Ten Things You Should Know Before Leasing Land for Solar Development
Amy Barkley, Livestock Specialist
Southwest New York Dairy, Livestock and Field Crops Program
October 22, 2020
This article reflects information presented by Daniel Brockett of Penn State Extension and George Thompson of Wilson, Thompson, and Cisek, LLC in the presentation, "10 Things you Should Try to Know Before Leasing Your Land for Solar Development", presented October 20th, 2020.
Development of land for solar energy projects is becoming common across the state of New York. These large projects require land leases from landowners, which can extend 40-50 years. While leasing land for solar development can provide supplemental income to a landowner, here are ten items to keep in mind before signing your name on the dotted line.
1.) What's your bargaining position
If a solar company is coming to you, that means that they need your land for a proposed project. Until you sign the option and/or lease agreements, you have leverage to make sure that the documents reflect your wants and requirements for the land they are planning to occupy. Keep in mind that once you sign, you will lose most, if not all, of your leverage. With these leases, you need to be thinking very long term. Although a lease may outline a contract term of 10-20 years, there will be a series of renewal options.
Understanding where main power hubs and lines are located can be helpful in determining your bargaining position. If you are close to land that includes this infrastructure, your position may be better than if your land is on the fringes of a development project.
Keep in mind that option payments tend to be smaller than lease payments. The option period is essentially a pre-lease; if the project gets approved, then your option agreement will transition to a lease agreement.
Even if the lease is presented with a sense of urgency, there is usually some time to take deliberate actions to review the documents.
2.) Optimization: What do you want? What do you want to prevent?
Knowing what is important to you will help you determine what the project on your land will end up looking like. For instance, if you have a pond that you do not want filled in, make sure that this is specifically addressed. If you want to have the option to farm under the panels, make sure that you list what agriculture you would like to have allowed once the installation is in.
If you have established infrastructure that the company would like use of, such as a right-of-way, restricted access road, concrete pads, etc., make sure that you are compensated for these. Maintenance requirements for these should also be written into the agreement.
The level of detail is important here, and everything you want counts. Even something as specific as your wishes surrounding herbicide use needs to be documented.
Think through the financial end of things, too - is it worth the money they are offering you to have your landscape changed? If not, what would that dollar amount look like? Do you want an escalator built in to make sure that lease payments keep up with the rate of inflation?
3.) Don't assume you can do things that are not written into your lease.
Even if something is "commonly allowed" under solar panels, that may not be true for a particular project or company. If you want to farm or have other access between the panels, make sure it is written into the body of the lease or in an addendum. The same holds true for access roads; if a company wants to utilize your regularly used access road, make sure you write into the lease that you can maintain use of it.
4.) Understand the duration of your lease
Solar leases tend to have lives of 40-50 total years, which is presented as a contract period with a series of renewal options. Understanding a lease's duration is important when establishing other written wants or needs in the lease agreement.
5.) The option agreement is their option, not your option.
An option agreement is the first step to a solar lease. At this point, the company is in a phase where they are inventorying and securing land for a proposed development. At this point, there is some uncertainty; if the plug is pulled on a project, a lease agreement may never come to fruition. By signing an option agreement, you may or may not be agreeing to a lease agreement. Read the documents carefully. Involving a legal professional is highly recommended.
There is a chance that not all of your land will be developed when moving from the option agreement stage into the lease stage. If the amount of land developed is important to you to make this worth your time, there is an opportunity to write into the agreement that a certain amount of land must be developed.
6.) Know how to modify your lease
Use of legal professional can be key to ensuring that a lease is modified to meet your expectations and demands. Leases usually cannot be altered once signed.
7.) Be clear when, where, and how you will get paid
Ensure that payment terms are clear and concise. Also make sure that there are protections written into the option and lease agreements regarding repercussions for missed payments.
8.) Things that are written count. Things that are spoken don't.
Landmen will come to your house, sit down, and have a lovely conversation with you. However, it is more likely than not that once an agreement and/or lease is signed, you will never see that person again. This makes it nearly impossible to follow up on demands from conversations had with these representatives. So, even if you talk though all of the items listed above with a landman, nothing "counts" if it isn't written into the documents you are signing. Consult a legal professional for a second opinion if something does not sound right.
9.) Your neighbors may not like this
Be mindful that some members of your community may not want a solar array as their next door viewscape. There are also folks who are talking with zoning to try to restrict solar development.
Some landowners may currently lease their land for hunting, fishing, agriculture, etc. If a lease comes knocking, it is good to think about those relationships and if there are any protections that can be put into the lease to get the best of both worlds.
10.) There's a lot of bad information out there on the internet.
Take time to speak to people who really know what is going on in the arena of solar development. If you come across information, make sure it is from a reputable source to dispel myths or verify information.
In conclusion, when approached with a solar development option agreement or lease, remember that only those items written down count. It's important to know what you want, and to make sure that any documents that you're signing reflect those needs before you sign. Use of a legal professional to help ensure your needs are met for the duration of a lease is strongly recommended.
More information can be found by viewing the original presentation at: https://psu.mediaspace.kaltura...
The American Solar Grazing Association also provides a series of solar-centric resources. You can access their website by this link: https://solargrazing.org/
Last updated February 17, 2021