With the UK aiming to achieve a reduction in carbon emissions to net zero by 2050 and a 68% reduction in emissions by 2030, an ever-greater emphasis has been placed on sustainability and green technologies in all sectors of the economy in recent years.
A key part of the government’s net-zero strategy is encouraging growth in sales of electric vehicles (EV) together with the development of the infrastructure underpinning them.
The trend of increasing EV sales is contributing to a higher demand for both public and private EV charging points, which had already doubled since the beginning of 2022. Recent research from Savills suggests that the UK will soon need around 1 million public EV charging points to keep up with anticipated demand, which is an ambitious figure bearing in mind that according to the same Savills report, there were just over 70,400 available public EV charging points in the UK at the end of September 2024. This illustrates that there is currently a significant opportunity for developers and landowners to potentially exploit.
Before deciding to enter into a lease of EV charging points, various considerations need to be taken into account, including the key terms of the lease.
What is an EV charging point lease?
An EV charging point lease is a lease between a landowner and a charge point operator (known as a CPO), granting the CPO the right to install and operate EV charging points on the land included within the lease. The CPO will usually be responsible for installing and later maintaining and managing EV charging points during the lease term and reinstating the land at the end of it.
What are the key considerations for landlords and tenants?
Below are some of the main points for the parties to bear in mind when agreeing heads of terms for an EV charging point lease and the terms of the lease itself:
1. Lease term
The length of term of an EV charging point lease will usually be linked to the expected lifespan of the charging equipment. Until relatively recently, most EV charging point leases were granted for terms of 10 to 15 years. However, advancements in technology have seen a shift to longer lease terms in the region of 25 years. The landlord should carefully consider whether the proposed term fits its future plans for the site. For example, if a redevelopment is likely, the landlord may wish to agree a shorter term, or alternatively negotiate a landlord redevelopment break clause or a lift and shift provision.
2. Property
The parties will need to agree what property is to be included in the lease, which will depend on the nature of the proposed development and each party’s specific needs. For example, the let property could be a car parking area within a larger service station or estate. Alternatively, it could comprise a row or rows of charging points, either self-standing or attached to a building, including the adjoining parking spaces.
3. Security of tenure
A tenancy created by an EV charging point lease would usually be a business tenancy with security of tenure under the Landlord and Tenant Act 1954 (the LTA 1954). If a lease is not excluded from the LTA 1954 security of tenure provisions, the tenant will be entitled to stay in occupation at the end of the term and request a new lease unless the landlord can successfully oppose renewal under one or more of the statutory grounds.
Whilst providing greater protection to the tenant, a protected lease may be problematic for a landlord who requires the land “back” at the end of the contractual term for its own use or any planned sale, or redevelopment.
It is also worth noting that EV charging point leases are not afforded any special status or protection, unlike telecoms leases under the Electronic Communications Code.
4. Rent
Various rent models may be used in EV charging point leases, for example:
- Fixed rent – an agreed annual sum per charging point or for the whole site is payable by the tenant. This is usually subject to an index-linked rent review, which could be annual or less frequent, for example, every three or five years. There may also be a periodic open market rent review to be carried out every five or 10 years.
- Rent calculated on a net profit basis – the tenant pays a certain percentage of its net profit to the landlord. The lease provisions setting out how the tenant’s profit is to be calculated will be complex and need to be carefully drafted. An alternative could be to charge a rent based on turnover or revenue generated from the site.
- A mixture of the above – the above two rent models could be combined, for example a fixed base rent of 80% of the open market rent with a profit rent top-up.
Both the landlord and the tenant should seek specialist advice from their surveyors to decide which rent model would be the most suitable for their specific commercial deal.
It is also important to consider when the rent will become payable. It could be payable from the date of completion, or alternatively the rent could commence when the EV charging points are connected to the electricity grid and become live, often defined as the “Energisation Date” in the lease. This is a matter for the parties to agree, but the landlord will prefer the first option and the tenant the second. A compromise might be to define the rent commencement date as the earlier of the Energisation Date or an agreed period after completion, such as nine months, to ensure that the tenant doesn’t deliberately delay the Energisation Date to postpone its obligation to pay rent.
5. Tenant’s repairing and reinstatement obligations
An EV charging point lease will almost certainly include the usual tenant’s full repairing obligation. The tenant will need to carefully consider the nature of this obligation and make sure that it can comply with it from a practical perspective. This may involve regularly inspecting the site to ensure compliance.To minimise the risk of future disputes, a schedule of condition could be attached to the lease.
