Did you receive a letter in the mail from a solar company asking to lease your land? Maybe they are promising significant cash flow to you for leasing the land? If so, you might be wondering exactly what this entails.

                Generally, a solar company will propose a contract which includes three phases: an option or development term, a construction term, and an operational or traditional lease term. This initial phase may give the company an exclusive right to conduct technical studies, surveys, or other due diligence to ensure your property actually fits the company’s needs for their desired project. During this phase, you are generally able to use the property as you see fit and may receive  nominal payment for the company’s use of your property.

The next phase is the construction term which is when the panels and infrastructure are constructed and connected. This is when you’ll likely see the most activity on your property over several months. Accordingly, your use of the land is constricted, but payments for the company’s use of your land generally increase.

Lastly, there will be the actual lease term which is when the solar project is in operation. This is generally the longest term (and can last up to 40 years!) and accordingly, will often pay the most consistent rates with annual increases in rent due from the solar company.

As enticing as this sounds, there are several things to consider before signing up. First, and as can be expected, your lease to the solar company is exclusive and may significantly restrict what you can do with your property, even the portion you retain and which is not subject to the lease. Additionally, there can be significant property tax liabilities due to the change in use of your land. If not adequately discussed and accounted for in the contract, you could inadvertently be subject to additional taxes as a result of the solar lease. Finally, you should also consider what happens at the end of the project. At the end of 40 years, the solar company might not be in the same financial position it once was. How will you ensure the company will adequately remove its infrastructure and restore your land to its pre-development condition? This should also be solidified in the contract.

If you’re considering a solar lease, which can often be a way to maximize your land’s value and contribute to clean energy initiatives, make sure you understand the terms of the contract and what is proposed. It’s never a bad idea to involve an attorney to ensure your interests are protected.