SOLAR GROUND LEASES: WHAT DO YOU NEED TO KNOW
With the United States making steps towards a more sustainable energy source, numerous areas of clean energy are being explored, wind turbines, electric cars, and the topic of this article, Solar Ground Leases.
Solar Ground Leases are a relatively new concept. What they are is an agreement between an owner of land, most often farmers, to lease a portion of their land to solar energy development companies. These leases are for solar energy developers to build solar energy production emplacements such as solar panels on the farmland. These emplacements will collect the energy from the unobstructed sunshine that often falls down on farmland making farms ideal places for these leases to be offered.
While it may sound great to have a portion of your land used for clean energy AND earning you money, these leases are not simple and it is very important to know some of the basics of these agreements and elements to be wary of.
The biggest element to keep in mind is the duration of theses leases. Since energy production takes significant time to set up and see quality return for the investment of time, energy, and recourses, Solar Ground Leases last typically for a long time, typically twenty to thirty years. A Solar Ground Lease is not something that a farmer or land owner can do for a short turn around time during a poor planting season as many farmers may hope.
Any space designated in the solar energy lease will be locked down and no longer usable by the owner for 20-30 years, thus if the land considered for the solar panels is prime planting grounds for crops, farmers need to properly consider how much revenue they will lose from the potential crop yield of that area, vs how much the solar contract will provide.
Another element that Solar Ground Leases carry that many people may not realize, is that payment can, on occasion, not begin right away at the leasing of the land. Solar Ground Leases often carry what’s known as a diligence period of 2-5 years before building begins where the energy developer surveys the land, runs tests and determines if the land will be a worthwhile investment for the panels and equipment. Leases can often be terminated by the development company if they determine during the diligence period that this agreement will not in fact be worth it to them to continue on with.
Because the terms are so long, and the imposition on the owner is so great, when negotiating these Solar Ground Leases, it is vital to have an attorney assist you with the review and negotiation of the contract.
It is very important for anyone considering a Solar Ground Lease to make sure they are 100% certain of all terms concerning the dates of the lease, how much is paid, when payment is due, if payment is required during the diligence period, what happens in the event of destruction of the Solar Panels due to natural hazards, etc… There is a lot that goes into Solar Ground Leases and land owners are discouraged from trying to negotiate these on their own.
If you are considering a Solar Ground Lease, please consider reaching out to the Law office of Andrew Szocka P.C. by calling our office at 815-455-8430 or by emailing us at info@szocka.com. We have experience in reviewing and negotiating Solar Ground Leases and have the knowhow to push back on less favourable terms to ensure this opportunity is as lucrative for you as it should be.