Solar leases could affect landowners and their neighbors 

This website is not to be used as legal advice.  Information provide is for educational use only.   This is only a few of the many issues you could discuss with a lawyer, that is experienced with solar leases. 
  • Address insurance and liability concerns.  
    • Should an accident occur on the property, what happens? Will the solar company provide insurance? Or, will you have to increase your liability insurance to cover potential losses. For example, if the panels were blown into a roadway or adjacent property during a windstorm, who is responsible? If you accidently damage panels who repairs them?  What about testing the ground and water for toxins after a panel has been damaged?  How will they handle solar fire smoke and toxins that leach into the ground?    
  • Comply with storm water and erosion control requirements. 
    • What measure will be taken to control storm water runoff and erosion during construction.  The effects of such changes may not appear for several years. Will the developer meet all storm water permitting requirements during construction of the solar array? Will they install all required erosion control practices? If erosion occurs, who is responsible for repairing the damage? What if it affects my neighbor's property?  Furthermore, who owns any soils (including top soil) that are excavated while leveling ground? Can the contractor remove them from the site? Will they bring soils in from other locations, which may potentially be contaminated with industrial chemicals or contain invasive weed seeds? ​Some leases state the topsoil can be removed and is not put back.  Other states the topsoil is removed and must be used to restructure the land.  
  • Be aware of where new power lines, transformers, etc. will be placed on your property.  
    • Can they use emanate domain to put them where they want? Could they put power lines where you don't want them? ​If a solar company is franchised, it may be able to change it to a public utility and then emanate domain could happen to you and your neighbors.  
  • What if the solar companies sells your lease to another company.  
    • The original company that builds the solar farm usually sells within 2 to 3 years after the project is completed.  As the lease transfers from company to company, what guarantees do you have that each company will honor the lease and you won’t get the run around by the time it sells again.  If too many lawsuits are filed, the quicker the original company may want to sell.  
  • Payment
    • While payment is important, the questions and conversations should not stop there, as payment provisions are far from the only issues that need to be addressed in the lease negotiation process. Some of the more serious issues presented in many solar leases include the restrictions on the landowner’s use of the land, how much of the land will actually be utilized, once the solar project comes to fruition and what are the requirements for restoring the land once the solar lease terminates.
    • For instance, when a solar company approaches a landowner seeking to lease his 150 acre farm, there is a high likelihood that the company does not intend to utilize the entire 150 acres for its solar facilities. Instead, the company may propose to use only 50 acres while reserving easements over the rest of the acreage. These easements are not “paid” for and restrict the landowner’s use of his undeveloped and underutilized land.  In this case, the landowner who thought he would receive $150,000.00 per year ($1,000.00 per acre based on 150 acres), will end up only receiving $50,000.00 per year. Negotiating a minimum acreage requirement can solve this problem. If the solar company fails to utilize the minimum requirement, payments will not be calculated on an acreage lower than the set amount.  Realize also, you may be asked to sign a non-disclosure regarding the amount you will get paid per acre.  This is ensures that landowners can not come back on the solar company if they find they are getting paid a significant amount less than their neighbor who signed.   There may be exclusivity (you can't engage with a competitor) and Non-Interference (you give them access to your property)
  • ​Tax implications:
    • ​Installation of solar on a property may potentially have significant tax implications. Land classified as agricultural may be reclassified as industrial or commercial with higher tax rates. Removal of agricultural exemptions could result in retroactive penalties. Solar panels may be considered taxable improvements. Landowners might consider language in leasing contracts to address such tax increases. Most land that is used for agricultural purposes is entitled to a tax reduction or exemption. Should you choose to lease your land for solar, that tax exemption or reduction could be rolled back for five years. This rollback of taxes has the potential to turn what appeared to be a worthwhile investment into a loss. 
    • Who will receive the Renewable Energy Tax Credits?
    • A typical lease will impose the obligation to pay property taxes on the landowner, including taxes attributable to the value of the solar facility. A properly negotiated lease should require the company to pay all property taxes attributable to their improvements, the underlying ground they occupy, and any other increases above the current assessment of the property. Likewise, the lease should impose the burden on the company to pay roll-back or recapture taxes which result from the inevitable disqualification of the property from Clean and Green or any other preferential tax assessment program. Although distinct from property tax, the lease should also require the company to pay all realty transfer taxes assessed as a result of the execution of the lease.
  • Closely review end-of-lease terms   
    • In general, lease agreements will be for the life of the solar panels, typically twenty to thirty years. At the end of the lease agreement, will the contractor be required to remove the installation, to include access roads, should they not renew the lease? Furthermore, if that contractor goes bankrupt, what assurances are given that the site will be restored? Is the contractor willing to post a just bond for decommissioning and site restoration? If concrete pads are poured, will they be abandoned in place? If earthwork is required to level the site, will natural top-soils be replaced? Some companies include right-of-first refusal at the end of the contract period. Such a clause could prevent farmers from leasing to other companies for higher rates. Is that acceptable to you?  What happens to the equipment? Who removes it? What will your property look like? Who's responsible for maintaining the land while it's leased?
