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Volume X, Number 298

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Solar Energy Lease – What Landlords Should Know

With more and more emphasis on clean, renewable forms of energy, the development of solar energy farms is increasing rapidly. Solar energy farms are large-scale commercial power plants that use solar panels to convert sunlight into clean energy, providing a source of safe, locally-produced renewable energy for many years after construction. A solar energy farm feeds power into the electrical grid just as fossil-fuel energy plants do, except that solar farms produce no pollution and use very little water.

Solar Energy Lease

As part of their development efforts, solar energy companies, which are often recipients of governmental monetary incentives to construct these farms, seek to lease parcels of land on which to construct their facilities. Key factors in the land selection process are the amount of land available to lease and its location.

Not surprisingly, when a solar energy company contacts a landowner about a potential lease, the company will seek to have the landowner sign the company’s standard form of lease. Entering into a solar energy lease can be a source of passive income for a landowner, but before becoming a landlord, the landowner should be mindful of several key aspects of any proposed lease.

What Landlords Should Know

  • Term: the term of the lease could be lengthy, typically 40 or more years
  • Due Diligence: the solar energy tenant will want a substantial amount of time (e.g., two years) to perform studies and other due diligence in exchange for only a small payment (e.g., $500)
  • Rent: the solar energy tenant may seek to keep rent fixed for the entire lease term
  • Mortgages: the solar energy tenant will seek to prohibit or limit the landlord’s ability to mortgage the property in the future
  • Use of Adjacent Property: the solar energy tenant may want access, easements, and other rights with respect to adjoining property owned by the landlord
  • Representations and Warranties: the solar energy tenant may seek broad representations from the landlord, including representations about the state of title to the property and the environmental condition of the property
  • Remedies: given the substantial capital investment involved, the solar energy tenant will seek broad remedies in the event the landlord defaults

The above matters are not exhaustive. In any lease, the solar energy landlord should also address insurance, indemnification, timber rights, taxes, and the condition of the property at the end of the lease term.

©2020 Norris McLaughlin P.A., All Rights ReservedNational Law Review, Volume X, Number 273
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About this Author

John F. Lushis, Jr. Economic Development Norris McLaughlin Pennsylvania
Member

John F. Lushis Jr., a Member of the firm and Co-Chair of the Economic Development Practice, focuses his practice on real estate, commercial transaction law, and environmental law.

He provides counsel on an extensive diversity of transactions including leases, acquisitions and divestitures, tax-exempt and conventional financings, brownfields redevelopment, and an array of commercial agreements. John has worked on multi-million-dollar loans and major tax-exempt financings for businesses and non-profits including Cetronia Ambulance Corps, Lafayette College, Lehigh University, Moravian...

(484)765-2211
James H. Laskey Corporate Business Attorney Norris  McLaughlin Law Firm New Jersey
Member

James H. Laskey is past Chair of the firm’s Business Law Group. His business practice is primarily transactional in nature, including mergers, acquisitions, licensing agreements for life science and technology companies, and product supply and distribution arrangements, especially for consumer products and manufacturing companies.

In addition to his business practice, Jim maintains a practice in administrative and government regulatory law, including public utility, telecommunications, energy, and antitrust issues. For more than ten years, he served as counsel to the Independent Energy Producers of New Jersey, a trade association for the power generation industry in New Jersey. Jim is also a registered legislative agent for New Jersey legislative activities.

Jim currently chairs our cross-disciplinary practice group for solar energy. He has gained extensive experience negotiating agreements for solar energy installations, purchase power agreements, and agreements for the creation and sale of Solar Renewable Energy Credits, also known as SRECs.

He was Chair of the Public Utility Law Section of the New Jersey State Bar Association in 1997 and 1998 and also served as Chairman of the Board for the Somerset County Business Partnership. Jim has been selected for inclusion on the list of The Best Lawyers in America. He was also selected as the Energy Law “Lawyer of the Year” for the Newark, New Jersey region in 2013.

Prior to joining the firm, Jim spent three years working for the Antitrust Division of the United States Department of Justice in Washington, D.C. Before that, he clerked for New Jersey Supreme Court Justice Sidney M. Schreiber.

Jim is married to the Hon. Mary C. Jacobson, the Assignment Judge in Mercer County.

(908) 252-4221
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