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What farmers should know about solar farm leases


It’s not uncommon for landholders to be approached by solar farm developers with attractive offers of seemingly high rent for use of their land. While it may be tempting to be drawn down that path, there are a few key things to consider before signing on the dotted line. In situations such as these, obtaining sound legal advice should always be a priority.

Here are some of the things to think carefully about before leasing your land to a solar farm:

Option agreement

Developers will typically ask for an option agreement, often for three years or more, to allow them time to obtain regulatory approvals. This is generally followed by a long-term lease, typically for 20 or 30 years with options to renew.

An option agreement will typically contain clauses that prevent you from talking to other developers while planning permits and grid access approvals are sought. The project may not eventuate at all if planning consent or access to the grid are denied. Be sure to consider the option terms and duration, as you may miss out on other opportunities while you’re tied to a project that may never happen.

Also, be sure that you are agreeable with the lease terms before you sign, as the option will generally commit you to grant the lease if the developer so chooses.

Long leases

Solar farm agreements are typically long-term arrangements. That means that you should do your research before deciding whether to commit. Option payments and the promise of (initially) high rent may seem enticing, but be aware that solar farm leases can run for 30 years, often with a renewal option. Sixty years is a long time to rent out a piece of land and you should think about other opportunities that may arise over time that you may miss out on.

Easements

Look out for terms in the option or lease that grant easements or additional rights to other land you own. Also, be wary of clauses that allow the developer to expand or shrink the area they're leasing without your consent. You need to know with as much certainty as possible what area of your land will be subject to solar farm activity and what your returns will be.

What happens if the energy company goes broke?

If the energy market or the technology changes or if the solar company goes broke, your rental income could come to an end. In the worst case scenario, you could be left with a field full of unviable panels and a legal obligation to clean up the waste, say if solar panels become the new asbestos.

You will also need to consider how you will manage risk to your land and water resources. Remember, these leases will remain in place whether you sell your land or bequeath it to a loved one, so your children or grandchildren could be the ones that have to deal with the decommissioning phase.

Legal advice

Obtaining legal advice from lawyers with experience in solar farm negotiations is highly advisable to help obtain outcomes that can work for you and help protect you now and into the future. Shine Lawyers have experienced energy lawyers who can help negotiate the right agreement for you.

The information above is intended for general information purposes only. It is not legal advice and should not be acted on as such.

Written by Shine Lawyers. Last modified: July 1, 2019.

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