Electric Vehicle Charging Stations – New Law Sends Electric Shock to Landlords

On September 21, 2014, Governor Brown signed AB 2565, giving tenants new rights to install electric vehicle (EV) charging stations in the parking lots or structures of their buildings. This new law will apply to all leases executed, renewed, or extended on or after January 1, 2015, and tenants will now have the right to install EV charging stations and essentially create exclusive parking spaces for themselves—even if they do not have any parking rights under their leases. The law applies to tenants of commercial properties that have more than 50 common area parking spaces, but fewer than two EV charging station spaces for every 100 parking spaces.

Under AB 2565, landlords may only impose reasonable restrictions on a tenant’s right to install an EV charging station. These restrictions may not significantly increase the cost to install an EV charging station or decrease the EV charging station’s efficiency or specified performance. The law specifically states that it is California’s policy to promote, encourage and remove obstacles to the use of EV charging stations. Therefore, it is possible that it will be difficult for landlords to enforce restrictions that are not clearly necessary or that appear to be overly burdensome. The statute does not provide examples of what would be considered reasonable restrictions, but here is a list of some potential restrictions to consider:

  1. Designating areas for the EV charging stations (landlords will likely want the EV charging stations to be in close proximity to one another);
  2. Requiring tenants to install separate electric meters to determine the amount of electricity used by the EV charging station;
  3. Restricting the hours of operation (e.g., no overnight storage of vehicles);
  4. Requiring tenants to install special signage to identify the EV charging stations;
  5. Providing one reserved parking space to each tenant—this would prevent tenants from converting multiple unassigned parking spaces to EV charging stations, which the law allows in leases that do not give tenants any reserved parking rights (see below);
  6. Requiring tenants to indemnify the landlord for damages caused by the installation and use of the EV charging stations (note, however, as discussed below, the statute does require the tenant to carry insurance);
  7. Prohibiting assignment of the EV charging stations to other parties;
  8. Requiring special stickers or tags for authorized users of the EV charging stations;
  9. Requiring tenants to provide an additional security deposit for the costs associated with their EV charging station obligations; and
  10. Requiring tenants to remove the EV charging stations upon lease expiration (while the statute does require the tenant to pay for any damage caused by removal, it does not specifically require removal).

If a lease is silent regarding the tenant’s right to install an EV charging station, the law suggests that the tenant may install such a station, so long as the tenant complies with the following:

i.     The tenant cannot install an unlimited number of EV charging stations. If under the lease, the tenant is allocated a certain number of reserved parking spaces (not necessarily for EV charging stations), then the tenant may only convert those existing reserved parking spaces to EV charging stations. If, however, a lease does not grant the tenant any reserved parking spaces, then the tenant may claim its proportionate share of the property’s existing spaces to convert to EV charging stations, based on the tenant’s square footage of the premises as compared to the total square footage of the building or shopping center.

ii.     The tenant must maintain a liability coverage policy for $1,000,000.00, must name the landlord as an additional insured under the policy, and must include a notice of cancellation to landlord. Additionally, the tenant must maintain property insurance covering any damage or destruction caused by the EV charging station and must name the landlord as its interests may appear.

iii.    The tenant is responsible for the costs to maintain, repair and replace the EV charging stations and for the costs of damage to property and the EV charging station resulting from the installation, maintenance, repair, removal or replacement of the EV charging station.

iv.    The tenant is required to pay for the cost of electricity associated with the EV charging station.

v.     The landlord may charge a reasonable monthly rental rate for any parking space that a tenant converts to an EV charging station.

This new law does not explicitly provide statutory enforcement mechanisms or penalties for either party’s failure to follow its requirements. It will be interesting to see how the courts will enforce AB 2565. Practically, most tenants will not want to incur the expense of installing, operating, and maintaining an EV charging station, especially in short-term leases, so this new law will likely not have significant impacts on most properties. But, landlords with limited parking spaces (or over-sold parking) should take steps to address the potential risks and impose reasonable restrictions to avoid feeling the shockwaves of this new law.

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