Solar Energy Lease: What Is It And What Landlords Should Know

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As more people become aware of the need for clean, renewable energy, solar energy farms, which are large scale commercial power plants that convert sunlight into clean energy, are increasing at a rapid rate.

To boost solar farm development, solar energy companies lease land to construct their facilities. Thus, solar energy leases are becoming more and more prevalent. But what exactly are solar energy leases, and what should you as a landlord know? Read on to find out. 

What is a solar energy lease?

Solar energy companies often receive governmental incentives to construct farms. As a result, the companies try to construct their solar farm facilities on leased land. Companies will seek out land based on the amount of land available and the location to ensure maximum sunlight exposure.

Whenever a solar company is interested in leasing land for their farms, they will contact the landowner to sign their company’s standard form of lease.

What should landlords know about solar energy leases?

If you sign a lease with a solar energy company, you will receive a passive income, but there are some key factors you should know beforehand. Here is what you as a landlord should know about solar energy leases:

1.     Long Lease Term

A solar energy lease term should be long, lasting typically 40 years or more.

2.     Due Diligence

The tenant will likely require a substantial amount of time, typically around two years, to perform studies in exchange for a small payment, normally around $500.

3.     Fixed Rent Payment

Most solar energy companies prefer a fixed rent that will last the entire lease term.

4.     May Prevent Or Limit Mortgage Of Property In The Future

The solar energy company may try to prohibit or limit the land owner’s ability to mortgage the land now or in the future.

5.     May Request Use Of Adjacent Property

The solar energy tenant may request access, easements, and other rights for adjoining properties owned by the landlord.

6.     May Seek Representations And Warranties

The company may want broad representations from you, including representations about the title and the environmental condition of the property.

7.     May Seek Broad Remedies

The solar energy tenant will likely seek broad remedies if you default since solar farms require a substantial capital investment.

Final Thoughts

A solar energy lease will allow you to receive a passive income, but you should be aware of key facts before signing any documents. Although the aspects above are not guaranteed to be part of a solar energy lease agreement, they often are. Be sure to look through your respective conditions of lease thoroughly and carefully before making a decision.

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