Difficulties in changing existing leases – one explanation of the “energy paradox”?

Abstract

Purpose

The purpose of this paper is to investigate if a green lease could eliminate the split incentive problem in two office buildings located in Stockholm, Sweden. It aims to provide a theoretical overview concerning the “energy paradox” and to describe a case study in which a green lease was to be implemented in the legal framework for two office buildings in the Stockholm region.

Design/methodology/approach

This paper documents a case study, in which a green lease was to be implemented in the legal framework for two office buildings, to promote a more active engagement in the buildings energy performance. In order to accomplish this, a project group was formed which consisted of representatives from the building owners, tenant, property manager, energy consultants and KTH, Royal Institute of Technology, Stockholm.

Findings

This paper reveals that it is very hard to alter already legally binding agreements. Furthermore, it shows that the separation of ownership and usage of a building may not be optimal from an energy efficiency point of view.

Originality/value

The paper gives an empirical explanation as to why at times energy efficiency measures are not undertaken, even though the investments themselves bring about a positive net present value. In addition, the paper analyses the situation where property maintenance is outsourced to a property management firm, which is a common but seldom discussed situation in the literature.

Citation

Bonde, M. (2012), "Difficulties in changing existing leases – one explanation of the “energy paradox”?", Journal of Corporate Real Estate, Vol. 14 No. 1, pp. 63-76. https://doi.org/10.1108/14630011211231446