Solar on a leased building — what to negotiate before you commit

Most UK SMEs don't own their building — they lease it. That doesn't rule out solar, but it changes the question from "do the numbers work?" to "do the numbers work given my lease?" Get the lease points wrong and a project with a healthy seven-year payback can become one you can't justify or aren't allowed to build.

Here's what to settle before you sign anything with an installer.

1. Lease length versus payback

This is the first filter. Commercial solar pays back in roughly seven to nine years and then delivers for another fifteen-plus (see our payback guide). If you fund the system yourself, you need enough lease left to capture that return.

A rough rule: if you're paying for the system, you want at least the payback period plus a few years remaining on the lease — realistically 10+ years, or a confident expectation of renewal. With only three or four years left and no security of tenure, self-funding rarely makes sense. The options then become a landlord-funded system or a Power Purchase Agreement (below).

2. Landlord consent — almost always required

Your lease will almost certainly treat solar panels as "alterations" or "additions" to the building, which means you need the landlord's written consent. Don't skip this: installing without consent can breach the lease and create problems at rent review or lease end.

The good news is landlords are increasingly willing, for a reason worth using in your pitch: solar improves the building's EPC rating, which helps the landlord meet Minimum Energy Efficiency Standards (MEES). A landlord who needs to keep the building lettable has a genuine incentive to say yes. Frame your request as improving their asset, not just your bills.

Get consent as a formal licence to alter, and make sure it covers the panels, the roof penetrations, cabling routes, and ongoing access for maintenance.

3. Who funds it, who benefits

Three structures, each with different lease implications:

• You fund and own it. Best returns, you keep all the savings and SEG income — but only viable with a long enough lease, and you'll need to agree what happens to the system at lease end (see reinstatement, below).
• The landlord funds it. They own the asset and recover the cost through a rent uplift or a share of savings. Lower risk and effort for you, lower reward. Worth proposing if your lease is short.
• A Power Purchase Agreement (PPA). A third party installs and owns the system on the roof and sells you the electricity at an agreed rate, usually below grid price. No upfront cost, no asset ownership, no capital allowances — but it works on a leased building because the PPA provider, you, and the landlord sign a tripartite arrangement. Common where capital is tight or the lease is short.

4. Reinstatement and dilapidations — settle it up front

Here's a trap. Many leases require the tenant to return the building to its original condition at the end of the term ("reinstatement"). Taken literally, that could mean removing the panels and making good the roof at your own cost when you leave — destroying part of your investment.

Negotiate this before you install. Ideally, get the landlord to agree in the licence to alter that the panels can stay (they're an improvement, after all), with no reinstatement obligation. If the landlord wants the option to require removal, understand that cost now and factor it into your payback.

5. Rent review

If your lease has rent reviews, clarify that your solar installation — a tenant's improvement — will be disregarded when the rent is reassessed. Standard practice is that tenant improvements are disregarded at review, but don't assume; get it confirmed in the consent documentation so your own investment doesn't inflate your rent.

6. Multi-let buildings and service charges

If you occupy part of a larger building, it's more complex: roof rights, who controls the roof, how generation is allocated, and service-charge interaction all come into play. It's still doable, but expect the landlord and possibly other tenants to be involved, and budget more time for the legal side.

What to negotiate before you sign

A short checklist to take into the landlord conversation:

1. Written consent (licence to alter) covering panels, fixings, cabling, and maintenance access.
2. No reinstatement obligation for the panels at lease end — or a known, costed removal option.
3. Rent-review disregard for the installation.
4. Ownership of the SEG export income clearly assigned to you (not the landlord).
5. Term certainty — enough lease remaining, or a renewal you're confident in, to clear the payback if you're self-funding.

The bottom line

Leasing doesn't stop you going solar — but the lease, not the roof, is where the project succeeds or fails. Sort consent, reinstatement, rent review, and the funding structure before you commit to an installer, and lead your landlord conversation with the EPC/MEES benefit to them. If the lease is too short to self-fund, a landlord-funded system or a PPA keeps the option open.

To check whether the underlying numbers justify the effort, run the calculator. For the financial reliefs that affect a self-funded system, see grants and funding. And for ongoing intel, subscribe to the Brief.

General information, not legal advice. Have your solicitor review the lease, the licence to alter, and any PPA before you sign.