The lease will also likely contain an obligation on the tenant to reinstate the property at the end of the term. The default position is to require the tenant to remove all of its equipment at the end of the lease, but this won’t always be the case.Whatever is agreed will need to be clearly set out in the lease. As the length of term will probably align with the lifespan of the equipment, the landlord is unlikely to want to be left with it at the end of the term.There may be an exclusion from the reinstatement obligation of any equipment or apparatus which has been adopted by statutory undertakers, given that the tenant may not legally be able to remove such equipment.
6. Assignment and underletting
Assignment and subletting are likely to be absolutely prohibited with a couple of exceptions.If a substation is required (which will depend on the electricity capacity available in the area), the tenant may be permitted to underlet part of the site for a substation to a Distribution Network Operator (DNO) on the DNO’s standard terms.See further discussion on this topic below.
If the tenant will be financing the project, there is likely to be an obligation on the landlord to enter into a “direct agreement” with the tenant and the tenant’s funder, on the funder’s standard terms.This agreement will allow the lender to take a charge over the leased premises and a right for the funder (or their nominee) to step into or take an assignment of the lease in certain circumstances.
7. Service charge
The landlord may wish to levy a service charge on the tenant, particularly where the property let is part of a wider estate and the tenant benefits from services provided by the landlord. For example, the landlord may seek a contribution from the tenant where the tenant and its customers benefit from lighting of the car park or maintenance of estate roads.
8. Lift and shift
EV charging point leases often contain provisions giving the landlord a right to request that the charging equipment is relocated to another part of the landlord’s property. In practice, this will require a surrender of the existing lease and the grant of a new lease of the alternative site, probably for the residue of the term of the existing lease, but this is a matter for negotiation. From the landlord’s perspective, this will be important if it wants to retain the ability to redevelop the land (or sell the land for redevelopment) in future. Moving the EV charging equipment will, however, be very costly. The lift and shift clause will almost certainly require the landlord to pay all of the tenant’s relocation costs, including its surveyor’s and legal costs for entering into a new lease.
Some other practical points to consider
Substations
Depending on the scope of the development and the electricity capacity of the area, a new substation may be required to provide additional electricity capacity for the EV charging points. If a substation is required, the parties will need to consider its location in conjunction with the DNO. The substation could either be located within the property let to the tenant or elsewhere on the landlord’s property. Where the substation is to be located within the property let to the tenant, the substation area will need to be the subject of a separate lease direct from the landlord (which may require a surrender of part first, if the EV charging point lease has already been entered into).
Substation leases are likely to be granted for a minimum term of 99 years, with a nominal or peppercorn rent, and with security of tenure under the LTA 1954. In some cases, the DNO may require transfer of the freehold. This could impact the landlord’s decision to go ahead with a proposed charging point lease, as it will be bound by the substation lease terms long after the charging point lease term expires. However, it may be possible to include a lift and shift clause, as discussed above. On the other hand, the landlord may view the increased electricity capacity which accompanies the new substation as a benefit to its property.
Wayleaves
Wayleave agreements may need to be entered into with the DNO where, for example, electricity cables are required to be installed for the charging points under the landlord’s or a third party’s land. Such agreements are typically between the landlord or other third party and the relevant DNO, with tenants sometimes also being parties to them.
Telecoms
The tenant will need a good internet connection given that most EV charging points operate via a mobile phone app.
Works compound
The tenant may require a right to construct and use a compound for storage of plant, equipment and materials in respect of the initial construction works. This right would typically be time limited by reference to the expected build period. There may be a similar right granted at the end of the term in respect of the tenant’s reinstatement works. Whether an additional rent should be charged for use of the works pound is a commercial point for the parties to agree.
Grid connection
The EV charging points will need to be connected to the electricity grid. The key questions to ask are: 1) is there a grid connection, 2) who is paying for it and 3) has it been arranged? With small connections, it is likely that the supplier will attend to the relevant paperwork. Larger connections will likely require a grid application (known as a G99), which will be personal to the applicant.
Is planning permission needed?
Under the current planning regime, installation of EV charging points is classed as “development”, which means it will either require planning permission or the exercise of permitted development rights. If planning permission is required, the parties will need to agree who will be preparing and submitting the planning application. If the tenant will be applying, it may require an agreement for lease conditional on the grant of a satisfactory planning permission, so it has certainty that the landlord will grant the EV charging lease if its application is successful.
The above is intended only as a general overview of the terms of leases of EV charging points and some planning and other considerations. If you have any questions on the above or require specific advice in this area, please contact our real estate team.
Jack Lightburn
Julija Kazlauskaite