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Considerations when negotiating solar leases

Mike Harrington/Getty Images Workers use machinery to clean the solar panels on their farm
REVIEW LEASE: It is important for landowners to closely review the proposed lease before signing it.
Country Counsel: It is critical to carefully review the lease from the first page to the last.

Over the past few years, many landowners have been contacted by solar companies interested in leasing land for solar panel construction. 

It is important for landowners to closely review the proposed lease before signing it. Options to lease may last three to six years, so your land would be tied up for that period. If the option is exercised, solar leases could last between 20 and 50 years.

This means bad lease terms could be around for a long time. Like all leases, the terms are negotiable. Do not be afraid to negotiate with the solar lease company. Like any rational buyer, they want the best deal and are probably not going to offer their best terms upfront.

The most obvious lease term to negotiate is the lease payment. Solar leases are based upon an annual rent-per-acre basis. Lease payments vary from lease to lease based upon location, access to electric infrastructure and expected project costs. 

Landowners are usually pleasantly surprised at the amount of the lease payment being offered, sometimes as much as $1,000 per acre. However, the lease also should include an escalator. The escalator increases the lease payment over time to help keep up with inflation. Royalties are extremely rare for solar leases, so upfront rent negotiations are vital.

Another important term of the lease is the removal of the solar panels at the end of the lease. Obviously, the panels should be removed, but what if the solar company does not remove them or goes out of business and abandons the project? 

The landowner can require the solar company to have a bond to cover the cost of removing the solar panels if state regulators do not require one. This helps ensure that the landowner is not stuck with a solar panel farm when the lease is over.

Be sure to know what rights are being given to the solar company. The solar company will need to use your land to construct solar panels, but what about access roads, easements and utility lines? The landowner should not hesitate to ask for restrictions for roads and utility lines, such as location, and that the easements terminate with the lease. 

Also, drainage tile repair or rerouting should be addressed to not only protect the land under lease, but also the upstream land that could be adversely affected by broken or damaged tile lines.

Indemnity is a term that should be in every solar lease. This important provision requires the solar company to pay for any legal costs, claims or liability incurred by the landowner due to the solar panel project. 

If a liability incident occurs, such as an injury to a person or an environmental violation, the landowner could be included in any lawsuits even though they were not directly responsible. Such lawsuits can be expensive to defend, thus the need for an indemnity clause.

Landowners should strongly consider having their leases reviewed by an attorney. Some of the terms in the lease will be “legalese,” with the meaning of the terms not always obvious. 

The landowner should always ask for the solar company to pay their legal fees. If the solar company will agree, then there is no harm in having the lease reviewed by an attorney, and the landowner may end up with a better lease.

These are just a few of the terms to consider for a solar lease. It is not uncommon for a solar lease to be 30 or 40 pages long. It is critical to carefully review the lease from the first page to the last. Not all the important terms are at the beginning  of the lease. 

Considering getting legal help with the lease review, especially if the solar company will pay your legal fees.

Moore is an attorney with Wright & Moore Law Co. LPA. Contact him at 740-990-0751 or rmoore@ohiofarmlaw.com.

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