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Climate concerns
At the end of last year, the UAE hosted COP28, which saw significant commitments aimed at combating climate change, including a commitment to accelerate the roll-out of electric charging infrastructure.
The Zero Emission Vehicle (ZEV) mandate, which came into force in January this year, sets out the percentage of new zero emission vehicles that manufacturers will be required to produce each year.
This requires 80% of new cars and 70% of new vans sold in Great Britain to be zero emission by 2030, increasing to 100% by 2035.
Such widespread take up and use of EVs across the UK’s transport network will require significant development of infrastructure.
Research suggests that by 2030, the UK is likely to need around 400,000 public charge points, including around 6,000 high powered charge points.
The UK’s increasing need for electric vehicle charging points (EVCPs) presents opportunities for landowners.
In this commercial property blog, we look at some of the advantages of leasing to EVCP operators, as well as practical considerations and drafting points to be considered.
Advantages
Landlords who provide amenities on their sites such as WiFi, food and drinks and toilet facilities may want to consider the benefits of establishing a public charging hub within their site.
Savills have reported that rents are currently tending to range between £2,000 to £4,000 per charger per year, with index linked uplifts, cap and collared at typically between 1 and 3%.
Other lease structures exist, with some EVCP operators offering a lower base rent of between £1,000 and £1,500 per year per charger (again, index-linked with a collar and cap) plus a 10 to 15% gross profit share.
Practical considerations
In terms of practical considerations, the first step is for the EVCP operator to consider whether the existing electricity supply is sufficient for the EV charging infrastructure requirements or whether additional infrastructure, such as an electricity substation, will be required.
The operator will also need to secure a point of connection. At the outset, the EV operator would need to contact the DNO to understand their requirements.
Under the planning acts the installation of EV charging points is considered ‘development’ and requires planning permission.
However, under general permitted development rights, planning permission is not required for the installation of wall mounted electrical outlets or upstanding EV charge points, provided that there is no Article 4 direction removing general permitted development rights. This should be checked.
Restrictive covenants, easements and third-party occupational interests may impact or prevent the proposed installation of chargers.
If the affected land is subject to a lease, then a licence or deed of variation may be needed to allow the operator access for the installation, connection, operation and maintenance of the EV chargers and, once the chargers have been installed, to reserve rights for third parties to use the chargers.
The landowner may need consents from existing utility providers to install the EV charging points’ associated cabling and other infrastructure, and if cabling needs to run through neighbouring land, an easement will be required.
Where the land is mortgaged, the consent of the lender will need to be obtained, and if the landlord’s interest is leasehold, consent will also be required from the superior landlord.
Landowners should also consider whether the installation of EV charge points will impact the buildings insurance policy or any other policies already in place, such as public and employer’s liability insurance.
Lease drafting points
We would generally expect to see lease terms of between 10 and 15 years, which is equal to the lifespan of the infrastructure.
Rent can be fixed or on a turnover rent structure.
If a turnover structure is agreed upon, the EVCP operator will pay a base rent per charging point with a top-up rent based on a percentage of net profit earned.
The base rent will usually be subject to annual RPI-linked increases.
EVCP operators are generally looking for leases within the Landlord and Tenant Act 1954 and landowners will naturally want the lease to be contracted out. This is a point for negotiation.
The lease would grant the operator rights to install, connect, operate and maintain the EV charging points.
The operator will be required to undertake general repair and maintenance work on the charging infrastructure.
It will also be required to ensure that the infrastructure is operating safely and in compliance with all regulatory requirements.
The parties should consider whether the operator will remove the charging infrastructure at the end of the term or whether the landlord could buy it so that it remains in place on lease expiry.
The operator may prefer to leave the charging infrastructure and any underground cabling in place as it may not be practical or cost-effective to remove it.
It is better to agree on a reinstatement programme before the lease is entered into so the parties know what is required on lease expiry.
The operator may require a right of exclusivity over the landlord’s property, which prevents the landlord from leasing any other parts of the property to other EVCP operators.
Alternatively, the operator may request a right of first refusal over any other parts of the property that the landlord intends to use for EV charging.
Leases will include restrictions on the landlord’s ability to redevelop.
Landowners will be keen to include a lift and shift clause, requiring the operator to relocate equipment where required.
The operator will want to ensure that it can recover its costs and is unlikely to agree to a lift and shift provision within, say, two or three years of installation without expecting to be reimbursed by the landlord for its capital expenditure.