Green Lease Explained: Clauses, MEES and Rooftop Solar on Let Buildings

What a green lease is, and what it is not

A green lease is an ordinary commercial lease with extra clauses about how the landlord and tenant manage and improve the building's environmental performance: its energy and water use, its waste, its emissions and its EPC rating. It is not a special kind of lease. The Better Buildings Partnership (BBP), a collaboration of leading commercial property owners whose Green Lease Toolkit is the usual UK starting point, describes it as a standard form lease with additional clauses, and those clauses bind both parties for the whole term because they are written into the lease. The BBP is also candid that a green lease does not, on its own, make a building perform any better. The clauses work only if both sides act on them.

Because the green terms are negotiated, the label covers everything from a promise to cooperate to a binding plan for works and costs. The BBP says it is not a formal standard-setting organisation, but it publishes ten Green Lease Essentials that it would expect any lease described as green to cover, and most of its model clauses come in light, medium and dark green versions so each side can choose how far to commit. RICS, the surveyors' professional body, adds two professional standards that shape how commercial leases and service charges are negotiated. This page explains how all of that works, with a focus on one practical question: what happens when someone wants to put solar panels on a let building. It is general information, not legal advice. A lease is a negotiated contract, so have a solicitor read yours before anyone signs it or drills into a roof.

The frameworks behind a green lease

The BBP Green Lease Toolkit

The toolkit was first launched in 2008, updated in 2013 and given a significant update in January 2024. Its drafting is structured around the Model Commercial Lease (MCL) framework, and although it started with multi-let offices, the BBP says the clauses can be used or adapted across a wide range of asset types. The ten Essentials are:

• Cooperation: a shared aim to improve the building's environmental performance and an agreement to work together on it.
• A building management or sustainability group: a forum to discuss data, targets and strategies.
• Sustainable use: neither side to run the building in a way that pushes energy or water use above reasonable levels.
• Data sharing and metering: regular exchange of energy, water and waste data, and the right to install meters or sub-meters.
• The landlord's right to do works: so that improvements are not blocked for the length of a lease.
• Tenant's alterations: a bar on works that harm environmental performance or the EPC, and a right to make works that improve them, with consent not to be unreasonably withheld.
• EPCs: control over who commissions an Energy Performance Certificate and how.
• Waste: less sent to landfill and more recycled.
• Reinstatement (yield up): the landlord to say which alterations need not be removed at the end, weighing the environmental cost of removal.
• Renewable energy: the procurement of renewable electricity, with the darkest version putting on-site generation first.

The shades matter for solar. A light green renewable energy clause only asks each party to buy a green tariff where one is available at commercially reasonable rates. The dark green version requires 100% renewable electricity sourced first from on-site generation, then from a power purchase agreement if that is impractical or cost-prohibitive, and only then from a high-quality green tariff. A lease with the dark green clause makes rooftop solar the first question rather than an afterthought. Cooperation clauses are deliberately softer: the BBP's drafting contains no legal obligation to implement whatever the parties discuss, so any works and their costs need a separate binding agreement.

The RICS leasing code and service charge standard

RICS's Code for leasing business premises covers business lettings in England and Wales, with exclusions that include agricultural lettings and lets of six months or less, and was reissued as a professional standard in September 2023. RICS members must follow its mandatory requirements, which include preparing heads of terms that cover a set list of items, and alterations is one of them. On green issues the code says leases of parts of multi-let buildings should encourage cooperation and the sharing of available data, that the parties should consider other green provisions using the BBP toolkit as the example, and that a lease should state which party is responsible for obtaining any EPC needed during the term. Its guidance notes are frank that green clauses usually aim at voluntary cooperation and do not compel either side to spend significant sums. Not all landlords follow the code, and a tenant should not assume one does unless the landlord confirms it.

The second standard, Service charges in commercial property, is in a second edition effective from 31 December 2025. It lists improvement costs above the cost of normal maintenance, repair or replacement among the costs a service charge should not include. An enhancement can go through the service charge only where it has been fully communicated to and agreed with tenants, supported by an analysis of the options and by a cost-benefit analysis over the term of the tenants' leases. The standard also warns that sustainability initiatives may count as improvements that are not recoverable, and that anything a landlord recovers must be allowed by the lease. For a landlord considering rooftop solar, this is the rule that decides whether any of the cost can be shared through the service charge at all.

The clauses that decide what happens on the roof

Most of a green lease concerns cooperation and data. For solar, a handful of clauses carry the weight. The table summarises what each typically covers in the BBP's drafting and why it matters.

