solar energy leasing - university of maryland...solar energy leasing: what you need to understand...

SOLAR ENERGY LEASING:What You Need to Understand About the Legal Issues

Presented byKathleen J.P. Tabor, Esquire

February 9, 2017MidAtlantic Women in Agriculture Conference

Copyright 2017 - Law Office of Kathleen JP Tabor, LLC

Solar Energy Options

• Purchase equipment – own useOR• Purchase equipment – sell excess powerOR• Lease equipment – own useOR• Lease property for solar project


What are we talking about….?


ISSUES?


What is a Solar Farm?

Generally defined as an area of land where a large installation of solar panels have been

placed to generate electricity.


“Solar Farming”

QUESTION: Is “Solar Farming” considered an agricultural activity in your State?

ANSWER: Perhaps!Solar Companies may call it farming, but does your State Department of Agriculture classify the activity as an ag activity or just a permissive (conditional) use on your property?There is no standardized definition of the term “solar farm” by Stateagencies. Most industry representatives and government agencies referto this activity as utility-scale solar applications. However, someindustry companies like to use the term “Solar Farm” when negotiatingwith farmers.


Solar / Agriculture UseMid-Atlantic States

MarylandSolar projects are considered a “local matter,” but is a permitted use on agricultural land, unless on land that is preserved for farming under a State easement program.

DelawarePermitted use on agricultural land, but may result in higher land valuation

PennsylvaniaConsidered agricultural only if majority of electricity from solar panels on land is used for the production ofagricultural commodities

VirginiaCounty-based decision, some have removed solar projects from list of conditional uses on agriculture land

New JerseyTerm “solar farm” used loosely for large solar projects. Not defined as an agriculture use.

New YorkAgriculture use is only the production, preparation, marketing of crops, livestock, livestock products (i.e. horse operations), timber operations, mulch/compost/organic biomass

North CarolinaSolar projects are a conditional use on case-by-case basis.


PROS & CONS!

• Changes to agricultural land-use classification ?• Changes to real-estate tax ?• Changes to the use of the land ?• Changes to the productivity of the soil ?


SAMPLE GUIDELINES: Delaware’s Guide On Leasing Land for Solar Projects

Pros: Lease payment income stream Potential for higher land valuation than in agricultural production Potential use of fallow or non-productive land Removal of the system and land restoration at lessor expense

Cons: Legal review and expense Sale of the property ay result in ownership sale complications arising from

the transfer of lease responsibilities Potential loss of productive tillable land for term lease

“Solar Technology Guide & Resource V.1.0,” prepared by Brian K. White, Lally White LLP (2011)


Tax Consequences

• Depending on the definition of “agricultural activity” by your State. This will determine if you qualify (or will lose) any tax benefits due to the classification of your property as agriculture.

• Typical “test” determining ag activity:– Land tilled, pastured, woodlands– Bona fide agricultural activity generally recognized by State– The agricultural activity is primary use of land– Continuous in nature, or just temporary use


LEASING YOUR LAND

FIRST: DO NOT SIGN any “Letter ofUnderstanding,” “Preliminary Agreement,” “SiteControl Agreement” or “Land Lease & EasementContract” or any documentation regardless ofthe title….without

consulting with an attorney!KNOW THE BENEFITS & COSTSUNDERSTAND THE CONSEQUENCES


CONTRACTS Formality is not necessary (i.e. using words such as “Whereas” and

“In Witness Whereof” or “Seal”) but should be in writing! Plain English is encouraged “Letter of Intent” IS a Contract Segmenting by section or paragraph should be easy to follow and

logical “Headers” are useful for quick references Terms and conditions essential to the particulars of the agreement

A contract is essentially telling a “story” - it should be clear and easy to read, the rights and

responsibilities of each party clearly defined, and how resolution of breaches or disputes relative to

the contract are managed.


