EV does it: lease drafting for charging points

Hollie Jordan-Wright rounds up the key leasehold considerations for electric vehicle charging. In June 2022, the Building Regulations etc (Amendment) (England) (No 2) Regulations 2021 introduced new requirements for installing electric vehicle charge points in new residential and non-residential buildings in England. The broad requirements are set out in the table below, although there are some exemptions which are outside the scope of this article. The changes give rise to important considerations for landlords when entering into a lease of premises within a building which is caught by the 2021 Regulations. Requirements for installing electric vehicle charge points New homes (including flats) Renovated residential New non-residential Renovated non-residential Those with associated parking facilities to have an EV charging point per dwelling Those with over 10 on-site parking spaces to have at least one charging point for each dwelling, and cable routes in all spaces without charging points Those with over 10 on-site parking spaces to have at least one charging point, and cable routes for one-fifth of available spaces Those with over 10 on-site parking spaces to have at least one charging point, and cable routes for one-fifth of available spaces Practical matters Landlords will need to give early consideration to a number of practical issues surrounding EV charging, including the initial cost of installation, plus maintenance, electricity usage and access rights. In terms of installation, a developer may decide to front the cost as part of the development costs, or it may opt to pay a management fee to a charging operator rather than funding the purchase of charging infrastructure outright. The primary consideration for a landlord (whether the original developer or assignee of the landlord’s interest) will be how the cost of electricity will be measured and recharged to its tenants. If charging points are connected to an individual tenant’s supply, then the cost of electricity can be paid through the tenant’s own account, but if the charging points are connected to a communal supply, then there may be a need for a third-party billing system. In addition, the recovery of management fees, repair and maintenance should also be considered. Residential long leases Most residential long leases will contain a covenant from the landlord to provide certain services, and a covenant from the tenant to contribute towards the cost of those services. The contribution will usually be a set percentage, or a reasonable proportion as calculated by the landlord’s surveyor. Most commonly, proportions are determined by the size of the dwelling or its maximum intended occupancy. Installation and maintenance of charging points is usually carried out by a third party. While the cost of initial installation will not usually be chargeable to the tenant, when drafting the form of lease for a development, a landlord will want to ensure that adequate provisions are included to allow it to recover the costs of electricity usage and repair and maintenance of charging points and cables from its tenants as well as any ongoing management fees payable to the charging operator. A landlord will also want protections for times when the charging points are out of service or periods during which a third party is undertaking repairs or maintenance. A failure to put in place a mechanism for charging on a third-party billing system could lead to disputes between landlords and tenants as to whether charges are being fairly apportioned according to use. What if a tenant doesn’t have an EV or use the charging point, but is required to pay towards the cost of electricity? Section 19 of the Landlord and Tenant Act 1985 requires service charges to be “reasonably incurred”. Although it is generally established that not all tenants are required to benefit from services to be liable to pay for them (eg the cost of lift repair and maintenance: Anchor Hanover Group v Cox [2023] UKUT 14 (LC); [2023] PLSCS 15) the cost of electricity usage could arguably be seen as different to the cost of repair and maintenance of infrastructure. The circumstances referred to above might lead to a tenant seeking to challenge its liability to pay those costs as a service charge under section 27A of the Landlord and Tenant Act 1985 on the basis that the costs were not reasonable and, if successful, could leave a landlord out of pocket. Another issue which could arise without a pay-as-you go system could be the use of the charging points by third parties, such as visitors to the block and contractors. Again, this could lead to a challenge by tenants as to their liability to pay where a landlord has not taken reasonable steps to control the use of the charging points. Non-residential leases For non-residential developments, similar considerations should be given. In addition, provision could be made in leases to reflect that the 2021 Regulations only require one fifth of spaces to have charging capacity. In multi-occupancy sites, landlords will want to ensure that each tenant has reasonable access to charging points and that points are not monopolised by some tenants to the exclusion of others, through such measures as a fair usage policy or restrictions on the time spent in a parking bay with a charge point. Although the statutory protections given to residential leaseholders do not apply to non-residential premises, service charge provisions in leases will often be based on a “fair and reasonable” proportion of the services. With commercial energy prices having increased significantly over the last three years, tenants are paying more attention to utility charges under their leases and will want to ensure that charges are reflective of the fair and reasonable provision. To this end, landlords will need express provisions so that those accessing the charging points are bearing the cost of usage. The key takeaway Considering how the charging points will be used and paid for before leases are granted could assist landlords in avoiding disputes in the future. It is therefore advisable for landlords to consider these issues early on in the development process, and incorporate necessary terms into the draft leases. Hollie Jordan-Wright is a senior associate at Howard Kennedy LLP Photo by Marek Studzinski/Unsplash