Factory Solar — Tenant vs Landlord Ownership Models (UK 2026)
Whether you tenant the factory or own it changes the solar economics. Tenants vs landlords face different decisions on capex, lease alignment, ownership transfer, and split-incentive resolution. This is the UK 2026 tenant-vs-landlord guide.
The split-incentive problem
In a typical tenant-occupied factory, the tenant pays the electricity bill but the landlord owns the building. Solar PV reduces electricity costs (tenant benefit) but lives in the building (landlord asset). Without alignment, neither party invests — this is the "split-incentive problem" that historically blocked commercial solar in tenant-occupied properties. The good news: 2026 has multiple proven solutions.
Solution 1 — Tenant install with landlord consent
If the tenant has 10+ years of lease remaining (or a strong renewal option), they can install solar themselves with landlord consent. Standard form: a "Licence to Install" appended to the lease, granting roof use rights and dilapidations carve-out. The tenant owns the system, claims AIA, and benefits from electricity savings. On lease end, the system is either removed (rare), transferred to landlord at depreciated value, or sold to incoming tenant.
Solution 2 — PPA with transfer-on-assignment clause
Best for tenants on shorter leases or with uncertain renewal. A third party owns and operates the system, the tenant buys the kWh under a 15–25 year PPA. Standard PPA contracts (BRE / Solar Energy UK template) include automatic transfer-on-assignment — if the tenant leaves, the PPA transfers to the next occupier under standard commercial property law.
Solution 3 — Landlord install, credit through service charge
Increasingly common in 2026. The landlord installs the system as a building improvement, then credits the kWh produced to the tenant via a reduced service charge. The landlord captures the long-term asset value; the tenant captures the short-term electricity savings. Particularly popular with major REITs (SEGRO, LondonMetric, Tritax) on multi-let logistics estates.
Solution 4 — Joint venture / shared ownership
Bespoke arrangements where a tenant and landlord co-fund the system, typically with the tenant putting up part of the capex and the landlord owning the underlying asset. Less common, more legally complex, but useful for sophisticated multi-tenant industrial estates.
What to ask before you install
Five lease and structural questions: (1) How many years of lease remain? (2) Is there a renewal option? (3) What does the lease say about external alterations? (4) Who is responsible for the roof condition? (5) Does the building have a Schedule of Condition or recent dilapidations report? Answers shape the install structure.
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