Since its initial boom in 2011, and despite subsequent issues with subsidies in the years that followed, solar panel electricity generation technology (known as solar photovoltaics (or ‘PV’)), continues to be one of the UK’s most important renewable energy sources. With prices of solar panels falling and subsidies continuing – albeit changing every few years – it remains an attractive option for ‘solar farm’ developers and landowners alike. Solar PV is an option both for owners of land, and for residential property owners and owners of commercial buildings with suitable roof space.
But as a landowner, what are some of the terms of a deal that you might want to consider?
1. What is the structure of the deal?
Most agreements are structured by first granting an Option Agreement to a developer. This gives the developer time to conduct their searches and surveys, obtain planning permission and negotiate a grid connection with a District Network Operator (‘DNO’).
A landowner may be offered a fee for granting the Option, and the length of agreements can range from one year to several. Term extensions may also be required, depending on planning appeals or connection difficulties. The major point for landowners to note is that, during the term, they will be restricted in their dealings with the land in question, and may be obliged to help obtain planning permission or allow access to their land, amongst other requirements.
If at the end of the period the site is not feasible, then the Option should be drafted so as to allow both parties to walk away and any damage caused reinstated.
2. Lease Terms
The length of solar leases is usually in the region of 30 years, typically to cover the period during which subsidies are obtained. Landowners and homeowners should be aware that terms are generally long. It may be possible to negotiate break clauses to kick in at certain intervals although this will be dependent on developers’ models.
This is clearly one of the most important terms and will vary between developers. The ways in which rent can be structured can also vary, from a flat level, to linking the amount to a site’s profitability, to a low rent but receiving electricity from the site. Rent reviews are also a key term to be negotiated.
- Reinstatement and decommissioning
At the end of the term, it will be the aim of a landowner to have their site back to normal. They may like to consider some form of security to ensure that takes place.
- Contracting out
Landowners are likely to want to provide that a lease that cannot be automatically renewed at the end of the term, and therefore to contract out of the security of tenure provisions of the Landlord and Tenant Act 1954.
- Other terms
Other terms that the parties will wish to consider are: rights to be granted to a developer, their respective obligations, assignment and sub-letting, insurance levels and the parties’ limits of liability. Landowners are often asked to grant wayleaves to the DNO over their land and to enter into planning agreements. It may, in some cases, be possible for owners of land to graze sheep below the panels, and an agreement struck to allow it, perhaps in return for a fee.
3. Other considerations
It is possible for land and building owners to purchase their own panels and undertake the works with the help of a management company.
Prior to entering into negotiations with a developer, it would be wise for landowners to consult with their legal advisers, accountants and mortgage companies, to establish whether a deal is appropriate both for their financial circumstances and in terms of their legal title to a land or building.
You should be careful what you sign. If you are not sure what you are being asked to sign or what its legal effect may be, professional advice should be sought from a legal adviser.