Commercial Solar Lease Agreement: A Landlord's Clause Checklist

A developer offers to fund solar on your roof. You get rent, your tenant gets cheaper power, and you carry no capital cost. The commercial case is often sound. What goes wrong is the paper: a roof lease runs for decades, and the clauses you accept on day one decide what you can do with your own building for the next twenty to thirty years.

This is a checklist for the landlord reading the first draft. It assumes the structure has already been chosen. If you are still deciding between a lease, a licence and a PPA, start with roof lease vs PPA vs licence, then come back here.

First, check what you are actually signing

A lease grants exclusive possession of a defined part of the building, usually the roof slab, the airspace and a cable route. A licence is permission only. Courts look at substance rather than the heading, so a document called a licence that gives exclusive possession for a long fixed term may be a lease in all but name, with the registration and tax consequences that follow. Read the operative wording, not the title.

The ten clauses

1. Term and break rights. Developer-funded roof leases commonly run 20 to 30 years. Check whether you have any break right, and whether the developer has one. A long term that outlasts your own hold period affects the sale value of the building, so involve whoever advises on exit.

2. Rent and how it is calculated. The rent may be nominal, fixed, or a base rent plus a share of generation revenue. If it is revenue-linked, ask how generation is measured, who can audit the figures and what happens if the array is switched off for maintenance.

3. Exclusive possession and the footprint. Pin down exactly what the developer occupies. A vague plan lets the footprint creep. Confirm that other roof uses, such as plant, telecoms or a future rooftop extension, are carved out.

4. Lender and insurer consent. A long lease is a third-party interest that ranks against the freehold your lender holds security over. It almost always needs the mortgagee’s consent, and often the insurer’s. Get both before exchange, not after.

5. Registration and SDLT. A lease of more than seven years is a registrable disposition at HM Land Registry. Stamp Duty Land Tax can arise on a premium or on rent above the thresholds, and on a long lease the net present value of the rent is the relevant figure. Take tax advice on the specific structure; the answer differs between a lease and a genuine licence.

6. Roof condition and re-roofing. Who warrants the roof is fit to carry the array, and who pays to take the system off if the roof needs replacing mid-term? Agree a process, a notice period and a cost split before the first panel goes up.

7. Export revenue and REGOs. Power the building does not use is usually exported, and that income normally accrues to the developer unless you negotiate otherwise. Renewable Energy Guarantees of Origin are a separate value stream that many providers keep by default. Ask for them or for a share.

8. Access, maintenance and disruption. The developer needs access for maintenance and repair. Limit it to reasonable hours and notice, require method statements for roof work, and make the developer liable for damage to the roof and to tenants’ premises.

9. Reversion, removal and dilapidations. At the end of the term, does the developer remove the system and make good, or does it transfer to you? Either can work. What does not work is silence. Ask for a removal bond or security if the developer is a special-purpose vehicle with few assets.

10. Assignment, step-in and change of control. Developers sell their portfolios. Confirm that you can approve or at least be notified of a new counterparty, and that if the developer fails you can step in or end the lease. Check what happens to the tenants’ power supply if the arrangement ends.

The PPA that usually travels with the lease

In most developer-funded deals the lease is bundled with a power purchase agreement under which the occupiers buy the on-site power at a discount to grid price. That contract affects your tenants directly, so read it as well. The mechanics of selling power to a tenant, including behind-the-meter and private-wire supply, are set out in our landlord-tenant PPA and private wire guide.

What to do before you sign

Have your solicitor mark up the draft against these ten points and get consents lined up in parallel. If the economics of owning the array yourself look better, the tax position changes: Annual Investment Allowance relief is available to an owner using the array in its own trade, but not for plant bought to lease to someone else, as explained in capital allowances on solar panels for owners and lessors.

Not sure which kind of lease you have been offered? Read solar panel lease vs roof lease.

Frequently asked questions

Is a solar roof lease the same as a solar panel lease?

No. A roof lease is a lease of part of your building to a developer. A solar panel lease usually means leasing the equipment to the person who uses the power. They are different contracts with different parties.

Do I need my mortgage lender’s consent?

Almost always, for a long roof lease, because it creates a third-party interest in the property your lender has security over. Check your facility terms early.

Who keeps the export income?

By default the developer, unless you negotiate a share. Ask about it and about REGOs before you agree the rent.

Can I model the alternatives for my building?

If you want to compare a roof lease against funding the array yourself for a specific building, send an enquiry and we reply by email.