The Lease War Has Begun
For 2024 and 2025, commercial landlords and tenants played a waiting game. Landlords hoped tenants would quietly pay "compliance costs." Tenants hoped the fines would never be collected. Brokers hoped the issue would resolve itself.
In 2026, the stalemate is over.
$268
Per ton fine
LL97 penalty
$804k
Annual fine
Large office tower
$200+
Class A PSF
Compliant buildings
"With this law in effect, scrutiny of data and due diligence are needed to understand how a building will perform before you enter into any [CRE] transaction. Emissions must be cut by 50% by 2030 and 75% by 2035, which is why it's coming to the forefront in leasing negotiations today."
The Core Question
Who pays? Landlords argue LL97 is a "law" requiring compliance, so costs are operating expenses. Tenants argue fines are "penalties" for owner-controlled inefficiency. The answer depends entirely on lease language.
The 5 Lease Clauses That Decide the Fight
Operating Expense
The Question: Does your lease explicitly include "environmental compliance" or "carbon costs"?
Pre-2019 leases rarely mention carbon. That ambiguity is now a battleground.
Compliance with Laws
The Question: Does the lease require tenants to pay for landlord's compliance?
Tenants argue this covers their operations, not base building capital.
Capital Expenditures
The Question: How are capital improvements amortized and passed through?
Tenants may accept amortized costs with reasonable payback periods.
Tax & Govt Charges
The Question: Are LL97 fines treated like taxes (landlord responsibility)?
Fines are generally not considered "taxes" in standard lease interpretation.
Penalty Exclusions
The Question: Does your lease exclude "fines" or "penalties" from pass-through?
This single clause can be worth millions.
The Landlord vs. Tenant Arguments
Landlord Position
- "LL97 is a law I must comply with to operate the building."
- "Compliance costs—including fines while we retrofit—are operating expenses."
- "We filed a Good Faith plan; fines are temporary."
- "Capital improvements benefit tenants through better buildings."
Tenant Position
- "A fine is a penalty for YOUR building's inefficiency."
- "We didn't design the boiler system. We won't pay your speeding ticket."
- "Show us you maintained the equipment before passing costs."
- "We'll pay for savings, not for neglect."
The party with the clearest, most specific lease language wins. But documentation matters too.
Real Proof: Umpqua Bank Protects Multiple Facilities
Organization: Umpqua Bank (regional bank with multiple branches)
Facilities: Banking locations with both heating and cooling needs
The Challenge
Banks operate on strict schedules with zero tolerance for equipment failure. Mineral scale was affecting hot water boilers and cooling towers across multiple branches.
The Solution
Umpqua Bank installed Vulcan mineral descaling technology across their facilities—targeting both boilers and cooling towers. For banking facilities, the Vulcan S25 or S50 provide ideal capacity.
The Results
- Boilers operating at design efficiency
- Cooling towers protected from scale buildup
- Reduced maintenance across multiple locations
- Documented efficiency improvements
Umpqua Bank — Boilers and cooling towers protected across multiple branches
The Documentation Advantage
In any lease dispute, documentation is power. Here's what Vulcan provides:
Installation Date
Proof of capital invested in equipment preservation—not just promises.
Pre-Installation Measurements
Documented baseline showing existing efficiency (or lack thereof).
Post-Installation Improvement
Verifiable 12-18% efficiency gain = proof of proactive maintenance.
Good Faith Exhibit A
When DOB or tenants ask "What did you do?", Vulcan is your answer.
Sample Lease Addendum Language
Consult with legal counsel before modifying lease language.
The ROI of Documentation
| Annual fine exposure (300,000 sq ft office, 500 MT excess) | $134,000 |
| 10-year lease exposure | $1.34 million |
| 12-18% efficiency gain from scale removal | $16,000 - $24,000 saved/year |
| Vulcan commercial model (typical installation) | Login for pricing |
| Estimated payback period | 3-12 months* |
Get Exact Pricing for Your Building
For precise pricing tailored to your building's specifications and mechanical systems:
- Existing customers: Log in to your account to view model-specific pricing
- New users: Create a free account to access detailed pricing and configuration options
- Need assistance? Contact our commercial team for a personalized assessment
Account registration takes less than 2 minutes.
* Savings and payback vary based on building size, water conditions, existing scale buildup, and actual equipment selection.
Selecting the Right Model
Different building sizes require different Vulcan models. Create an account to view detailed specifications and pricing.
| Application | Typical Equipment | Recommended Model | Pipe Size | Flow Rate |
|---|---|---|---|---|
| Small commercial | Boilers, DHW systems | Vulcan S10 | Up to 3" | 65 GPM |
| Mid-size commercial | Boilers, heat exchangers | Vulcan S25 | Up to 4" | 130 GPM |
| Large commercial | Cooling towers, central plants | Vulcan S50 or S100 | 5-6" | 300-530 GPM |
| Multi-building portfolio | Multiple systems | Mix of models | Varies | Portfolio assessment |
Three Possible Lease Outcomes
Clear Lease Language
Explicitly addresses carbon costs, fines, and capital improvements
Minimal dispute risk
Ambiguous Language
Outcome depends on documentation and negotiation leverage
Moderate to high dispute risk
Silent / Pre-2019 Lease
No mention of carbon or environmental compliance
Highest dispute risk; litigation likely
If you're in Category 2 or 3, documentation becomes your strongest negotiating tool.
Strengthening Your Position
- Review your lease. Identify which of the 5 clauses apply to your situation.
- Document your maintenance. Installation dates, efficiency measurements, improvement records.
- Calculate your LL97 exposure. Know your numbers before negotiating.
- Consider lease amendments. Clear language benefits both parties.
- Bring proof to the table. Vulcan documentation shows proactive management.
- Create an account to access model specifications and technical documentation.
- Contact our commercial team for documentation templates and building assessments.
Strengthen Your Lease Position
Whether you're a landlord or tenant, documented efficiency improvements provide negotiating leverage.
About the Author
Waslix- Clearly Clean Water (Vulcan Mineral Descaler) provides non-chemical, maintenance-free scale prevention solutions that help commercial landlords and tenants document proactive equipment management for LL97 compliance and lease negotiations. Create an account to access detailed model specifications and pricing.
