As a land owner ( the lessor), it is ultimately your choice what you agree to and sign in relation to Wind Turbine developments that may impact your property.
A) You will be presented with a large set of documents prepared by a tier one legal firm engaged by the Developer (lessee) and documents will be biased and in favour of the developer. The documents will likely include a preliminary Development Agreement setting out the details of the site, proposed commercial returns, rights of entry for all sorts of purposes including surveying, ecological reviews, wind velocity monitoring etc. They may offer you a small sum for “independent review” however it is likely that a thorough review would lead to extensive negotiations and a large legal bill to do so.
B) The documents will likely provide further agreements including the Lease itself. You may be required to consent to a caveat on your title. This immediately means that ANY transaction involving the Title of your property is subject to the consent of the developer. It could mean that the whole of your title that is bound up in the Development Agreement (even if only a small corner of your property is impacted) will be subject to that caveat. Further you may be asked by the developer to agree to a caveat from a third party such as the developer’s financier or equity partner. Who knows who you may be dealing with.
C) The Lease Agreement will become operational upon completion and commissioning of the Wind Turbines. The Lease will be for a term of around 25 to 30 years and will have an option, exercisable by the developer, for a further 25 to 30 years. You may wait many years before the Development is completed.
D) It is likely that the lease will contain a recision clause in favour of the developer whereby the Lease can be rescinded at short notice (probably 3 months) with NO FURTHER OBLIGATIONS TO PAY YOU RENTAL. If you are relying on this income for retirement or to pay out inter generational family members, remember that there is a risk that the income stream can disappear.You will need to rely on the “make good” provisions in the Lease whatever they are and how enforceable they may be against the owner of the assets at the time.
The above items are just a few that we think will be included in Developer documentation and, in the absence of access to the Documents, it is impossible to tell what other Clauses may be included.
In general Turbine and Solar Farm developers seek to have access to the state power grid and to negotiate the pre-sale of power generated under an Long Term Energy Service Agreements (LTESA) that provides certainty of future pricing. In turn, the Developer will then use these agreements to raise capital (Equity and Debt) against the future income stream provided by the LTESA contracts. These contracts may be a much lower price than the spot price of energy however provide the Developer with a clear pathway to profitability.
The less the developer pays you as land rent and the higher the negotiated price through the LTESA route, the higher the profit margin and in turn the higher the return on equity employed.
You as the land owner are not likely to receive an adequate return unless you collaborate with your neighbours BEFORE agreeing to any proposed deal with a developer.
The Documents used by Wind and Solar developers are complex, thorough and will be drawn up strongly in favour of the Developer. Given the very long term nature of these agreements, it is in your interests to seek independent legal advice.
If you wish to discuss the above in confidence please reach out to us.
