, the requirement for public rules on buildings is only a grain of sand when compared with the need to provide a structured set of private obligations between landlord and tenant intended to improve environmental performance during the life of the contract that binds them. If necessity sharpens ingenuity, it is here that contractual practice has been occupying a space that the Portuguese legislature has not yet specifically regulated.

On this subject, a brief international comparison is useful.

France: environmental concerns as an obligation, not merely a contractual option

France offers one of the most interesting examples of convergence between environmental law and lease law. Article L.125-9 of the Code de l'environnement establishes that leases, whether entered into or renewed, for premises exceeding 2,000 m² and intended for office or commercial use must include an annexe environnementale. Paragraph 2 of the same provision requires the landlord and tenant to exchange useful information on energy consumption and provides for the landlord's access to the leased premises to carry out works to improve energy performance.

In addition, other legal requirements demand information on equipment, energy and water consumption, and waste, as well as the periodic preparation of a review of the evolution of energy and environmental performance, including the definition of an improvement action programme. In other words, the green lease comes close here to a true mechanism for environmental governance of the property.

England and Wales: when energy efficiency can affect the ability to lease

Under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, non-residential properties covered by the regime are subject to a Minimum Energy Efficiency Standard (MEES). For example, since 2018, landlords, except in certain cases of exemption, have not been able to grant certain new leases of commercial properties with an EPC rating below E; since 1 April 2023, the requirement has generally extended to existing private commercial properties covered by the regime.

What is the legal consequence? Energy efficiency stops being merely an economically desirable quality of a property and can become a true regulatory condition for its exploitation for lease purposes.

The European horizon

Directive (EU) 2024/1275 of the European Parliament and of the Council of 24 April 2024 on the energy performance of buildings establishes a reinforced framework for improving energy performance and introduces, among other mechanisms, minimum energy performance standards for certain existing buildings, a trajectory towards a decarbonised building stock by 2050 and, indeed, new zero-emission buildings from 2030, with an earlier date for public buildings.

In the face of national legislators' inertia, in July 2026 the European Commission initiated infringement procedures against all 27 Member States for failure to fully transpose that Directive within the applicable deadline.

The question therefore stops being whether regulation of energy performance will affect the leasing market. The question becomes how much, and when.

The central question: what should a "green" contractual obligation be?

At this point, the discussion ceases to be environmental and inevitably becomes dogmatic, and perhaps even spiritual. A clause stating that the parties "will cooperate to promote sustainability" may serve as an almost impeccable political banner while being legally almost useless. In truth, no contract can live on principles alone.

However, the energy outcome of a property depends on a broad range of factors: the landlord may control the envelope and centralised systems, while the tenant largely conditions the actual use of the space. Weather conditions, occupancy levels, the activity carried out and the evolution of equipment may also influence the results achieved.

Accordingly, the definition of absolute targets should be considered with some care, so as to ensure that the obligations assumed by the parties remain proportionate to their respective degree of control and influence over the relevant factors. This is therefore a question that goes beyond the universe of green leases, since it involves the challenge, common in contract law, of converting economic, technical or performance objectives into legally suitable obligations that can be concretely assessed.

It will also be important to clarify the allocation of costs associated with efficiency measures, the methodology for calculating savings, the impact of changes in the use of the property, and the mechanisms for monitoring and reviewing the obligations assumed.

On the other hand, the consequences associated with any breach should be defined in a balanced way and may include, depending on the case, the adoption of corrective measures, the granting of a cure period, or other contractually appropriate mechanisms.

Comparative experience, particularly the practice developed in the United Kingdom, reveals precisely this concern with grading sustainability clauses, distinguishing between solutions of greater or lesser intensity and seeking to prevent insufficiently detailed environmental commitments from producing disproportionate contractual consequences.

Contractual sustainability should therefore not mean multiplying rigid obligations. It should mean a clear, realistic and balanced distribution of responsibilities, capable of transforming environmental objectives into legally useful and enforceable commitments.

A brief note on the role of data

Green leases are also making leasing progressively more dependent on data. Energy and water consumption, waste production, equipment performance and use of heating and cooling systems are elements that, although traditionally associated with technical matters, are increasingly relevant to the definition and monitoring of sustainability commitments. Information sharing makes it possible to measure performance, establish references and, where appropriate, define concrete targets.

In this context, it may be useful for the contract to establish simple rules on the relevant data, its frequency and form of sharing, as well as monitoring or audit mechanisms. The objective should not be to transform the lease into a complex monitoring system, but to ensure that the parties have the information needed to assess results and identify possible improvement measures.

Naturally, this sharing should be framed with due caution, particularly in relation to confidentiality, commercially sensitive information, access by third parties and, where applicable, personal data protection. More than creating complexity, the aim is to ensure that the information necessary to implement environmental commitments circulates in a predictable, proportionate and legally appropriate way.

Conclusion: how should Portugal act in the next generation of leases?

Comparative experience shows that sustainability can be integrated into the contractual relationship in different ways: through contractual autonomy, as happens to a large extent in Australia; through specific legal duties of information and cooperation, as in France; or through minimum energy performance requirements with an impact on the very possibility of leasing, as in the United Kingdom.

In Portugal, the matter is still mainly at the confluence of the general lease regime, energy legislation and private autonomy - but the evolution of European law, particularly regarding the energy performance of buildings, should progressively bring these areas closer together. Green leases therefore appear less as a new legal category than as a meeting point between different requirements that the law is already beginning to place on property and on its use.

In essence, we are still dealing with a lease agreement in its green years: what is changing is what that contract must regulate, not only the use of the property and payment of rent, but also consumption, performance, information, investment, and the allocation of the respective costs and benefits. By meeting new requirements under the tone of environmental and sustainability criteria, the content of the lease agreement can and should mature without having to change its nature. Perhaps, then, the future of green leases in Portugal depends more on robust contracts, mature contractual practice and a growing environmental awareness among society and economic agents than on the creation of an autonomous legal regime giving them a legal identity of their own, applied only out of fear of sanctions for non-compliance.