“Green” clauses in charities’ commercial leases
Charities need to be aware of “green clauses” in new leases and lease renewals, whether they are leasing retail, office or other commercial space and some of the legal issues and financial obligations that might arise. Also, how should a charity tenant respond if the landlord approaches them and requests to install solar panels on the roof?
In today’s world where we share a responsibility to achieve net zero and we increasingly understand the importance of sustainability and renewable energy sources, the idea of using solar panels to generate electricity is an attractive prospect for many charities occupying commercial property and their landlords. And for charities, a landlord may think reducing carbon footprints would be a particularly acceptable situation.
Whilst it is important to try and reduce carbon footprints, the question arises as to who has the right to install solar panels in relation to a commercial building. A landlord may think the right remains with them, but quite often on a letting of a whole building the airspace belongs to the tenant and therefore the landlord has no automatic right to install solar panels on the roof.
Breach of covenant
Further, even if the airspace was excluded from the tenant’s demise the works involved in the installation of solar panels would cause a disruption to the charity and would likely put the landlord in breach of the covenant for quiet enjoyment that is granted in leases. A landlord is therefore unlikely to be able to unilaterally go into a commercial building and install such solar panels. With respect to the tenant the lease will most likely prohibit external alterations and therefore the tenant will not be allowed to install any solar panels.
In order to combat these scenarios, in more recent leases, clauses are now being included which seek to permit entry by the landlord in order to carry out works which may improve the energy efficiency of their building. This should be met with caution in order to protect the charity’s occupation and use of the building without too much interference. Instead, if the landlord is adamant that it wants to include such rights in the lease then these should be qualified so that any works require the tenant’s approval.
Careful consideration of details
The way forward in relation to the installation of solar panels is clearly going to be one which requires both the agreement of the landlord and the tenant, and it will be important to give careful consideration to all the details. The logistics of how to install the equipment will need to be considered together with how the disruption to a charity’s operations can be minimised.
The manner in which the landlord carries out the works will need to be governed so that the landlord is obliged to carry out such works in a good and workmanlike manner and with due diligence. Careful consideration also needs to be given as to the maintenance obligations in relation to the solar panels and what happens if they are damaged or if they consequently damage the roof of a building. Hidden building defects can cause serious financial issues for a charity depending on the type of lease.
Carry out a building survey
Before occupation of any commercial property, the charity tenant should carry out a building survey to help it determine the present state of the building, the works which are likely to need carrying out at the end of the lease, and to provide an estimate of costs which can be factored into fundraising and properly accounted for on the charity’s risk register.
If any damage is caused to the tenant’s property during its occupation by the installation of maintenance of any solar panels (for example to the roof which may be demised to the tenant) then there must be an obligation on the landlord to make good any damage caused to the reasonable satisfaction of the tenant.
It is also worth considering whether or not the charity has the right to carry out the repairs to its premises if the landlord does not make good any such damage with a claim against the landlord for its costs in doing so. Finally in relation to repair obligations, a carve out should be sought which provides that the charity is not required to remedy any disrepair to its premises that result directly from the installation, maintenance, repair or removal of any solar panels.
Question of cost
Aside from the practicalities relating to any energy improvement works that the landlord wants to carry out there is also a question of cost. From a charity’s perspective it is important to review, in particular, the service charge provisions to see what costs the landlord can pass onto the tenant. This is especially important if a tenant has a short term lease as any improvement works will have little benefit for them and therefore the costs of such works being passed on to them should be resisted.
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