Landowners face several potential risks when entering solar lease agreements, including:
Loss of Control and Use of Land
- During the lease term, the solar company often requires near complete control of the leased property to protect its solar project, which severely limits the landowner’s ability to use the land for other purposes.
- The lease is in many ways similar to selling the property for the duration of the term, although some limited uses such as agrivoltaic farming (crops that do not shade panels) or solar grazing (e.g., sheep) may be negotiated.
Environmental Liability
- Solar equipment can contain hazardous materials, which if mishandled can lead to environmental contamination on or around the leased land.
- Both the solar company and landowner could face enforcement or cleanup liability if contamination occurs.
- Landowners should conduct a baseline environmental assessment before leasing and insist that the solar tenant indemnify them against any environmental claims arising during the lease.
Legal and Contractual Risks
- Vague lease terms, especially those lacking clear exit clauses or payment structures, can cause disputes between landowners and solar developers.
- Failure to conduct proper due diligence on zoning regulations and land suitability may delay or jeopardize projects.
- Without legal representation, landowners risk accepting unfavorable terms that may impact their long-term interests.
Financial and Land Use Implications
- While leasing can provide steady revenue, landowners must weigh the trade-off of losing flexibility in land use for the lease duration.
- There may be challenges at lease termination regarding land restoration or renegotiation.
Summary Table of Key Risks
| Risk Category | Details |
|---|---|
| Control of Land Usage | Near total control by solar company; limited land use by owner during lease term |
| Environmental Liability | Possible contamination from hazardous materials; shared liability without proper indemnity |
| Contractual Uncertainty | Vague terms can cause disputes; unclear exit clauses and payment structures |
| Legal Compliance | Potential delays from zoning/environmental issues if not researched |
| Financial | Loss of agricultural or other land uses; dependency on developer for restoration at lease end |
Landowners can mitigate many risks by obtaining legal counsel, conducting environmental and title due diligence, negotiating retained land use rights, and ensuring clear, detailed lease terms with proper indemnities and exit provisions. Partnering with reputable solar developers who manage regulatory compliance and land restoration also reduces risk.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-potential-risks-for-landowners-in-solar-lease-agreements/
