Can Commercial Solar Panels Be Installed on Leased Buildings?

A Guide to Permissions and Lease Agreements

GE Solar Array

Commercial solar panel installations on building rooftops are increasingly common as businesses seek to reduce energy costs and improve their sustainability. But there is often a big question over whether tenants can install solar panels on buildings they do not own. The short answer is a resounding ‘yes’ if it is done with the property owner’s consent and under a properly structured lease agreement.

At Eden Sustainable, we’ve been helping clients install rooftop solar systems on tenanted properties for over ten years - so here’s our simplified breakdown of the necessary permissions and key lease considerations for a successful installation.

Landlord Permission

Installing solar panels on leased properties typically requires explicit permission from the building owner. While many landlords are open to the idea, especially as it enhances the property’s value and its environmental credentials, tenants should initiate discussions early.

Gaining landlord approval often involves demonstrating to the landlord the financial and environmental benefits of the installation. In some cases, landlords may also wish to participate financially or through a power purchase agreement (PPA).

The landlord’s consent will likely require the following documents:

• License to Alter: A license to alter grants tenants the permission to make modifications to the property. This license specifies the scope of alterations, including installation and maintenance needs and often requires the tenant to restore the property at the lease’s end. Tenants usually bear all associated costs and may need to meet specific structural and safety standards.

• License to Underlet: If a tenant plans to sublease space (potentially including access to the solar installation), landlord consent is typically required. The primary tenant remains responsible for compliance, and the sublease may have conditions on who maintains and uses the solar system.

The licences will also cover the following points:

• Ownership and Maintenance: Clearly define who owns the solar panels. Often, the tenant retains ownership if they are funding the installation, but the landlord may assume ownership at the lease's end.

• Maintenance and Access: Outlines responsibilities for maintenance, inspections, and repairs. The lease should also allow the tenant reasonable access to the roof or installation site.

• Insurance and Liability: Specifies which party is responsible for insuring the panels and who bears liability for potential damage or injury related to the installation.

• Termination and Removal: Clarifies what happens to the solar panels when the lease ends. Some agreements may require the tenant to remove the system, while others do not.

Consents and Regulatory Compliance

Both the tenant and landlord should ensure compliance with local regulations and permitting requirements.

Key consents for a rooftop solar installation on leased commercial buildings include:

• Planning Permission: Some rooftop installations qualify as permitted development (PD), but it’s essential to confirm this with local authorities, particularly for listed buildings or properties in conservation areas.

• Building Regulations Approval: Installations must comply with structural and fire safety standards, especially concerning the building’s load-bearing capacity and electrical system compatibility.

• Distribution Network Operator (DNO) Approval: Approval from the local DNO is necessary if the installation will connect to the grid. The DNO assesses the local grid’s capacity to handle additional power and approves or suggests modifications.

• Supply Licence Exemption: In the UK, rooftop solar installations may qualify for a supply licence exemption for on-site use or direct supply to a few neighbouring properties. However, this exemption does not apply if electricity is re-sold to building occupiers in a Lease/PPA setup. Eden has developed a unique solution to address this, enabling a fully funded solar system that supplies power directly to tenants.

Financial Agreements

Lease agreements for solar panels often include financial arrangements that allow both landlord and tenant to benefit from the system’s energy savings.

Two common approaches include:

• PPA: Under a PPA, the tenant purchases electricity generated by the solar panels at a fixed rate. This can provide significant energy cost savings without upfront investment. At Eden, we have been at the forefront of rooftop PPAs for over 10 years and we have our own £75m fund ready to deploy into new PPAs.

• Shared Savings Models: In cases where both landlord and tenant benefit, a shared savings model can allocate energy savings or export earnings from surplus power based on pre-agreed percentages.

Long-Term Considerations

When structuring the lease agreement, it’s vital to address long-term factors such as lease renewals, property sales, and potential impacts on property value. An agreement that considers these factors helps both parties manage the system effectively throughout its lifespan.

Here from our clients who are landlords

Conclusion

Installing solar panels on leased commercial buildings is feasible and beneficial with careful planning, landlord approval, and appropriate lease modifications. By addressing ownership, maintenance, compliance, and financial structures, businesses can leverage rooftop solar energy to meet their sustainability goals, reduce operational costs, and align with regulatory standards.

Whilst this may all seem pretty complicated, for experienced developers like Eden it’s a well-trodden path and we’re able to guide our clients (and their advisors) through the process in order to make it as pain-free as possible.

If you’re thinking about making the switch to a more sustainable energy future then contact us via our website and we’d love to help you unlock the benefits.

Take your step to a more sustainable future

Eden Sustainable was founded in 2014 and has over a decade of experience building commercial solar solutions and maintaining a very high level of customer satisfaction.

Installing commercial solar panels is a smart investment for most UK businesses looking to reduce energy costs and improve sustainability. Eden’s team are on hand to design and build the perfect solar solution for your business and set you up for long term competitiveness by offering you the information and support you need to make an informed decision.

Contact us today to learn more about our solar services and how we can help you achieve your sustainability goals. Together, we can empower a more sustainable future.