Solar Panels on Leased Commercial Property: Landlords and Tenants

Solar on a building you rent: what you need from the landlord

• Written consent. Panels, fixings and cabling are alterations. Most commercial leases need the landlord's consent, often a formal licence to alter. Start with the alterations clause.
• Roof responsibility. Who repairs the roof, and who pays to take the panels off and put them back if it needs work.
• Lease length. If the lease ends before the system has paid back, the numbers don't work unless the panels can stay or be valued at the end. See commercial solar payback.
• What happens at the end. Remove and make good, or leave in place. Agree it now.
• Insurance. Both the building insurer and your own will want to know.

Bring the installer's layout and the roof findings from the survey to the landlord: it is much easier to agree a specific proposal. See commercial solar payback.

Solar on a building you let: the landlord's options

Green lease clauses

The Better Buildings Partnership's Green Lease Toolkit describes a green lease as a standard form lease with extra clauses for managing and improving the building's environmental performance, binding on both sides for the term, while warning that it doesn't make a building greener by itself (BBP). Its clause list includes the tenant's ability to make alterations that improve environmental performance or the EPC rating, EPCs, and renewable energy (BBP).

Its "green lease essentials" set out levels for renewable energy. At the most ambitious level the parties use renewable energy from on-site generation, or if that isn't practical or is too costly, a PPA, or failing that a high quality green tariff, and show evidence of the source (BBP). Putting on-site solar first in a lease is a way to make it the expected route rather than a favour to ask.

Selling solar power to tenants

A landlord who owns the panels and wants to sell the power to tenants is supplying electricity. That generally needs a supply licence or an exemption under the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001; GOV.UK advises taking legal advice if unsure (GOV.UK). Meters, billing and what happens when a tenant leaves need thought too. Get a solicitor involved before you promise tenants cheaper power.

Lease length, PPAs and roof leases

Solar Energy UK says PPAs usually run for 10 to 25 years (Solar Energy UK), so a tenant with a few years left is a poor fit unless the agreement can pass to the next occupier, and the landlord usually has to sign up too. See solar PPAs.

A landlord can also lease the roof space to a solar funder. In England and Wales, the grant of a lease of registered land for more than seven years has to be completed by registration at HM Land Registry (Land Registration Act 2002, s27). A roof lease should cover access, roof repairs and removal, insurance, and what happens when the building is sold or refinanced. Lenders on the building may need to consent.

MEES and EPC ratings

The minimum energy efficiency standard for non-domestic lettings in England and Wales (GOV.UK):

• The rule. Since 1 April 2023, landlords of privately rented non-domestic property covered by the Regulations need at least an EPC E rating, or a registered exemption, to keep letting it.
• Who it covers. Properties legally required to have an EPC, let on tenancies of more than 6 months and less than 99 years.
• Exemptions. Including the 7 year payback test, all improvements made, and third-party consent, for example where a tenant or superior landlord won't consent. Most last 5 years and don't pass to a buyer.

If solar is among the improvements recommended for your building, it is one way to lift the rating. Ask your EPC assessor what it would change before relying on it.