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Powering profits with solar energy

Many landowners are exploring solar farming as a way of maximising the profitability of their sites, but there are some potential pitfalls to be aware of. Olivia Midgley gets some top tips from Dawn Carlisle, partner at Leeds-based law firm Shulmans.

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Get expert advice

While it might go against the grain, it is always advisable to get a specialist land agent on board to advise and assist on the best deal possible.

 

The solar market changes frequently due to reducing government set tariffs, fluctuations in the equipment and construction costs, and the value of investment in the site. Therefore, getting good advice is paramount, including a discussion with your accountant as there are various tax issues which may arise.

 

Secondly, involve your lawyer as soon as possible to check it is legally possible to develop the land in this way. For example, your title deeds may have restrictive covenants restricting the use of land or there may be third party rights which effectively sterilise parts of the land, therefore making it less valuable for the proposed purpose. It is best to know all of this upfront to avoid all parties wasting time.

 

In relation to costs, it is more usual than not for the solar developer to meet the landowner’s reasonable legal and land agents’ costs and your solicitor should get cover for you by way of a legal undertaking covering those costs.


Ensure you retain control

It is usual for a solar developer to ask you to sign an option agreement to give them time to get their planning permission and grid connection agreement.

 

Typically, these can last from nine months to two years. It is a good idea to include obligations on their part to pass the rights to drawings and planning information to you if they do not exercise the option and also for them to assign the benefit of any grid connection agreement they have entered into.

 

This way you have an advantage if there is a likelihood of anybody else coming to the table. Make sure there are rights for you to terminate the option should planning be refused, unless they are permitted to appeal.

 

As an aside, if your land is used for grazing there is usually no objection to you continuing to graze livestock on a licensed basis, subject to no harm being done to the solar apparatus. Other low impact farming operations may also be permitted.


Ensure you retain control

It is usual for a solar developer to ask you to sign an option agreement to give them time to get their planning permission and grid connection agreement.

 

Typically, these can last from nine months to two years. It is a good idea to include obligations on their part to pass the rights to drawings and planning information to you if they do not exercise the option and also for them to assign the benefit of any grid connection agreement they have entered into.

 

This way you have an advantage if there is a likelihood of anybody else coming to the table. Make sure there are rights for you to terminate the option should planning be refused, unless they are permitted to appeal.

 

As an aside, if your land is used for grazing there is usually no objection to you continuing to graze livestock on a licensed basis, subject to no harm being done to the solar apparatus. Other low impact farming operations may also be permitted.


Minimise risk

While negotiations proceed, the question of whether you should demand some security for the developer to decommission the kit at the end of the lease term is always a thorny point. From the landowner’s perspective, you want to be sure the developer will remove the equipment and if they just walk away you have some financial cover in order to do the work yourself. It is likely to be a condition of the planning permission that it is decommissioned at some point.

 

There are various means by which financial security can be arranged, whether at the beginning of the lease or at some later point. This should be discussed between the parties early in the negotiations as this can often be a sticking point at the last minute.


Agree terms

Once you are at the stage where the option has been entered into, the planning permission obtained and the lease is due to complete, some option agreements allow the developer to take possession of the site and carry out the development before completion of the lease.

 

In my experience, it is always harder to pin someone down to complete a document when they already have possession, particularly if rent is only due once the lease is complete. This can cause a headache, with potential for dispute. It is therefore perhaps better to grant a slightly longer term to allow the developer to carry out the installation only after the lease is completed, which still gives them enough years to be able to claim the full entitlement to the relevant tariffs once the development is complete and certified.

 

You will also want to consider the impact of any work being carried out and having contractors on your land. The timing of works may impact operations, loss of crops and it could also affect Basic Payment Scheme and its relevance if you can continue using the land. The actual presence of contractors on land can often lead to disputes if all of these things have not been discussed and agreed up front.


See the returns

While all of this may sound overwhelming, when thoughtfully considered the arrangements between landowners and solar developers can be highly beneficial for all concerned. There are many good developers out there and, with proper advice from advisers with specialist knowledge, there can be an excellent partnership where both the landowner and solar developer can benefit handsomely.

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