12th July 2023
Renewable energy initiatives are becoming increasingly popular with landowners, particularly as the ventures are becoming more incentivised and usually require minimal landlord input once up and running – particularly in the case of solar.
But while the benefits to being involved in such a scheme can be lucrative, they do come with an array of pitfalls that landowners, whether they are renting the land or taking it on themselves, should look to avoid.
Don’t undervalue your land
As the renewable market continues to grow and the advancement of technology marches on, the profit from such schemes is likely to increase drastically. Avoid missing out on potential revenue by opting for a turnover rent which specifies a certain percentage of the income any schemes on your land make.
Consider the wider picture
Major schemes such as solar farms need to be connected to the grid via service media that runs through adjoining land to the nearest grid connection. While this will run underground, make sure the route for such is specified and you do not grant general rights for cables to be run anywhere over your retained land as this could sterilise its future development potential. Developers will not want to build houses on land where there is threat of other exercising rights over it.
Make the most of environmental opportunities
Even while another initiative is the primary project for your land, make sure you are considering any other options available to you to maximise the natural capital available. When renting out your land, don’t forget to reserve the right to utilise your land for any environmental credits it might be able to generate (for example nutrient neutrality or biodiversity net gain) so that it is clear to the tenant environmental benefits remain the property of the landlord to exploit.
Get the right advice
If you are considering taking on a renewable project on your land, have a professional team look at what is being proposed before you finalise a deal or agree heads of terms for a scheme. At the very least, this should consist of legal, tax and environmental experts. Make sure they have the chance to review the deal and have their input as signing an agreement before getting advice can be more costly in the long run.
Renewables projects like solar have the potential to provide good income streams spanning 20-to-30 years or more. As a landowning family, it may be worth considering ring-fencing these projects to allocate the income from them for future generations. To do this effectively, thought as to structuring (e.g. placing the land in trust) should happen before the prospect of obtaining planning permission. This helps to ensure that an associated transfer of land, for example into trust, takes place whilst the land is still at or near its working value, rather than an enhanced value.
Agreements for renewable schemes such as solar farms and anaerobic digestion (AD) plants will eventually come to an end, with requirements often in place for the site to be restored back to its original condition. This is likely to be a costly process so make sure you are aware of what these requirements entail and that there is an adequate sinking fund for the landowner to resort to in order to pay for that restoration if the tenant fails to carry out its obligations in this respect.
The Thrings Clean Energy and Development of Land lawyers are experienced specialists in all aspects of the built environment, working with landowners, developers, planners and construction businesses. To find out how they can assist in the success of your land project or development, get in touch.
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