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Due Diligence for Solar Lease Offers

Updated: Feb 26


Due Diligence for Solar Lease Offers

According to the US Department of Energy, solar energy is the fastest growing and most affordable source of electricity in the United States. Solar power generation was 3% of the country’s electricity in 2020, but they have projected that this will increase to 20% by 2050. Solar companies are presenting landowners with lease offers as they plan more and more utility-scale solar farms across the country.

Solar leasing is very lucrative since it can allow landowners to turn underused or unused land into a significant revenue-generation opportunity. Solar lease agreements are long term in nature, and can last upwards of 50 years. Given the extensive duration of solar projects, it's important to not jump into an opportunity without conducting due diligence first.

Not only should landowners review potential lease agreements in detail, they should also investigate the solar company itself. Property owners who have received lease offers are responsible for conducting due diligence, but many wonder which questions they should ask. Landowners should fully understand the fundamental terms of the proposed agreement, how the lease will affect their property, and the right questions to ask solar developers. In this guide, we will outline a few questions that landowners can ask to conduct their own research.


*This article is not intended to be used as legal advice (LandGate cannot provide legal advice). It is intended to be used as a starting point to help kickstart the due diligence process.*

Did you receive a lease offer from a solar developer? Are you looking for a second opinion? Find your parcel on our map to get your free Property Report and see how LandGate's solar lease estimates compare:



Why is due diligence important?

A solar lease agreement is a legal contract that allows a solar developer to install and maintain a solar panel system on a landowner's property. The solar developer typically sells the electricity generated by the solar panels back to the local utility company. The landowner receives lease payments in exchange for allowing the use of their land.

In any legal agreement, both parties must do their research to build trust and create a mutually beneficial relationship. Given the long-term duration of solar land leases, this is especially crucial. A solar developer may occupy your land for 20 to 50 years, so it is well worth taking the time to thoroughly investigate.

Although most solar energy companies have good intentions, every industry has bad players. It is the landowners responsibility to conduct their own research to ensure that they are working with a reputable company.

Questions you should ask solar energy companies

Before examining the specifications of a solar lease offer, it is important that landowners vet the energy company itself. Most companies in the solar industry are credible and eager to start new projects, but every industry has bad players. The questions below can help you examine the credibility and success of a solar energy company:


  • How many solar facilities have you developed in total?

  • How long has your company been in business?

  • How many other projects are you actively working on?

  • Does your company have any other planned projects in this state/ county?

  • How many of your planned projects have entered the production/ construction phase?

  • Will your company be the one managing production after the solar panels are installed?

  • Do you have local land representatives who will be working with you over the life of the project?


Landowners may also find it helpful to visit operating solar facilities and meet with other landowners under solar lease agreements. If possible, this should be done for a solar farm that has been developed by the same company that has presented you with an offer. LandGate's LandApp tool can help you find operating solar farms near you:


solar data layer


Questions you should ask about your solar lease agreement

In general, terms of the lease contracts for solar energy projects are completely negotiable. Many solar developers push for a quick signing even though careful examination of any lease offer is crucial. Landowners should consult with an attorney before signing any contracts. Below are some important considerations:


  • What can/ can’t I do with my land during the lease?

  • What happens if they default on the lease agreement?

  • Will I be responsible for my property taxes and other fees?

  • What are the implications on heirs of the land?

  • What happens to the solar panels if the lease agreement is terminated early?

  • What is the minimum payment that I will receive?

  • What is the effect on non-leased land?

  • Who will maintain the land during the lease?

  • Approximately how many acres of my land will have solar panels placed on it?

Solar lease offer considerations for landowners

The numerous benefits of solar energy production have contributed to its rapid growth in the U.S. However, like any other renewable energy project, solar farms have pros and cons. The challenges of solar farms are also important for landowners to consider:

Advantages of solar power

  • Solar power creates good-paying jobs

  • The energy produced from solar panels is clean and renewable

  • Solar power benefits local communities and landowners in the form of lease payments. Similarly, the community hosting the solar farm benefits from the taxes paid by solar developers.

  • Solar power enhances US economic growth


Challenges of solar power

  • Solar farms can be considered unpleasant to look at

  • Royalties are not common in solar leases

  • The amount of electricity produced from solar farms is heavily dependent on weather conditions


Conclusion

Reputable solar companies should welcome questions from landowners and strive for a positive relationship given the long-term nature of land lease agreements. Although it may not be necessary to loop in an attorney immediately after receiving a lease offer, landowners should always seek legal counsel before entering into any agreement with a developer.

Are you interested in leasing your land for a solar farm? Find your land’s estimated value for a solar lease below, and then follow this step-by-step guide for publishing a free listing to LandGate’s marketplace:





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