Electric Vehicles Will Open Roads for CRE

SAN DIEGO—Electric cars and the infrastructure to support them—including charging stations—are an important part of our transportation future. According to Sean W. Southard, a partner with Crosbie Gliner Schiffman Southard & Swanson LLP, Governor Jerry Brown wants California to put 1.5 million electric vehicles on the road by 2025. In fact, California is a global leader in EV sales, with more than 100,000 sold here in less than four years. According to the California Air Resources Board, Californians buy approximately 40% of all plug-in vehicles sold in the US.

With the rapid increase in the number of EV vehicles in the state, developers and tenants need to stay abreast of evolving legislation, Southard tells GlobeSt.com. We spoke exclusively with Southard and fellow attorney Van Nguyen about the implications of electric vehicles and new legislation that creates important new territory for commercial developers, landlords and tenants.

GlobeSt.com: What implications does the increase in EVs have for developers/landlords?

Southard: 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. With mounting pressure for commercial enterprises to go green, tenants, landlords and developers should stay abreast of the nuances and implications of this important new legislation. Tenants have become increasingly environmentally savvy, so it makes financial sense for real estate developers to provide car-charging stations as part of the amenity package. Like other amenities, adding car-charging stations is a boon to tenant satisfaction, as well as offering potential for increased revenue, adding value for investors and tenants alike.

GlobeSt.com: Can you tell us about new legislation encouraging growth of the EV market?

Southard: Governor Brown recently signed AB 2565—which is codified in California Civil Code sections 19947.6 and 1952.7—setting the stage for the continued development of EV infrastructure by permitting the addition of EV charging stations in commercial properties. 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 an EV charging station and their obligations regarding the operation, maintenance and removal of an EV charging station. While there are some nuanced differences between Civil Code sections 1947.6 and 1952.7 with reference to their specific applicability to commercial and residential real estate leases, there are relevant provisions of both statues 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 on in the lease-negotiation process.

GlobeSt.com: What will be the biggest impact of the law?

Southard: Perhaps the biggest impact of the law is that it makes unenforceable any provision in a commercial lease that is signed, renewed or extended on or after January 1, 2015, that either prohibits or unreasonably restricts the installation of an electric-vehicle charging station. However, the prohibition does not apply to commercial properties with less than 50 parking spaces or which otherwise already have existing EV charging stations for tenant use at a ratio of two EV charging stations for every 100 parking spaces. Additionally, the law provides that landlords may not avoid or delay a tenant request for the installation of an EV charging station.

GlobeSt.com: What about EV costs?

Southard: Under the new legislation, the tenant is responsible for all of the costs related to the design, installation, operation, maintenance and removal of an EV charging station (including reimbursing the landlord for the reasonable costs incurred by landlord in connection with the installation of the EV 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.

GlobeSt.com: Are there other important provisions?

Southard: According to the law, a commercial tenant may install a number of EV stations equivalent to the number of parking spaces allotted under its lease. If an additional parking space is not available, then landlords are not obligated to provide a designated parking space to accommodate the installation of an EV charging station. Finally, a tenant does not have the right to install an EV charging station in more parking spaces than are allocated to the tenant under its lease.

The new statutory scheme 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—the terms and conditions regarding the installation, operation, maintenance and removal of an EV charging station; the tenant's obligation to pay the costs associated with the installation, operation, maintenance and removal of an EV charging station; and representation by the tenant in compliance with applicable government requirements.

As landlords face a surge in tenant requests to install EV 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.