The latest mile marker on California’s road toward a clean air future came in the form of legislation encouraging the growth of the electric vehicle market.
Last year, Gov. Jerry Brown signed Assembly Bill 2565 – codified in California Civil Code Sections 1947.6 and 1952.7 – setting the stage for the continued development of electric vehicle infrastructure by permitting the addition of electric vehicle charging stations in commercial properties. California already accounts for 40 percent of all electric vehicles sold in the nation, so the impact of AB 2565 will reach across the state and across industries. Moreover, Brown wants California to put 1.5 million electric vehicles on the road by 2025.
With the rapid increase in the number of electric vehicles in the state and mounting pressure for commercial enterprises to be green, AB 2565 creates important new territory for commercial landlords – and their attorneys.
The law notably voids and makes unenforceable any provision in a lease for commercial property that prohibits or unreasonably restricts the installation of an electric vehicle charging station. It also provides a framework of rules governing the rights of tenants to install a charging station and their obligations regarding the operation, maintenance and removal of a charging station.
While there are some nuanced differences between Sections 1947.6 and 1952.7 regarding their specific applicability to commercial and residential real estate leases, there are relevant provisions of both statutes that may impact commercial properties such as office, retail, multifamily and industrial buildings. As a result, both commercial landlords and tenants should carefully consider the key provisions of the law early in the lease negotiation process:
Prohibitions to Charging Stations
Most importantly, any provision in a commercial lease signed, renewed or extended on or after Jan. 1, 2015, that either prohibits or unreasonably restricts the installation or use of a charging station is unenforceable. This prohibition does not apply to commercial properties with less than 50 parking spaces or which already have existing charging stations for tenant use at a ratio of 2 charging stations per 100 parking spaces.
Landlords may not willfully avoid or delay a tenant request for the installation of a charging station. In fact, landlords must approve a tenant’s written request to install a charging station so long as it complies with the Civil Code and the landlord’s reasonable procedures governing the making alterations to the property.
Locating the Charging Station
If the lease does not provide a tenant with a reserved parking space, and if the circumstances surrounding the installation of a charging station effectively provide the tenant with a reserved parking space, then the landlord may charge a reasonable monthly rent for that reserved space. But if an additional parking space is not available, then landlords are not obligated to provide a designated parking space to accommodate the installation of a charging station. Finally, a tenant does not have the right to install a charging station in more parking spaces than are allocated to the tenant under its lease.
Costs of the Charging Station
The tenant is responsible for all of the costs related to the design, installation, operation, maintenance and removal of a charging station (including reimbursing the landlord for the reasonable costs incurred by landlord in connection with the installation of the charging station, such as the cost of permits or supervision). These costs also include the obligation to pay the related electrical usage as additional rent.
AB 2565 contemplates that the landlord and tenant will enter into a written agreement (presumably by way of an amendment with respect to leases in effect prior to the effective date of the statute) that incorporates, among other things, (a) the terms and conditions regarding the installation, operation, maintenance and removal of a charging station, (b) the tenant’s obligation to pay the costs associated with the installation, operation, maintenance and removal of a charging station, and (c) representation by the tenant that it is in compliance with applicable government requirements.
As landlords face a surge in tenant requests to install electric vehicle charging stations on their properties, alternative provisions must be incorporated into all legal forms regarding the charging stations. Such provisions and related agreements should be drafted in consultation with the landlord’s design, development, property management, and legal teams.
Plug-in vehicle sales currently represent about 3% of personal vehicle sales in California.
Electric cars and the infrastructure to support them are an important part of our transportation future. In fact, plug-in vehicle sales in California passed the 100,000 mark earlier this year, and currently represent about 3 percent of personal vehicle sales in the state.
With electric vehicle sales soaring, the National Renewable Energy Laboratory estimates that up to 1.2 million residential and workplace charging stations will be needed statewide by 2020. As the drive toward electric vehicles continues, attorneys – as well as tenants, landlords, property managers, and developers – need to stay abreast of the nuances and implications of this important new legislation.
Sean W. Southard & Van Nguyen, CGS3
Sean W. Southard is a partner and Van Nguyen is an attorney with San Diego-based Crosbie Gliner Schiffman Southard & Swanson LLP – aka CGS3 – a law firm specializing in commercial real estate law.