Powerful Opportunity - Policy-driven increase in electric cars offers new opportunities for landlords

United Kingdom

We explore below some key points for landlords considering introducing EV points in new locations

The UK Government’s Clean Growth Strategy (published in October of last year) sets out proposals to reduce carbon emissions over the next decade. One of the main proposals is drastically reducing the number of petrol and diesel cars on UK roads by 2030, with sales of new petrol and diesel cars ceasing by 2040.  There are differing opinions on how feasible these objectives are, but it seems inevitable that the number of electric cars in the UK will continue to increase at pace over the coming years.  Infrastructure will need to keep up with rising new demand for electric vehicle charging (‘EV’)

Many petrol stations now have at least a few EV points and they are reasonably well represented at motorway service stations but with average charging times of 30 minutes for the newest electric cars (when using a rapid charging point), locations offering more opportunity for ‘dwell time’ are required.  With private installers/operators of charging points on the look-out for such locations, local authorities and other bodies with publicly accessible car parks are well placed to potentially benefit from the increasing number of electric cars. Leisure centres have already been identified as ideal locations where drivers can pass time while charging their cars – yes, drivers could charge them at home - but charging times are greatly increased if not using one of the rapid charging points.  Leasing a few spaces to EV providers could provide landlords with some extra income, as well as contributing to decarbonisation targets, and offering consumers more choice.

EV leases are a relatively new type of landlord/tenant arrangement, and their typical content continues to evolve.  But like all lease arrangements, it is best to agree heads of terms in advance of entering into ‘legals’ and below are some of the specific points that we suggest landlords may wish to factor in when considering leasing out EV space:

  1. Hours of Use – Operators are likely to want the rapid charging points to be accessible 24 hours a day but that may not be feasible for security or other reasons.  This should be discussed with a potential tenant upfront so they are clear on potential limitations to hours of use.
  2. Rent – Similar to other energy leases, operators are likely to offer a base rent with a top-up based on income.  Levels of rent and timing of top-up payments (and evidence to support the payments made) should be agreed in advance.
  3. Lease Term – Upfront costs are likely to be significant for the operator so we expect they will be looking for terms of 10 years and upwards.  Landlords could consider attempting to build in a break option at some point if turnover top-ups do not reach a particular level.
  4. Lift and Shift -  Future development should be provided for by including rights to move the charging points to another location or part of the property where development is proposed – these rights are similar to those you would include in a letting to the operator of an advertising hoarding or telecoms company.
  5. Access – We have all been stuck in a petrol station queue at some point and that is a possibility with  EV points too.  Landlords should consider whether operators should be placed under any obligation to prevent queues obstructing other uses of the property. However, operators may not be keen to accept such responsibility.

EV has the potential to be a win-win for landlords and tenants, as well as providing more consumer choice and making a positive contribution to sustainability. As with all asset classes lease contracts which regulate EV arrangements need to be fit-for-purpose and flexible. This is achievable where there is an understanding of how EV leases tend to differ from more mainstream leases (such as shop units) and where the unique features of EV are factored in to lease content.