Basics to Consider before You Plug in to an EV Charging Station Agreement
Electric vehicles are gaining in popularity in all markets. By the year 2025 electric vehicles will hit 10% of global passenger vehicles according to the Long-term Electric Vehicle Outlook report published by BloombergNEF and growth will continue with EVs predicted to make up 31% of the cars on the road in 2040.
Given the increased use of electric vehicles, it is becoming common for retailers to desire EV charging stations in the parking lots in front of their entrances for customer use and close to their back docks for use by delivery fleets. Benefits cited by retailers for hosting EV charging stations include increased foot traffic in stores while cars charge, increased branding as environmentally responsible, new revenue stream and broader pool of potential employees attracted to an innovative employer.
There are several basic considerations with respect to charging stations. 1) Choosing the best business model for your commercial property: using third party owned charging stations, which are leased to either the tenant or the property owner; or owner owned charging stations. 2) Evaluating the three typical pricing structures for charging station users: No fee; nominal fee to cover costs; and revenue producing. 3) Choosing one of the two basic types of charging stations: a level 2 charging station that adds approximately 25 miles of EV range per hour of charge time; or a DC fast charging station that adds between 60 and 100 miles of EV range per 20 minutes of charge time, depending on the electrical source.
There are several types of fee arrangements under the third party owned and leased business model that the charging station owner may collect, including (1) a charging station lease fee or (2) fees from businesses that run advertisements on its charging station screens and (3) percentage (usually 10%) of the increased revenue generated by customers spending a longer time in the store while their car charges.
A charging station arrangement becomes more complex when any of the following exist: (1) the parking lot on which the charging station will be installed is part of a shared common area; (2) the retailer who desires the charging station is a tenant and must obtain the consent of the landlord for the charging station or (3) the charging station includes advertising screens as part of its structure. Terms and provisions to include in charging station agreements to protect the property owner include source of electricity, separate metering of electricity, strict repair requirements and advertising content control, among a few.
In our real estate and corporate practices we are drafting and negotiating more and more EV charging station agreements and performing required due diligence to determine compliance with recorded covenants, conditions and restrictions and applicable zoning laws, including parking ratios following the loss of parking spaces taken by charging stations. We are charging ahead to create agreements that protect our clients now and into the future as charging station technology and use change and develop.
Sarah Shaw is a real estate partner in the Chicago office of Honigman LLP and Chauncey Mayfield is a corporate partner in the Detroit office of Honigman LLP.