In the rapidly evolving landscape of renewable energy, commercial solar leasing has emerged as a significant topic, particularly due to the high rental rates in many areas across the country. This practice involves installing solar panels on large areas of land leased from third parties to generate electricity from sunlight. Unlike residential solar contracts, large-scale commercial solar leases come with unique aspects that warrant careful consideration.
Rusty Rumley, Senior Staff Attorney at the National Agricultural Law Center, and Grace Henson, Research Fellow, have been delving into the intricacies of these leases. Their research aims to shed light on the common clauses and the variety of terms found within these agreements. In a recent blog series, they analyzed numerous commercial solar leases to provide landowners with a comprehensive understanding of what to expect.
One of the critical aspects of commercial solar leases is the access and use of the property. Land carries an intrinsic value for farmers, and protecting it is often a priority. It is essential to consider whether the lease agreement significantly limits the landowner’s access to or use of their property. Many leases contain an “owner access” or property use restriction clause that specifies what actions can be taken by both the solar developer and the landowner. Clear expectations from both parties can limit potential conflicts in the future.
The clauses in solar leases can vary greatly. For instance, some leases may include vague language like, “Landlord shall not make any material changes to the property that would impact the soil quality of the Easement area or block the sunlight.” This clause is written entirely in favor of the solar developer and lacks specific guidance. In contrast, other leases may provide more detailed provisions, such as allowing the landowner to continue using the property for agricultural, ranching, timber harvesting, and other reasonable purposes during the development term.
However, it is crucial to note that such clauses may only apply to the development term, not the entire lease. Once construction begins, the landowner may lose access to some property, and the exact property at issue is not always described in the clause. Landowners should ensure that their lease agreement reflects their rights to use the land throughout the entirety of the lease term.
Another critical aspect is the notice period before the solar lease moves into the construction phase. During this phase, the solar developer may need extra space to store equipment and supplies, and the landowner may not be able to continue farming this property. Landowners should negotiate for a sufficient notice period to avoid losing a growing crop, especially for row crops. Additionally, it is essential to include language specifying damages when a solar lease moves into the construction phase.
Furthermore, a lease may include an owner access clause that specifies the process for the landowner to access the leased premises. For example, a clause may state that the landowner has the right to access the property at reasonable intervals and times, upon at least forty-eight hours’ prior advance written notice to the lessee. This clause clarifies the steps to be taken for the landowner to access the property and also places a restriction on the actions taken by the landowner while on the property.
Maintenance of the property is another crucial aspect of solar leases. Most leases establish which party is responsible for maintenance. Some leases require the tenant to maintain the property, while others hold the landowner responsible. For instance, a lease may state that the landlord shall maintain the property adjacent to the leased premises in good condition and state of repair to avoid interference with the tenant’s use of the leased premises and the easement.
In conclusion, commercial solar leases are complex agreements that require careful consideration. Landowners should thoroughly review any contract before signing it and seek legal advice to ensure their rights and interests are protected. The research by Rusty Rumley and Grace Henson provides valuable insights into the common clauses and terms found in commercial solar leases, helping landowners make informed decisions.