What to Look for in a Solar Land Lease
Whether you are driving the roads of Brown County or reading this newspaper on a weekly basis you probably have noticed that solar panel “farms” are a hot topic. With the closure of local coal-fired power plants in the past few years and federal politics favoring what has been called green energy sources such as solar and wind, it is no wonder we see these projects popping up across the county and just over our borders.
Across the state, local communities and officials are dealing with solar companies and their salespeople flooding into the Buckeye state trying to sign up as many contracts as possible. In ten counties, the Commissioners have moved to ban solar and wind projects in townships and unincorporated areas of their counties, including Butler to the west and Logan to the east.
As noted in Bailey Miller’s recent article in this newspaper, solar developers are offering landowners profitable contracts up to $2,000 per acre per year to sign up. While I have not seen contract offers at the higher end of that spectrum, $750 to $1,000 per acre per year offers are not uncommon.
My purpose in writing this piece is not to discuss how these projects fit or fail to fit within our overall community. What I hope to provide is some information to those whom a solar company approaches to lease their land and a few basic things to look for in that agreement.
The first unique part of a solar land lease is that it has two periods or terms in it. The first is the option period and the second is often called the extended or power period. Knowing how many years the property will be under contract and how much will be paid per acre during the two different periods in the contract is essential.
An “option period” is a period, usually five to ten years, when the property owner agrees to give the solar company time to investigate whether they want to proceed with putting a solar project on their property. There are many reasons why it takes the solar company this long to make the decision but during that time, they are willing to pay $40-$125 per acre to have the right to start the project if they wish. During this time, they may take some soil samples but generally do not disturb the property and the owner can still grow or lease crops, hunt and enjoy the property. If the solar company chooses not to build during this period, they will cancel the contract and the property owner will keep the money paid out during the option period.
Once the solar company decides to proceed and notifies the homeowner in writing of their intention to build a solar array, the contract's “extended period” or “power period” starts. This period is usually between thirty and forty years. The solar company will build out its hardware on the property. Crops in the field may be tilled over, and a settlement paid to the farmer. No more hunting may occur on or near the solar company’s hardware. During this period, the solar company will pay the higher lease per acre amount of closer to $750 to $1,000 per acre per year.
The next concern is what happens if the solar company goes out of business. Make sure this issue is addressed in the contract, that the company purchasing the original contract must abide by the terms of the contract, unchanged. This goes for you as well. Make sure you can sell the property if you wish, with the understanding that the buyer would get future payments that would have to be made to the new owner.
You will want to make sure the contract has a clause that if any action by the solar company or their equipment damages your property, they have sufficient insurance coverage to satisfy the value of their investment and yours. They should provide you annually with a copy of their insurance coverage showing it to be in force.
One of the most important concerns is what happens to the framing structures, fencing and panels the solar companies build when the contract ends, or the solar company abandons the project. The contract should clearly state that the solar company must remove and legally dispose of all solar panels, framework and footing up to a few feet under the soil's surface. There are hazardous waste materials in the panels and other issues with being stuck with these things left on the property. The homeowner should not under any circumstances take responsibility for keeping or removing the solar materials.
One of the key points the solar salesman makes is that there is no money out of pocket for the property owner. Yet I strongly suggest anyone considering signing a solar lease contract or any contract have the document reviewed and explained by an attorney. This advice should not surprise you coming from an attorney. If you hear me out, I am amazed when people come to my office after a contract goes bad (or they didn’t even have a contract) and did not have an attorney review and explain it to them. In the case of a solar lease, these contracts will affect the family land for roughly fifty years, a generation. They can potentially bring in more than a million dollars of revenue over their term, sometimes many millions, based on the project size. With an investment like this, it is in the property owner’s best interest to know what they are agreeing to and have legal counsel. Several solar companies have caught on to the fact that an educated partner is a good partner and even agreed to pay up to $1,000 toward legal fees to have their contract reviewed. If this clause is not in the contract, ask. You deserve the peace of mind of knowing you understand what you are getting your family into.
Along with the solar company reimbursing for attorney fees, some contracts include a signing bonus. I recommend asking for a bonus payment, made at the time you sign the agreement. Be aware that these dollars are taxable, but you should do a little something to celebrate the occasion. This truly is a once-in-a-lifetime moment.
Another key provision the owner should look for is that if there is a dispute arising out of this contract that it must be settled in the Courts of the State of Ohio. Solar companies come from across the country and Canada and sell these contracts or merge with other companies frequently. If the company does something to violate the terms of their contract, you do not want to be traveling to California or Delaware to sue; you want the right to go to our County Courthouse in Georgetown and be heard on the matter there.
Solar Lease Agreements are long and detailed documents prepared by the solar company’s attorneys to give them the best shot at making money off of your land. If this is something you are considering I strongly urge you to contact a local attorney to review the document, make recommendations and explain the details and terminology to you before you commit your family’s land to a lifetime of marriage with a solar company.
Jim Schroeder is an attorney licensed to practice law in Ohio, New York, New Jersey, Pennsylvania and the District of Columbia. His office is located in downtown Sardinia at 101 Winchester Street and he can be reached at (937) 886-4563 or email@example.com.