21 April 2023

Considering a solar development: key points for landowners

Solar panel development in farming field

The growing energy crisis coupled with the government’s plan to be carbon neutral targets has seen an increasing number of farming clients diversifying to solar and battery storage development projects.

Usually on schemes of this nature, it is common for a developer to be granted an option to lease subject to receipt of satisfactory planning permission for the renewables development.

Here are some key aspects that a landowner needs to consider when considering such a project.

1. Length of the option agreement

Option agreements are entered into between landowners and developers. They essentially grant the developer an option to purchase or lease the land by exercising the right at any time during an agreed ‘option period’ in return for an ‘option fee’.

The developer will naturally seek an option period which is as long as possible to exercise the option. The landowner should consider carefully the length of time they are willing to tie up their land for. Also, agreements can often contain clauses whereby developers can extend the initial option period if planning permission has been submitted but the decision is awaited. In these circumstances, it can be beneficial for landowners to negotiate a further option fee.

2. Use of the land and crop loss

Careful consideration needs to be given to the cropping schedule on the land and what would happen if the developer sought to exercise the option part way through a cropping cycle. The agreement needs to contain sufficient compensation provisions and also cover potential recovery for future payments such as green credits.

Consideration should also be given to an tenancy arrangements or contract farming agreements, as notice provisions may affect when works can begin.

3. Extent of the developer’s rights

The landowner needs to be careful to limit the extent of the rights being granted to the developer over the landowners retained land (the land not directly affected by the development but which is owned by the landowner), being cautious not to detriment its future use.

Solar developers involve many cables and wires, but consideration needs to given as to where these can be laid so as not to affect the landowners development and future use of their retained land.

4. Tax implications

Upon the change of use of land, certain tax reliefs may be lost. This needs to be considered carefully with your tax advisors, prior to entering in to any such schemes.

5. Planning application

The developer will seek an agreement from the landowner not to object to the planning application. The option agreement needs to be clear as to the finer points of the developers application, such as the layout of the development.

Further, it should consider and minimise the impact on any retained land to ensure that any planning application submitted is satisfactory to the landowner.

6. Reinstatement of the land upon completion of the lease

It is important that the lease contains sufficient reinstatement provisions and also the necessary surety and bonds to protect the landowner if something goes wrong.

Final thoughts

If you are considering a solar development on your land, our specialist energy and renewables team are on hand to assist you with your development requirements. Get in touch with our expert solicitors for more information.

Katie Wright, Wilkin Chapman LLP
Need help?

Contact Katie to discuss this further.

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