A Brief Introduction About Solar Farm Land Lease Agreement
Renewable sources of energy are much in demand today, with the non-renewable sources depleting faster with every passing day. One such source of renewable energy is solar energy. The energy is generated through multiple photovoltaic cells constructed on a piece of land at the right location that gets a lot of sun as a part of solar panel farming. These pieces of land are known as solar farms. The owner of the solar farms might lease the land to someone for a sum of money. The document that governs this solar panel leasing is known as a solar farm lease agreement.
Who Takes the Solar Farm Land Lease Agreement?
A solar panel lease agreement is entered into by a solar farm owner, who becomes the lessor and a lessee who wishes to generate solar energy on the plant. The purpose is to Any person, organization, or company can be a party to the agreement. The terms include details of the premises and the percentage of rent.
Purpose of the Solar Farm Land Lease Agreement
The solar lease contract is written proof that can be enforced in the courts of law. It creates a layer of protection when it comes to leasing a solar farm. Its purpose is to be an exhaustive document that contains the aspects of pricing, rights, and obligations to rent the land and to hold each party responsible for it.
Contents of the Solar Farm Land Lease Agreement
These are the key terms of a solar lease agreement:
- The names and contact details of the lessor and lessee.
- The details of the premises where the solar farm is constructed (lease area and easements).
- The commercial operation dates.
- The total term of the contract.
- The amount of rent in a year and the number of acres taken on lease.
- The percentage of rent and time in which it will be increased periodically.
- Detailed rights and obligations of both the parties.
How to Draft the Solar Farm Land Lease Agreement?
While drafting the document, keep these points in mind:
- Be clear and avoid ambiguity.
- Define terms.
- Mention the governing law.
- Mention boilerplate legal clauses.
- Mention alternative dispute resolution procedure to be adopted.
- Include a clause for the mechanism to deal with late payments and the interest to be charged as late fees.
- Determine and mention a clause about repairs and who will spend for the same.
- Including a clause for granting of easements to the lessee.
- Include a clause about the rules and regulations for the use of solar farm land to be followed by the lessee.
- Refer a sample agreement on the internet while drafting.
- Include the terms and conditions that talk about usage, pricing, repairs, easements, termination and other things in detail.
Negotiation Strategy
Negotiating the rates for rent of the solar farm and other terms like who gets the profits that are generated by the sale of solar energy is important in this agreement. Deciding at what percentage the rates of lease increase of what period of time can also be negotiated.
Benefits & Drawbacks of the Solar Farm Land Lease Agreement
Benefits:
- There are tax benefits and other incentives for the lessor.
- The contract is a record of everything that is decided between the lessee and the lessor for the solar farm leasing.
- It provides legal protection.
Drawbacks:
- Solar leasing is not a great concept for some as it is expensive and the lessee does not own anything.
- There are no tax benefits for the lessee.
- The contract usually is multi-year, locking you down financially and legally.
What Happens in Case of Violation?
Violation of a solar farm land lease agreement gives rise to a breach of contract(1). The remedies of breach of contract like specific performance, claiming monetary damages etc. are available to the aggrieved party.
How to get out of a solar lease?
The clause for terminating a solar lease is a part of the solar lease agreement (generally can be done before the commercial operation date). It generally requires a notice period and a document in writing. This often happens as solar lease contracts are multi-year, sometimes more than a decade long.
[Also Read: Land Lease Agreement ]
How Much Money Can a Solar Farm Make?
The solar panel land lease rates are very lucrative for the owner of the farm. A 10-acre farm might get a rent of $2000 per acre per month in an urban area while in rural areas the rent could be around $500 per acre, per month. On the other hand, solar energy when sold can fetch anywhere around 15 cents per kWh.
solar farm land lease agreement is becoming increasingly common. As the agreement is quite long, it is advisable to hire an attorney to refer to the online templates instead of drafting it yourself.