Warehouse Solar for Tenants

BBP Green Lease Toolkit and the standard addendum

The BBP Green Lease Toolkit is the de-facto industry standard for sustainability-related lease provisions. The Toolkit includes a standard solar PV addendum that addresses the key issues: tenant's right to install solar, landlord's consent process, treatment of EPC uplift, dilapidations, end-of-lease handling, insurance, access and reinstatement. The institutional landlord market accepts this standard form, which compresses negotiation timeline significantly.

We provide the BBP-aligned lease addendum template free with every desk feasibility, and run the consent process directly with the landlord on the tenant's behalf. For most institutional landlords, the addendum is signed within 4-8 weeks of submission. For owner-occupied or family-owned property, the timeline is shorter (1-4 weeks). For complex multi-let or mixed-use property, the timeline can extend to 8-12 weeks.

Capital allowance treatment for tenant solar

Tenant-installed solar qualifies for capital allowance treatment in the same way as owner-occupier solar. The 100% Annual Investment Allowance (AIA) applies to the first £1m of qualifying capex per company per tax year, providing 25% effective tax relief in year one for limited companies (at current corporation tax rate). Above £1m, the residual qualifying capex falls into the 50% First Year Allowance (FYA) for special-rate plant — subject to current legislation.

For a £900,000 solar PV install, the year-one tax shield is £225,000 (£900k × 25%). Net effective cost: £675,000. Year-one cash benefit from generation: typically £180,000+. Net cash payback: ~3.7 years. After-tax IRR: 22-25% over 25 years. Tax allowance treatment is fully accessible to tenants — there is no requirement for owner-occupier status.

For tenants within UK Freeport zones (Felixstowe & Harwich, Liverpool, Plymouth, Teesside, Solent, Thames, Humber, East Midlands), the 100% Enhanced Capital Allowance (ECA) is available on top of standard AIA — material additional uplift to project IRR.

PPA option for shorter leases

For tenants on shorter leases (under 7 years remaining) or where the landlord requires it, a third-party PPA structure shifts the lease risk to the PPA provider. The PPA provider funds, owns, and operates the system; the tenant signs a long-term offtake agreement (typically 20-25 years) at a tariff per kWh consumed, typically 30-50% below grid retail at signing with index-linked escalation that rises slower than grid retail.

Zero upfront capex. Tariff differential to grid retail provides immediate cash benefit from day one. Carbon abatement and customer audit benefits accrue to the tenant as offtaker. PPAs work best at scale (above 500 kW) and on buildings with stable long-term tenancy — below 500 kW the transaction cost of structuring the PPA outweighs the benefit.

PPA end-of-lease handling: standard PPA agreements include provisions for lease termination, including transfer of the offtake agreement to a successor tenant or removal of the system at PPA provider expense. We work with multiple PPA funders including specialist solar PPA providers and the major utility PPA arms.

End-of-lease and dilapidations

BBP addendum addresses end-of-lease treatment with three standard options: (a) tenant removes the system at expiry — typical for shorter leases; (b) tenant transfers ownership to landlord at agreed value — common where remaining asset life is significant; (c) PPA continues with successor tenant — applicable to PPA-funded systems. The right option depends on lease term remaining when solar was installed and the tenant's long-term plans.

Dilapidations: the BBP addendum specifies that the tenant is responsible for reinstatement to the original roof condition if option (a) is chosen, and that the landlord cannot require unreasonable reinstatement that would damage solar-PV-compatible roof improvements. We provide a 5-10 year-old system valuation if option (b) is chosen, working with both parties on the agreed value.