By Oliver Bussell, Partner, Commercial Property & Development and Planning
Cash-strapped landowners have always looked at commercial developments; but increasingly common nowadays are opportunities around renewable energy.
For example, a solar farm developer could take an option from a landowner securing the right to lease a site. That enables it to seek the necessary consents and connection agreements to make the site operational.
The obvious advantage to the landowner is that it will get an option sum payable at grant of the option (legal fees are generally paid by the developer, too). But care is needed. What will the effects of the lease be in practice? A solar farm is a living, working business, operating adjacent to or within an existing holding. Developers inevitably present their legal agreements as standard, but these need to be looked at critically because of the potential effects on neighbouring land both during site set-up and across the operational life of the plant.
Structuring payments is another issue: lump sum or yearly rent? Rent usually means more money overall - but that revenue stream can be uncertain. On one project we advised on, the client preferred rent but was worried about the covenant strength of the developer. Our solution, agreed late on in the drafting and outside the heads of terms, was a substantial rent deposit benefiting the landowner.
Reserving rights is important, too - the right to claim the benefit of biodiversity net gain, for example. There are also issues about the state of the site at the end of the lease: again, without careful structuring and legal input these can be unenforceable, paper promises.
Thinking clearly about the land and about enforcing contractual promises is critical to a successful renewables venture. CooperBurnett brings creative legal thinking to the dialogue between landowners and developers, helping strike a fair balance between their different priorities.
If you wish to discuss this further, please do not hesitate to contact Oliver Bussell by email: [email protected] or tel: 01892 515022
This blog is not intended as legal advice that can be relied upon and CooperBurnett LLP does not accept any responsibility for the accuracy of its contents.
Originally published in the Tunbridge Wells Business Magazine: www.twbusinessmagazine.com