As the global drive towards sustainability continues apace, what legal considerations are arising for property developers and investors?
A key trend in ESG-led property investment is the installation of electric vehicle charging points (EVCPs). The 2022 Building Regulations require the following developments to have at least one EVCP: all new residential buildings with an associated parking space; all non-residential buildings undergoing a major renovation with more than 10 parking spaces; all new non-residential buildings with more than 10 parking spaces; and, from 2025, existing non-residential buildings with more than 20 parking spaces.
July 2022 to October 2022 saw an 8% increase in EVCP installation in the UK. As the trend accelerates, commercial landlords and tenants need to keep up.
Following COP26 in 2021, photovoltaic (PV) technology was popularised as a relatively inexpensive investment. Landlords normally install the PV cells, retaining control over the apparatus and running the maintenance costs through the service charge. However, tenants may install and maintain PV cells when they lease whole sites.
PV cell installation raises questions such as who is responsible for upgrades and maintenance; and who should benefit from profits from the sale of surplus energy? Where the tenant decides to install the equipment, another point is what happens to it at the end of the lease – should the tenant remove it or will the landlord want to retain it if it is still in good working order?
The key challenge for landlords is deciding who will bear the cost of environmental improvements. Tenants are reluctant to incur additional expenditure on their premises and operations for short-term leases when the benefits are further in the future.
Equally, landlords are not incentivised to invest money in energy and water efficiency when the tenant benefits from lower energy bills. In addition, landlords monitoring tenants’ compliance with net zero provisions both on and off site creates tricky management issues.
Fred Lee is senior counsel and Monopoly Christiaan-Rakus is associate at law firm Farrer & Co
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