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Solar Energy Leases

Spurred by federal, state, local, and utility incentives and the continuing emphasis on green energy, solar energy entities are building solar farms throughout the United States. These solar farms can take many forms. The most common is the PV or photovoltaic solar farm that consists of hundreds or even thousands of solar panels mounted on large racks. These panels contain photovoltaic cells that convert the sun’s light directly into electricity.

Solar Energy Farms

A PV solar farm can range from a few acres to hundreds of acres and is typically built on open unimproved land, often farmland. When identifying and selecting a site, solar energy companies will evaluate several key factors including topography, the proximity of the site to electric power substations and transmission lines, access to water, and local land use and zoning regulations.

Typically, a solar energy entity will propose, perhaps unexpectedly to the landowner, a lease or a pre-lease option that has a lengthy due diligence period. Compensation to the landowner during this due diligence period is often nominal, yet it is coupled with a commitment by the landowner to deal exclusively with the proposed tenant. Nevertheless, if the results of the due diligence period are satisfactory, the lease term could then extend 30 to 40 years or even longer at a rental rate per acre that is subject to escalation, resulting in long-term substantial passive income to the landowner.

What Landlords Should Know

As with most transactions, however, the landowner must be cautious. The leases proposed by the solar energy companies often contain many pages of detailed provisions ranging from access to insurance to roll back taxes. The lack of a proper review and understanding of these provisions can result in major difficulties. For more information, read our prior blog post, “Solar Energy Lease – What Landlords Should Know.”

©2021 Norris McLaughlin P.A., All Rights ReservedNational Law Review, Volume XI, Number 123
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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...

(908) 252-4221
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