Clause	What it usually does	Why it matters for solar
Rights and reservations	Defines what is let and what the landlord keeps	The BBP's renewable energy drafting note asks the parties to remove obstacles to on-site generation, particularly access to and rights over the roof and airspace
Tenant's alterations	Bars works that harm environmental performance; allows improving works with consent	The BBP's improvement right excludes structural alterations, so roof works can still fall under the ordinary alterations covenant
Landlord's right to do works	Lets the landlord carry out improvement works during the term	Decides whether the landlord can install on the roof and plant despite disruption to services
Renewable energy	Requires renewable electricity; the dark green version puts on-site generation first, then a PPA, then a high-quality green tariff	Makes rooftop solar an expectation where practical and not cost-prohibitive
Service charge	Sets which costs the landlord can recover from tenants	Decides whether solar costs can be recharged at all
Data sharing and metering	Shares consumption data; allows meters and sub-meters	Needed to allocate or bill generated power and to evidence savings
Rent review	Sets what is assumed and disregarded when the rent is reviewed	Decides whether the panels push the rent up
Yield up and reinstatement	Says which alterations must be removed at the end	Decides whether the panels come off at expiry and who pays

Three ways solar gets onto a let building

There are three routes: the landlord installs, the tenant installs, or a third-party provider takes rights over the roof. The green clauses, together with the ordinary lease terms, decide which route is open and on what terms.

1. The landlord installs

Where the roof is part of the building the landlord keeps, it can usually install on its own parts of the building. The BBP notes that a landlord is generally free to improve the common parts and building systems because the lease does not restrict what it does with its own parts of the building; the difficulty arises where the works would interrupt services the landlord has promised to provide, which the toolkit's landlord-works clause is drafted to deal with. The panels will normally be fixtures, and in law a fixture belongs to the freeholder of the land. That leaves three money questions.

• Who pays. Under RICS's standard, the cost is unlikely to be recoverable as an ordinary service charge item unless the lease allows it and the enhancement has been agreed with tenants on a cost-benefit basis. The BBP's view is that where works will cut a tenant's energy or other utility costs, it is reasonable for the tenant to contribute to the extent of its savings, and it suggests fixing a contribution, or a payback formula, at heads of terms stage. One model the toolkit cites, the Energy Aligned Clause developed for the City of New York, limits annual recovery from tenants to 80% of the predicted energy cost savings. Illustrative only: if a tenant's predicted saving were £5,000 a year, an 80% cap would limit that year's recharge to £4,000.
• Rent. The BBP's rent review principle is that the effect of a landlord's own improvements on open-market rent can be reflected at review, but review should not be used to rentalise the landlord's capital spending, and a tenant that pays for the works directly or through the service charge should not pay twice through a higher rent.
• Who gets the power. Power used in the common parts cuts the landlord's own bills. Selling it to tenants is different: supplying electricity to premises without a licence is an offence under section 4 of the Electricity Act 1989 unless an exemption applies. The class exemptions include small suppliers that supply only electricity they generate themselves, never more than 5 MW at a time, of which no more than 2.5 MW goes to domestic consumers. Which exemption fits a particular building, and how metering and billing will work, are questions for the landlord's advisers before any tenant is charged. Exported power can earn Smart Export Guarantee payments.

A landlord that pays for the panels and holds its interest in the building when they are fitted can be treated as their owner for capital allowances under section 176 of the Capital Allowances Act 2001, because a UK property business is a qualifying activity. If it would rather not fund the system, the dark green renewable energy clause points to a power purchase agreement as the next option, or it can bring in a third-party provider, covered below.

2. The tenant installs

A tenant that wants panels on the building it occupies is proposing alterations, so the alterations covenant governs. RICS guidance says leases of part of a building commonly prohibit structural and external alterations while allowing internal non-structural ones with some landlord control, and the RICS template heads of terms ask the parties to say, for external structural, external non-structural, internal structural and internal non-structural works, whether each is prohibited, needs consent not to be unreasonably withheld, or is permitted without consent. The BBP's model clause giving tenants a right to make improving alterations with consent excludes structural alterations, and tenant works under its renewable energy clause stay subject to the ordinary alterations provisions, so roof-mounted solar is likely to need specific consent even under a green lease.

Where the lease contains a covenant against making improvements without the landlord's licence or consent, section 19(2) of the Landlord and Tenant Act 1927 treats it as subject to a proviso that the consent "is not to be unreasonably withheld", whatever the lease says to the contrary. The landlord may still require, as conditions of consent, a reasonable sum for any damage to or diminution in the value of its premises, its legal and other expenses, and, for an improvement that does not add to the letting value of the holding, an undertaking to reinstate where that is reasonable. The Act extends to England and Wales only, and section 19 does not apply to agricultural holdings under the Agricultural Holdings Act 1986 or to farm business tenancies, a trap for tenants of farm buildings.

