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Community Solar: Site Lease, Easement and License Agreements

Site Lease, Easement and License Agreements

Community solar projects can be developed on a wide range of sites, including municipal or private property.  Along with agreements on the sale, transmission and purchase of electricity from the solar panels, developing community solar projects requires agreements on use of land or other property for power generation.  This section provides guidance on issues and model agreements for site leases, easements and licenses.

Urbana's Landfill Solar Lease

     On December 10, 2018, Urbana's City Council voted in favor of "A Resolution Approving an Option to Lease and a Ground Lease of Urbana Landfill Complex".   Attached to the Resolution are an Option to Lease Agreement covering 41 acres in a closed landfill, a Form of Solar Facility Ground Lease, and a Form of Memorandum of Option to Lease.

Leasing Municipal and Private Property for Solar: Key Steps and Considerations

The Solar Foundation – 2012

This document examines essential components for leasing municipal or private property for developing a solar power project.

  • "[M]unicipalities need to ensure that no legal obstacles exist that would hinder their ability to enter into solar lease agreements. Local government officials should seek legal advice from a qualified municipal or land use law attorney to determine what authority they possess to pursue solar leases, what state or other laws or regulations must be followed in the pursuit of these agreements, and any other specific considerations that may apply."
  • Essential Lease Components
    • Lease payments
    • Option payments
    • Lease escalators
    • Insurance - "Leases should state that developers will offer property owners insurance that adequately protects them in the event of injury or property damage."
    • System removal and site decommissioning - "Lease agreements should include language indicating that the developer is responsible for removing the system at the end of the lease (and for ensuring they are financially capable of doing so) and for returning the land to its original state."
    • Lease term 
    • Property tax 
                                                                                                                                          

 

Guide to Land Leases for Solar

Solar Energy Industries Association – 2016

Describes top questions for diligence on a solar developer that proposed to lease land, and key points that agreements between landowners and solar developers should address.

  • Have you completed similar solar projects in my state?  Can you provide references?
  • What land will be leased?
  • What is the effect on non-leased land?  "Considerations include vehicle access if the unleased portion is not along a public right of way; the accessibility of the unleased land to utilities and other services; and current and planned uses for the unleased property. For instance, solar developers will want to contract for protections to ensure that trees, buildings, and other improvements do not shade the solar panels."
  • How long does the term run?  "Solar developers may propose a lease term of 20 years or more with options to continue the lease for additional years."
  • How is rent calculated?
  • Who pays for taxes and other expenses?  "The lease should clearly identify whether the landowner or solar developer pays such items as real estate taxes, landowner insurance premiums and other landowner expenses associated with the property. Some issues to consider with respect to taxes are 1) whether the land leased is one or more separate tax parcels or part of a larger tax parcel, 2) whether the solar project will cause the land to qualify for any tax incentives, and 3) whether the solar project causes a loss of tax status due to conversion (e.g., if it is now used for non-agricultural purposes)."
  • What if the land is mortgaged?
  • What protections might the solar developer's lender want?
  • What happens to the developers's improvements?  "The landowner will want a clear understanding of what happens at the end of the lease. Often, the landowner will want the developer to remove the solar project at such time to return the land to its original state. Such removal can be expensive. To ensure the developer fulfills his or her obligations, a landowner may require a deposit or escrow to cover the costs of returning the land to its original state."
  • Who will maintain the land?  " Issues to consider include vegetation clearance, drainage (such as storm water management), buffer zones, fire safety, and wildlife. If the developer is responsible for, but fails to maintain, the land and that failure harms adjacent land or future use of the leased land, the landowner may want the right to be reimbursed for any costs or losses. A related concern regards liability if someone becomes injured on the land. The landowner may want the developer to maintain insurance or indemnify the landowner for claims arising from the developer’s use of the land, including environmental issues."
  • What rights (if any) should there be to water, minerals and other natural resources?
  • Whom should I contact if I have questions about the lease, especially following the installation?

Solar Power Purchase Agreements: A Toolkit for Local Governments

                                                                            

IREC – 2015

In addition to community solar projects serving multiple subscribers, other solar projects serve a single large electricity user.  A municipal government may purchase all of the energy produced by the solar project.  A retail solar power purchase agreement is a long-term contract to purchase power from a third-party owner and operator of a solar energy generation system.  In this report, the model agreements are drafted for a municipal government to purchase all of the energy produced by the solar project. 

Although a community solar project is different and involves multiple subscribers, this document provides several model agreements that can be used by a local government interested in pursuing a community solar project on municipally-owned land, including:    

  • Model Site Easement Agreement
  • Model Site Lease Agreement
  • Model Site License Agreement

The report also provides a Model Power Purchase Agreement. 

Revisions to these model site easement, lease and license agreements may be necessary for a community solar project. For example, the model site easement, lease and license agreements all contain language referring to an underlying power purchase agreement. In the context of a community solar project, this language would have to be removed, and other terms may have to be added.

 

University of Minnesota Law School Environmental Law Clinic, "A Guide to Sample Community Solar Garden Leases