6 things farmers should know about solar & wind farm lease agreements.

Renewable energy projects can be low-stress revenue streams for farmers to earn regular income through good years and bad ones. To make the decision process easier, we’ve spelled out what farmers need to know before signing a solar or wind farm lease agreement.

Have you been approached by an Operator about putting a wind turbine on your land, or leasing your land to a solar farm? Solar and wind farm lease agreements can be a great option for farmers to add a regular income stream to their regular farming operations. They can also be beneficial to the local community, particularly during the construction phase.

But like any commercial agreement, it’s important to make sure you really understand what you’re signing up for; any landowner approached about having their land used for a renewable energy project has to weigh up the benefits of the project against possible issues that may arise.

The renewable energy and commercial property law teams at Johnston Withers Lawyers regularly advise on matters like this with South Australian farmers and landowners, and in this article we’re addressing six common questions we get asked by landowners trying to decide whether to enter into a solar or wind farm lease:

1. What interest will the Operators have in my land?
2. What is an easement?
3. What does an easement stop you doing?
4. What other obligations might I have under a solar or wind farm lease agreement?
5. What obligations does the Operator have to look after my land?
6. What happens if the Operator goes into liquidation?

But before we dig into these in more detail, it’s important to note that when landowners are approached about a wind farm lease agreement or a solar farm lease agreement, the process usually involves an option deed – meaning that the Operator is seeking to secure the landowners while they undertake testing of the land and the approval process.

So basically, be aware that entering into an option deed doesn’t guarantee that a wind farm will actually be built; the Operator is just seeking to secure an option to do so.

Read the rest of this article to help get your head around lease agreements but remember, these are not the only matters to consider, so it’s important that you only use this information as a guide and you seek professional advice before signing a solar or wind farm lease agreement.

Our friendly team is here to help make sure you make an informed decision and that your interests are protected in any wind farm lease agreement or solar farm lease agreement. For expert advice tailored to your specific needs, get in touch with us here.

1. What interest will the Operators have in my land?

A solar or wind farm lease agreement is the lease of the land on which the renewable energy project would be situated, and the land over which the monitoring and preliminary works and investigations would take place.

You still own the whole of the land, however the Operator will generally require the exclusive use of some portions of the land (e.g. where a wind tower may sit and the cable or other access runs), and also require access to the whole property, for non-exclusive use.

The Operator will usually require easements to register these interests in the land, in addition to a caveat for the option deed or the lease itself (and don’t worry, we explain all this below).

2. What is an easement?

An easement is an agreement that identifies the Operator’s interest in the land, which is recorded on the certificate of title. Easements are usually registered over the land during the construction and then during the operational phase of the wind or solar farm. There are a number of different easements that the Operator may require:

Access easement

An access easement generally refers to an easement mainly for roads, from the public roads to the facilities the Operator constructs. The Operator would be required to construct and then look after those roads. Where there are no restrictions as to access, you’d also be allowed to use them.

Power line easement

There will also be a power line easement for power lines and cables for the electricity generated. Whether lines are underground will depend on the Operator’s plans. It’s likely they’ll be underground if the area is suitable, and overhead in rocky areas or where costs become an issue from the Operator’s perspective.

Wind flow easement

Another common easement relates to the “wind flow” area and allows Operators to make sure there are no trees or structures over a certain height surrounding a wind farm.

3. What does an easement stop you doing?

There are various obligations with respect to easements areas. It’s likely that easements will include obligations that certain areas will not be able to be used by you for farming activities at certain times.

Your use of the land (i.e. in the non-exclusive use areas) is also subject to you indemnifying the Operator against any damage you may cause to their equipment. The chance of causing damage to the cables, etc. may be remote but if it were to happen, the potential claim could be huge. It’s important to make sure that you speak with your insurance broker to make sure your insurance policy would cover this risk (and would be sufficient in value to cover any loss)

4. What other obligations might I have under a solar or wind farm lease agreement?

Once again, this differs depending on the lease.

Generally, you’re not entitled to allow others to obtain rights over the land, such as for mining, other wind farms, or similar. You might not be allowed to plant trees or shrubs without consent, again on the basis of how they may affect the wind generation, within the wind easement area at least.

The lease may also limit how the land is transferred either by sale or inheritance. It would likely not stop you from transferring the land, but would require that any transfer of the land is subject to the lease, and a new owner cannot ask the Operator to remove their equipment, etc. The lease may also require any new owner to enter into a deed of transfer of lease (this is relatively commonplace in commercial lease transactions).

It also means that your mortgagee (if you have one) would need to be aware of, and consent to, the lease or caveat so that in the event of foreclosure they can’t deny the Operator’s use of the land.

Having trouble understanding the solar or wind farm lease agreement you’ve been given? Got questions? Talk to our expert renewable energy and commercial property law team for help.

5. What obligations does the Operator have to look after my land?

It’s common for wind farm lease agreements to require the Operator to comply with environmental laws as part of their terms, and:

• Maintain the land and make good any damage
• Fence off dangerous areas
• Take “reasonable precautions” against damage to trees, crops, vegetation, etc.

In some instances, there’s no option but to cause damage to trees and crops (for example, when a proposed road location has trees or other materials on it). Landowners should consider what other forms of damage can’t reasonably be avoided by their operations, and factor that into their decision to sign a wind farm lease agreement or other renewable energy project lease agreement.

6. What happens if the Operator goes into liquidation?

This is perhaps one of the biggest potential risks of entering into any wind farm lease agreement. If the company that you enter into the agreement with (or its successor if they sell the rights) goes into liquidation, there may be insufficient funds to de-commission the plant. This means that the items could be left in place, potentially in a state of disrepair.

If the equipment had value, it would probably mean that it would be removed. There is a real risk, however, that useless equipment could be left on the property at the end of the lease.

Remember, seek professional advice before signing any agreement

Of course, it’s important to emphasise that each wind farm lease agreement and solar farm lease agreement is different, and these are not the only matters to consider, but they give you a sample of what a wind farm lease agreement (or similar) could entail. So only use this information as a guide, and seek professional advice before signing an agreement.

Proudly independent and fiercely local, Johnston Withers has been helping South Australian families, individuals, businesses and communities for over 75 years.

Please feel free to contact Andrew Mitchard or any member of our commercial property or renewable energy law team on 08 8231 1110 to discuss any potential solar farm lease agreements or wind farm lease agreements. The Operator will usually pay the costs of obtaining advice from us.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.