Renewable Energy

5th May 2022

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by Daniel Ball, Solicitor, Partner, Commercial Department

With the withdrawal of farm subsidies, farmers are having to look at alternative sources of income, and as part of that process farmers are considering diversification and in particular renewalable energy.

Since the government announced its strategy to reach net zero carbon emissions by 2050, landowners are being approached by developers with proposals to use their land for battery storage sites, solar generations, wind farms and other smaller forms of generation which can include balancing frequency equipment.

Farmers or landowners who are approached by developers in connection with such a development need advice from an experienced land agent to ensure the commercial terms reflect the current market values, and an experienced lawyer to negotiate the form of legal documentation.

At the outset of the transaction, the developer will need to obtain planning permission to use the land as a solar farm. This creates an issue for the developer who shall need to reserve the site whilst planning is obtained. The developer will not want to enter the Lease immediately and start paying rent to the landlord without knowing whether they can build the solar farm. The Landowner and the Developer therefore enter an Option. Typically, Option Agreements are for a specified period and during this time the landlord is expected to support the developer in the procurement of planning permission.

In the event of the Option being exercised, the developer will take an interest in the land and usually, this takes the form of a Lease.  The Option itself would typically include a plan showing the extent of the property to be leased. Albeit it is not sufficient for the landowner to simply grant to developer a Lease of the property. The solar farm shall need to be connected to the grid.

The successful gaining of planning permission is only one element of a successful development. If planning permission is granted, these developments need to be funded. Therefore, a qualified land agent and solicitor are so important to the landowner. Whilst the landowner may be tempted to maximise the rent and commercial terms of the deal for its own gain, it needs to bear in mind that its Option and Lease will probably be competing against other Options and Leases. Funders will undoubtedly be taking a commercial view of the Options and Leases available to them – it will choose those Options and Leases which generate the highest return for the funder. The Landlord would therefore be well advised to take a balanced view when negotiating the Option and Lease to ensure there is sufficient “fat” in the deal for both the developer and funder.

Whilst the farmer/landowner may be approached by a developer in connection with a renewable energy deal only once or twice, the developers have experienced multiple deals and are well practiced in the negotiations associated with options and leases for solar farms. The developer has continuity and regular experience with dealing with landowners and it is therefore essential that the landowner employs a land agent and lawyer with sufficient experience on dealing with solar farms, to be able to gain that level of continuity that the solar developer has, and not miss an opportunity for farm diversification.

For an initial discussion about your situation and how we can help you, contact Daniel Ball for specialist advice on danielball@fraserdawbarns.com or 01553 666606.

 

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This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek advice specific to your own circumstances.  Fraser Dawbarns LLP are always happy to provide such advice.

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