The Green Deal Energy Efficiency Scheme was established by the Energy Act 2011, with the initiative of reducing energy consumption by encouraging commercial property owners to install energy saving measures in their properties.
Some commercial property owners have purchased solar panels for their property outright. In these cases the proprietors benefit from the electricity generated for free and they ‘sell’ the surplus energy to the national electricity suppliers. However the majority of proprietors have opted to avoid the initial expense of purchasing the solar panels and have instead entered into a Green Deal with the solar panel provider.
In this situation the panel provider retains ownership of the panels and takes a Lease (usually for 25 years) of the roof and airspace of the property. A 25 year Lease of a roof is in theory no different from leasing part of the garden of the commercial property. It may be less intrusive on a day-to-day basis but the legal commitment is of course no different.
1. Planning Permission
Panels should not be installed above the highest part of the roof (excluding the chimney) and should project no more than 200mm from the roof slope or wall surface. If the commercial property is a listed building or it is in a conservation area, consent may be more difficult to obtain due to concerns over the panel’s visibility and the impact they have on the visual appearance of the building.
2. Maintenance, Repair and Insurance
It needs to be made clear who is responsible for repairing, maintaining and insuring the solar panels in the Leases. The Lease should be drafted in such a way so that the Landlord and Tenant know who has such obligations.
The Microgeneration Certification Scheme (MCS) has become the standard installation on many installations outside the MCS are currently unacceptable to most mortgage lenders. Additionally, only MCS installations are eligible for FITs payments so the financial benefits for non-MCS installations are much lower.
The guidance requires that responsibilities for obtaining all necessary permissions and consents, and for dealing with matters such as insurance and maintenance, are clearly set out in the Leases. Importantly, from the lender perspective, there is also a requirement that a lender will have the right to break the Lease and have the panels removed if they are adversely affecting the sale of a property in the event of possession.
4. Building Regulations
Any solar panel installation would usually require building regulations approval.
5. Consent Of Other Parties
In the case of Leasehold commercial property there is likely to be a clause in the Lease requiring the Tenant to obtain the Landlord’s consent before making additions/alterations to the property. Where the demise includes the roof structure (usually in the case of a lease of the whole) the Tenant will have the right to carry out the installation subject to obtaining Landlord’s written consent.
By contrast, in a multi-let building the Landlord often retains control of the structure of the building and so in theory they could install panels on the roof without the need to obtaining the Tenant’s consent.
6. Restrictions On Title
It should be checked that the commercial property is not subject to restrictive covenants which prohibit making such alterations/installations. In such cases it may be necessary to obtain a deed of release from the covenant.
If there is a mortgage on the commercial property the lender may also have to consent to the installation of solar panels.
7. Selling – Duty To Disclose
The Green Deal does not operate like an overriding interest or some other matter that is affixed to the property to which the buyer or new tenant automatically takes subject. The seller/prospective landlord/licensor must ensure the buyer/tenant/licensee is made aware of the existence of the Green Deal on the commercial property.
At present the main way to ascertain whether a property is subject to a Green Deal or not is through the Energy Performance Certificate (EPC). If any works are carried out under a Green Deal a new Energy Performance Certificate needs to be carried out and provided.
Elizabeth McGlone, Neves
Covering Your Legal Bases When Installing Solar Panels On Commercial Property
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