Lease of Land for an Electrical Vehicle Charging Station
Legal points to consider when granting a Lease of Land to be used as an Electrical Vehicle Charging Station.
The demand for electrical charging points in commercial properties will continue to increase over the coming years. Many providers will be looking to lease suitable sites to install their charging points, including spaces on existing car parks on shopping centres and trading estates.
There are many different organisations looking to enter this market, many of which you may not have heard of. Some of these players will be subsidiaries of established companies in the energy sector, but others will be new to the UK.
A Landlord will need to consider the covenant offered by the proposed tenant in this market, especially given the onerous obligations to secure necessary connections from the national grid and then to install the charging points on site. Thereafter, a Landlord will be concerned to ensure that the Tenant can meet the rents and comply with other duties such as reinstatement of the charging points at the end of the term. These types of leases are often granted for long term periods, due to the costs associated with installation.
As such, where the proposed tenant is a new formed entity, it would be prudent for a Landlord to request a parent company guarantee. Where the proposed Tenant is an established company, care must be taken by the Landlord to ensure that the Lease does not afford complete freedom for the Tenant to be able to assign to a subsidiary company, who may offer a weaker covenant going forward.
As part of the infrastructure for developing such sites, there may be the need for an for an Electricity Substation to be constructed on the land. This is in addition to a wayleave agreement between the Landlord and the grid provider, to support the installation of cabling from the highway to be linked to the charging points. A substation lease may be required to convert the electricity taken from the grid to the right voltage conversion. These leases are often granted on standard terms due to their nature and purpose and are often granted for much longer terms to the charging station lease itself. Your solicitor will advise you on the practical implications of this. A key point being that the Lease of the parcel of land supporting the charging points which generates the main income stream for you could potentially terminate before the end of the term of the substation lease.
The agreement between the Landlord and the Tenant will need to set out in clear terms that the Tenant should cover the costs of the Landlord for the legal work involved with any wayleave agreement and potential substation lease.
Turning to the Lease itself, your solicitor will guide you to vast range of issues, including:
- Where the stations are to be located and how use of them may impact any retained land. For example, will use of the stations cause access issues, do you want to place any restrictions on use in terms of parking /preventing obstructions to access points?
- The Rent structure. You may wish to consider incorporating a profit rent mechanism in addition to a fixed base rent. Whilst we are not qualified to advise on current rental values for such sites, your solicitor may be able to offer you their knowledge of rents achieved for other charging stations and guide you to consider matters such as including a turnover rent payment obligation. As an example, you may wish to include a 10% of the net profit that the Tenant earns from the charging stations and consider the review mechanism for the fixed rent.
- Service charges. For example, if the charging stations are to be located on a wider estate, do you want the Tenant to be contributing towards costs to repair the common parts of the estate such as the access roads leading to the charging stations? It is also prudent to ensure any new provisions line up with any existing service charge provisions contained within leases on the wider estate. It may also be prudent to vary existing leases although your solicitor can guide you on this point.
- Connections to existing estate roads may need to be considered and whether any alteration to existing common parts are permitted under terms of the wider estate leases who benefit from use of the same.
- The party responsible for the maintenance and repair of the charging points themselves and the site of which they are located should be determined. In most cases this will lie with the Tenant. However, the Tenant will press for the Landlord to take all preventative measures to ensure that there is no damage caused to the charging Points by other uses of the estate. The Landlord will need to check the impact of the charging points on its site insurance policy (and whether the Tenant’s third-party risk cover from time to time is sufficient).
- Planning and other consents. Will planning permission be required for installation? Under the general permitted development order, planning for certain charging types of charging points is not required. However, it will be prudent for your Tenant to ensure it has necessary consents in place and as a result they may require you to enter into an Agreement for Lease to provide them with surety that you will grant the Lease once planning is in place. Other consents may be necessary, where there is a superior landlord or mortgage involved.
- Do you propose to redevelop your site? Consideration should be given to ‘’lift and shift provisions’’ and your solicitor can advise you on this where required. Without such provisions the Tenant location will be certain for the duration of the lease term and possibly beyond.
Overall, a proposed transaction for a charging point lease involves a substantial number of issues which need to be considered. There are likely to be a several legal documents involved for each deal, ranging from an agreement for lease, the main lease, an agreement for alterations, a wayleave agreement/deed of grant and a substation lease. It is important to discuss all such requirements and costs that may be associated with the same with your solicitor.
For further information, please contact:
Adele Walker
Solicitor, Real Estate
adele.walker@brmlaw.co.uk
