A major trend in ESG-driven real estate investment is the installation of electric vehicle charging points (EVCPs). The 2022 Building Regulations require at least one EVCP for the following developments: All new homes with associated parking spaces. All non-residential buildings undergoing major renovations with more than 10 parking spaces. All new non-residential buildings with 10 or more parking spaces. From 2025, existing non-residential buildings with 20 or more parking spaces.
Between July 2022 and October 2022, the UK saw an 8% increase in EVCP installations. As this trend accelerates, commercial landlords and tenants will have to catch up.
Following COP26 in 2021, photovoltaic (PV) technology has become widespread as a relatively cheap investment. Landlords typically install PV cells, maintain control of the equipment, and run maintenance costs through service fees. However, tenants can install and maintain solar if they lease the entire site.
PV cell installations raise questions such as who is responsible for upgrades and maintenance. And who should benefit from the profits from the sale of surplus energy? If the tenant decides to install the equipment, another point is what happens to the equipment at the end of the lease. Should the tenant remove the equipment, or if it works, would the landlord want to keep it?
A key challenge for landlords is deciding who will pay for environmental improvements. Tenants are reluctant to incur additional expenditure on premises and operations for short-term leases if there are more benefits in the future.
Similarly, landlords have no incentive to invest money in energy and water efficiency if their tenants are benefiting from lower energy rates. Monitoring compliance with the zero clause presents a difficult administrative problem.
Fred Lee is Senior Counsel at the law firm Farr & Co, and Monopoly Christiaan-Rakus is an Associate.