Part I of the same Act adds a formal route for premises used for a trade or business. The tenant serves notice of the proposed improvement with a specification and plan; if the landlord objects within three months, the tenant can apply to the court, which may certify it as a proper improvement, and an improvement that is certified or not objected to may be carried out despite anything in the lease. It is procedural, so take advice before relying on it. In practice tenant works are documented in a licence for alterations, and the BBP suggests the licence should also record whether the works must be removed at the end of the lease. A tenant's-eye view, including the questions to put to a landlord, is in the guide to whether a tenant can install solar panels.

For the tenant, the attraction is that it uses the power behind its own meter and, if it pays for the panels and holds its lease when they are fitted, it is the party treated as owner for capital allowances. The BBP's rent review principle also helps: works a tenant carries out voluntarily, at its own expense and in line with the lease, should be disregarded at review, which the BBP describes as the normal position in modern review clauses and in the MCL. Older leases can differ, so check the wording before installing.

3. A third party installs: roof leases and PPAs

The third route is for the landlord to grant a solar provider rights over the roof, usually a lease of the roof space. The provider funds, owns and maintains the system and sells the power to the occupier under a power purchase agreement, or exports it. The BBP flags PPAs as bespoke, sophisticated legal documents that need proper advice. A roof lease is a lease in its own right: where the landlord's title is registered, a lease granted for more than seven years must be completed by registration. The terms that matter, from rent to access and the end of the term, are covered in the guide to renting your roof to a solar provider.

A provider holding a lease of the roof has an interest in land, so it can be the party treated as owner for capital allowances, and an occupier that only buys the electricity has no capital expenditure to claim on. Where a funder instead leases the equipment to the occupier, the funder can be treated as owner only if lessor and lessee are not connected and jointly elect under section 177, and the lessee then cannot claim under section 176. If an equipment lease or operating lease is on the table, ask the funder whether it will need that election.

Who claims the capital allowances

Ownership in property law is the wrong test. HMRC's manual lists solar panels among items that will normally be fixtures and states that in law a fixture belongs to the freeholder, which on its own would shut tenants out. Part 2, Chapter 14 of the Capital Allowances Act 2001 replaces that test, and HMRC's summary is that actual ownership is irrelevant. Under section 176 a person is treated as owning a fixture if it incurs capital expenditure on the plant for a qualifying activity it carries on, such as a trade or a property business, the plant becomes a fixture, and it has an interest in the land at that moment. A lease, an easement and a licence to occupy land all count, although HMRC accepts a licence only if it is exclusive.

Situation	Who is treated as owner	Rule
Tenant pays and holds a lease when the panels are fitted	The tenant	s176
Landlord pays for panels on its own building	The landlord	s176
Landlord and tenant both pay towards the same system	Only the lowest interest, normally the tenant	s176(2) and (3)
Landlord contributes a capital sum to the tenant's cost	The tenant on the part it bears; the landlord may claim on its contribution if sections 537 and 538 are met	s532, s537
Landlord installs, then grants a new lease for a premium that covers the panels	The incoming tenant, if both parties elect within two years of the lease taking effect	s183
Funder leases the equipment to the occupier	The funder, but only with a joint election made in time	s177, s178
Provider holds a lease of the roof	The provider, through its own interest in the land	s175, s176
Tenant buys on hire purchase	Decided by the fixtures rules, not the hire purchase rules	HMRC CA23320
Lease ends	Tenant stops being treated as owner; landlord treated as owner from then	s188, s193
Lease renewed to the same tenant	The new lease counts as the same qualifying interest	s189(3)

When a tenant's lease expires, its disposal value for the panels is any capital sum it receives for them, such as compensation from the landlord, and otherwise nil. Whoever claims, solar panels are special-rate expenditure: the annual investment allowance gives 100% relief on up to £1 million of qualifying spending a year, and companies cannot claim full expensing on solar panels. What the relief is worth is set out on the capital allowances for solar panels page, and every landlord, lender and PPA scenario is in the guide to who claims capital allowances on solar panels.

MEES and EPCs: the rules now and the proposals

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 set the minimum energy efficiency standard (MEES) for rented property. For non-domestic property, a landlord must not let a sub-standard property unless an exemption applies, and since 1 April 2023 that has covered continuing an existing letting, not only granting a new one. In practice the minimum is EPC E: a property in scope with an EPC rating of F or G must be improved or have a registered exemption. The rules cover non-domestic properties that are legally required to have an EPC and are let for a term certain of between six months and 99 years, and they apply in England and Wales.