    • The lease must contain proper decommissioning terms, such as the removal of both above-ground and below-ground solar improvements and the regrading of the soil. Will they leave wiring if below a certain depth? A properly negotiated solar lease should also require the delivery of a security bond or other financial guarantee to the landowner that secures the performance of the decommissioning of the solar facility. The landowner should also have the right to demand that such financial security be re-evaluated every few years so as to ensure that the amount of the bond or security is adequate to cover the costs of decommissioning.   If solar company buys decommissioning bond, what happens if they stop payments? 
    • We aware that solar companies may target older landowners as they won’t be around to fight the decommissioning and many of the heirs do not live at the property or may not even live locally. ​
  • Make sure your bank approves. 
    • If you have a mortgage, your lender might need to approve or endorse the lease agreement.  
  •   Fencing:
    • ​Most solar arrays will be fenced with limited access. When landowners lease this area, they may need permission to enter this section of their property (unless this is addressed in the lease document).
  • If you want out of the lease before the project starts, can you do that?
    • In most cases, the landowner cannot back out of a project once they have signed an option. In other words, the option agreement provides the developer the option, not the landowner. ​ The solar company could walk away at anytime without any legal ramifications, but you may not be allowed too.
  • Will you be able to sell off part of your land?  
    • It is doubtful.  All or none of the land may be sold, but you will lose your land rights due to the lease as it may say it can not be parceled.  
  • When will the payments start? After 18 months of construction?  It could be longer than you think.  
    • One of the most inconsistent provisions found in the majority of solar leases is the timing and clarity of the various “stages” of the lease term and the payment obligations of the company which are tied to those stages. Often times, in addition to or in lieu of an “option period” (the period during which the company has an option or right to lease the property), a lease may provide for a “development period” and/or a “construction period” which precede the “operations period.” These early periods could sometimes appear to last for only a few years, but upon careful inspection, actually begin and end upon the occurrence of future events which are out of the landowner’s control and may never occur, resulting in an indiscernible lease term. More importantly, the company’s payment obligations are often determined by the current period of the lease term. During the development or construction period, the company’s payment obligations are only a few thousand dollars per year. Once construction begins and the construction period is underway, the property is no longer available for farming and, once again, most leases provide no meaningful payment to the landowner. The obligation to make rent payments based on the property acreage does not begin until the future operations period, which may or may not occur. Under these terms, a landowner could find himself many years into a lease with restrictions on the use and ownership of the property, but with no meaningful compensation and no right to terminate the lease. If construction has begun, the landowner may be losing additional years of income with no reasonable expectation of compensation from the company. The periods comprising the term of the lease must be properly negotiated to set maximum time limits in order to protect the landowner’s financial interests and to encourage the company to diligently endeavor to construct and operate a solar facility.
  • Loss of land rights 
    • Related to the lease term “periods” could be the rights of and permitted uses by the company during those periods. Most solar leases and options confer significant rights to the company during the option and development periods without reciprocal protections for the landowner. For example, most leases and options allow the company to apply for government approvals and permits or to rezone or reclassify the property during the early periods, which may result in the landowner’s rights with respect to the use of the property being materially changed. These rights are exercisable by the company prior to ever even committing to construct a solar facility on the property.
    • The solar company may keep your land in locked in a lease indefinitely without putting panel on it and you will receive no compensation for years to come.  
  • Letter of intent:​
    • (LOI) Some, but not all, proposals start with a letter of intent from the developer to the landowner. This letter is typically brief but may include some important details of the project. This letter may give the potential lessee (the solar developer) some binding provisions from the lessor (the landowner).  Landowners should be cautious that this letter does not provide benefits to the landowner and requires them to give up some rights.  This is a legal document that requires a signature. As a general rule, any legal document that requires your signature should be reviewed by your attorney. While this document is usually written clearly, it is still a good idea to engage legal counsel at this early stage.
    • Another general rule worth considering is to get everything in writing – even conversations with the land agent. Things spoken over the phone or in-person can be misconstrued or may be inaccurate – an email conversation or a written agreement is more accurate. It can easily be shared with your legal counsel.​
  • Ask for references:
    • We suggest asking the developer for references who have been under contract for years before signing on the dotted line. As well as some of the ones above, here are a few good questions to ask other landowners:
      • Was the project completed in the time allotted? 
      • Did they take care of your property?
      • Are they paying as promised?
      • Are they maintaining your land as promised?
      • What are the end-of-term arrangements?
      • Who will take care of removing the solar equipment at the end of the lease?  What are the terms?  Or are the answers just general:  "money is set aside"​
This website is not to be used as legal advice.  Information provide is for educational use only.   This only a few of the many issues you could discuss with a lawyer that is experienced with solar leases. 

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