The split incentive, and why it can be solved
On most let commercial, industrial and agricultural property, the landlord owns the roof and structure while the occupier buys the electricity. If the landlord pays for solar, the tenant gets the saving; if the tenant pays, it is investing in a building it does not own and may leave. This is often called the split incentive, and it explains why many suitable let roofs remain bare.
It can be solved, but the answer depends on the building, the lease and the tenant's demand. A survey is a useful starting point because it gives both parties the same independent figures for generation, self-consumption and cost.
The main ownership models
| Model | Who pays | Who benefits | Main points to agree |
|---|---|---|---|
| Tenant installs with landlord consent | Tenant | Tenant saves on bills | Licence for alterations, reinstatement, insurance, lease end |
| Landlord installs and sells power to the tenant | Landlord | Landlord earns a return; tenant buys power below its grid rate | Supply agreement, price, metering, what happens if the unit is vacant |
| Landlord installs for common parts | Landlord | Common parts costs fall, often passed through the service charge | Service charge terms, transparency |
| Third party leases the roof | Investor or funder | Tenant buys cheaper power; landlord may receive roof rent | Roof lease terms, access, removal for repairs |
| Landlord and tenant share the cost | Both | Both, in agreed proportions | Clear allocation in the lease or a side agreement |
Landlord-supplied electricity
Where the landlord owns the system, it can sell the electricity to the occupier under a power supply agreement, similar to a power purchase agreement. The price is usually set below the tenant's grid unit rate so both sides gain. Selling electricity to occupiers is generally possible without a supply licence under the exemptions that exist for on-site supply, but the arrangement needs proper legal and metering advice.
TODO for the site owner: Have a solicitor or energy lawyer confirm the current licence exemption position and any Ofgem rules that apply when landlords sell solar electricity to tenants, before adding detail.
Rooftop leases
A third party, often a funder, can take a lease of the roof space, install the system and sell the power to the occupier. Roof leases are often long, frequently running for 20 years or more, so the landlord should check:
- Consent from any mortgage lender
- Rights of access for maintenance, and the landlord's right to have panels removed and reinstated for roof repairs
- Who insures the system and who is liable for roof damage
- What happens if the tenant leaves and there is no buyer for the power
- Removal and reinstatement at the end of the term
Lease length and payback
Simple payback for a well-matched commercial system can be around 5 years in our illustrative example, but panels last much longer, with performance warranties commonly 25 to 30 years. The payback page shows how the figures build up. A tenant with three years left on its lease is unlikely to fund a system that pays back in five. A tenant with fifteen years left may be happy to. Options include:
- Renewing or extending the lease at the same time as agreeing the installation
- Agreeing in advance that the landlord buys the system from the tenant at an agreed value at lease end
- The landlord funding the system and recovering its cost through a power price or rent adjustment
- Choosing a funder-owned model so neither party carries the capital risk
Green leases, MEES and EPCs
Green lease clauses commit landlord and tenant to cooperate on energy performance: sharing consumption data, allowing improvements such as solar, and agreeing how costs and benefits are shared. They can make solar much simpler to agree, both on new lettings and when leases are renewed.
In England and Wales, the Minimum Energy Efficiency Standards (MEES) restrict the letting of privately rented non-domestic property with a low EPC rating, currently below E unless an exemption applies. The government has signalled tighter standards for larger non-domestic buildings in future. Solar PV is one of the measures that can improve an EPC rating, alongside insulation, lighting and heating upgrades, so it can form part of a landlord's compliance plan.
TODO for the site owner: Verify the current MEES position for non-domestic property in England and Wales, including the 2026 interim government response on future EPC targets for larger buildings, and the separate position in Scotland and Northern Ireland, before publishing specific dates or ratings.
Multi-let sites and metering
On estates with several tenants, the electrical arrangement often decides what is possible:
- Each unit has its own supply: an array on one unit's roof can serve only that unit, unless a private wire is installed to another.
- One supply with sub-meters: the landlord buys electricity for the whole site and recharges tenants. Solar connected to the main supply benefits the whole site, and the recharge method needs updating to reflect it.
- Landlord common parts supply: solar serves lighting, lifts and shared plant, with savings flowing through the service charge.
The survey identifies each meter and supply on the site and recommends where an array can connect. Half-hourly data for each tenant, shared with their consent, makes the model much more accurate; our energy data analysis page explains what is needed.
Survey points specific to let buildings
- Roof life: if the roof covering is near the end of its life, it is normally better to replace it first. Removing and refitting panels later adds cost. A roof survey records the condition.
- Roof warranty: some cladding and membrane warranties restrict fixings.
- Insurance: the landlord usually insures the building, so the insurer needs to know about the system.
- Agricultural lettings: farm tenancies raise similar questions, with added considerations about improvements under the tenancy.
Our sector pages for warehouses and offices cover the building issues for the most common let property types.
What to have ready for a landlord or tenant survey
- Leases for the relevant units, or a summary of terms, break dates and alteration clauses
- A site plan with unit boundaries and the location of each meter
- Supply details (MPANs) and, with tenant consent, half-hourly data for each supply
- Roof maintenance history and any warranties
- Current EPCs
- Contact details for any mortgage lender whose consent may be needed
Request a free survey for a single building or a whole estate.
Frequently asked questions
Who should pay for solar on a let building, the landlord or the tenant?
There is no single answer. Tenants with long leases and high daytime demand often fund it themselves with landlord consent. Landlords may install and sell the power to tenants, or recover costs through the service charge. A funder can also lease the roof and sell power to the occupier. The right model depends on lease length, demand and who wants to own the asset.
What happens to the panels when the tenant leaves?
That should be agreed before installation. Common options are that the panels stay and pass to the landlord, the landlord buys them at an agreed value, or the tenant removes them and reinstates the roof. Where a funder owns the system, the agreement usually allows the power supply to continue with a new occupier or provides for removal.
Can solar help a landlord meet MEES requirements?
Solar PV is one of the measures that can improve an EPC rating, and a better rating helps with the minimum energy efficiency standards that apply to let non-domestic property in England and Wales. It is usually most effective alongside other improvements such as lighting and heating upgrades. An EPC assessor can model the effect of solar on your specific building.
Can one solar array serve several tenants on an estate?
Sometimes. If the estate has a single supply with sub-meters, an array on the main supply can benefit the whole site, with recharges adjusted accordingly. If each unit has its own supply, an array normally serves only one unit unless a private wire is installed. The survey maps the metering so you can see what is practical.
How long is a typical rooftop lease for solar?
Roof leases granted to solar funders are often long, frequently 20 years or more, to match the expected life of the system and give the funder time to recover its investment. Terms vary, so landlords should take legal advice on access, removal for roof repairs, insurance, lender consent and what happens at the end of the term.
Related pages
Power purchase agreementsHow on-site solar PPAs work, typical contract lengths, how prices rise over time, what happens if you sell or move, and the clauses to check before signing.
PPA vs CapExA side by side comparison of outright purchase, rooftop PPAs and lease or asset finance, including how lease length and site tenure change the answer.- Roof surveyHow a solar roof survey assesses covering type, condition and remaining life, fragility and safe access, shading, orientation, drainage and existing warranties.
- Energy data analysisHow half-hourly consumption data shapes solar sizing and payback: getting the data, profile classes, baseload, weekend and seasonal use, self-consumption and batteries.
- WarehousesLarge unshaded roofs and daytime shift work make many warehouses a strong fit for rooftop solar, provided the roof structure, rooflights and lease terms stack up.
- OfficesWeekday daytime demand suits solar, but office roofs are small and busy. The survey looks at roof plant, carports, multi-tenant supplies and landlord consent.