Solar can count towards compliance. For non-domestic property, a relevant energy efficiency improvement includes a measure on the list in the Green Deal (Qualifying Energy Improvements) Order 2012, which includes photovoltaics, provided a recommendation report, green deal report or surveyor's report has recommended it for the property. A landlord can register an exemption for a recommended measure that fails the seven-year payback test, which a measure fails where the expected savings on energy bills over seven years are less than the cost of repaying it.

Consent is where the green lease bites. A landlord that cannot obtain the consent of a tenant, superior landlord, mortgagee, freeholder or planning department to a relevant improvement can register a third-party consent exemption; where the tenant's consent was the problem, it lasts until that tenancy ends or is assigned. The BBP points out that if the lease gives the landlord an absolute right to carry out the works, the landlord cannot rely on a lack of tenant consent for that exemption, which is one reason landlord-side green drafting reserves rights to do improvement works.

On the future standard, older articles are out of date. On 18 June 2026 the government published an interim response to its 2019 and 2021 consultations. It proposes that from 2031 private rented buildings over 1,000 square metres in England and Wales reach EPC B where cost-effective, that buildings under 1,000 square metres stay subject to EPC E, and that the previously proposed EPC C milestone for 2027 will not be taken forward, with the payback test and exemptions kept. None of this is law yet: the changes take effect only after secondary legislation passes through Parliament. RICS adds two cost points: obtaining an EPC would not normally be a recoverable service charge cost, and later energy-efficiency costs might be a legitimate service charge item only subject to the lease and where tenants receive a proportionate cost benefit.

Business rates and export payments

In England, plant and machinery used to generate or store power from photovoltaics is excluded from rateable value for any day before 1 April 2035, under regulations in force since 1 April 2022. That matters to whichever party pays the rates on the property; the detail is on the business rates exemption for rooftop solar page.

Exported power can earn Smart Export Guarantee payments for installations in Great Britain of up to 5 MW. For solar PV up to 50 kW, the export supplier will ask for evidence that the installation and installer are certified, through MCS or an equivalent scheme, and the system needs an export meter and an export MPAN. The SEG contract also requires the generator to tell the supplier about a change in ownership or in the person entitled to payment, which belongs in the lease-end plan. More on Smart Export Guarantee payments.

Heads of terms checklist for solar in a green lease

The BBP recommends referring to green lease clauses in the heads of terms, so that both sides and their advisers consider them early, while keeping legal drafting out of the heads themselves. Where solar is on the table, settle these points before the solicitors start drafting:

1. Roof and rights. Is the roof let or retained? Which rights of access, cable routes and plant space go with it, and should any landlord reservations be relaxed?
2. Who installs. Landlord, tenant or third party, and whether the work is part of the landlord's or the tenant's initial works, with a long-stop date.
3. Alterations consent. Where solar sits in the alterations grid, and the conditions: drawings, structural survey, installer certification, insurance and making good.
4. Cost sharing. Any tenant contribution, fixed or set by a payback formula and capped by reference to savings, and whether any of it goes through the service charge.
5. Power and metering. Who uses the power, at what price, how it is metered and billed, and who holds the export MPAN and SEG contract.
6. Tax. Who is treated as owner for capital allowances, and any joint election under section 177 or section 183, with its deadline diarised.
7. Rent review. Whether the panels are disregarded or taken into account.
8. Repair, maintenance and insurance. Who maintains the system and the roof beneath it, who insures each, and who pays to lift and refit the panels for roof repairs.
9. EPC and data. Who commissions EPCs, and what generation and consumption data is shared.
10. Term and finance. Whether the lease term, any break dates and any loan, lease or PPA term line up, and whether a roof lease of more than seven years needs registering.
11. End of term. Whether the panels stay or go, who decides and by when, and any payment for them.
12. Disputes. How disagreements about savings, costs or works are resolved.

Lease first, then finance

The lease decides who can install; the funding route decides who keeps the savings and the tax relief. A landlord or tenant that owns the system keeps both; under a PPA or roof lease, the provider owns the system and claims the allowances, and the occupier pays for the power instead of the panels. Keep any loan, lease or PPA term inside the lease term and its break dates. Compare the routes on finance options compared and, once the lease position is clear, request a costed quote with the relevant lease clauses to hand. Because the statutes above apply in England and Wales, a business in Scotland or Northern Ireland should take local advice.