The Statute of FraudsANY contract that

• Cannot be performed within one year;• Transfers an interest in land;• Contracts for sale of goods over $500 +;• Establishes one party as the surety (guarantor) of

another party’s debt or obligation;• Requires the Executor of a Will to pay debt of estate

with own money; or • Is in consideration of marriage (i.e. prenups)

MUST be in writing to be considered valid!Copyright 2017 - Law Office of Kathleen JP

Tabor, LLC

Essential Elements of a Contract

• BEGINNING– Intro Paragraph

• Who are the parties, what is being contracted– Recitals

• MIDDLE– Terms and Conditions

• Beginning Date, Termination Date, Payments

– Warranties and Representations• Promises, Acknowledgments

– Obligations and Rights• Who does what, when, and why

– Remedies

• END– Provisions such as “Notice,” “Choice of Law,” “Transferability,”

“Severability,” “Dispute Resolution” and Signature Block


Common Elements in Solar Contracts• Development Activities

– Inspections, tests, surveys, evaluations, borings, etc.

• Leased Property identification– Formal description, maps

• Payment Terms– Payments during development phase– Long term payments for rental of land– Insurance, taxes, (personal & real) utilities, assessments

• Interests Granted in Land– Easements, Leasehold

• Duration of Use– “Due Diligence” Period, Operational Period, Termination Date(s)

• Confidentiality


Common Elements in Solar Contracts• Permits, Laws, and Recordation• Land Improvements (additional plantings?)

• Surface Damage / Hazardous Substances• Land Restoration• Quiet Enjoyment• Encumbrances and Liens• Assignments

– May the Company sell contract to another?– May the Landowner transfer ownership of land?

• Indemnification• Condemnation• Force Majeure• Default• Consequential Damages


MEAN SOMETHING!


State Departments of AgricultureMaryland Department of Agriculturehttp://mda.maryland.gov/Pages/default.aspxDelaware Department of Agriculturehttp://dda.delaware.gov/Pennsylvania Department of Agriculturehttp://www.agriculture.pa.gov/Pages/default.aspxVirginia Department of Agriculture and Consumer Serviceshttp://www.vdacs.virginia.gov/New Jersey Department of Agriculturehttp://www.state.nj.us/agriculture/New York Department of Agriculture and Marketshttp://www.agriculture.ny.gov/North Carolina Department of Agriculture and Consumer Serviceshttp://www.ncagr.gov/


http://mda.maryland.gov/Pages/default.aspx

http://dda.delaware.gov/

http://www.agriculture.pa.gov/Pages/default.aspx

http://www.vdacs.virginia.gov/

http://www.state.nj.us/agriculture/

http://www.agriculture.ny.gov/

http://www.ncagr.gov/

EXTENSION SERVICES RESOURCESUniversity of Maryland Extension Serviceshttps://extension.umd.edu/University of Delaware College of Ag & NRhttp://extension.udel.edu/ag/Penn State Extensionhttp://extension.psu.edu/Virginia Cooperative Extensionhttps://www.ext.vt.edu/Rutgers/New Jersey Extension Serviceshttps://njaes.rutgers.edu/extension/Cornell/New York Extension Serviceshttp://cce.cornell.edu/program/agricultureNorth Carolina State Extensionhttps://www.ces.ncsu.edu/


https://extension.umd.edu/

http://extension.udel.edu/ag/

http://extension.psu.edu/

https://www.ext.vt.edu/

https://njaes.rutgers.edu/extension/

http://cce.cornell.edu/program/agriculture

https://www.ces.ncsu.edu/

THANK YOU!Kathleen Tabor, Esquire

Law Office of Kathleen JP Tabor, LLC(443) 454-2163

www.ktaborlaw.com

On behalf of….Paul Goeringer

Extension Legal SpecialistUniversity of Maryland

Department of Agricultural and Resource Economics2200 Symons Hall | College Park, MD 20742


SOLAR ENERGY LEASING: What You Need to Understand About the Legal Issues

SUMMARY Of PRESENTATION

Check with your own State’s Department of Agriculture for current regulations and guidance. Do your due diligence!

CONSIDER THE PROS and CONS WHEN CONTEMPLATING A SOLAR LEASE AGREEMENT!

DO NOT SIGN ANYTHING WITHOUT FIRST CONSULTING WITH AN ATTORNEY!

SOLAR LEASES ARE COMPLEX—UNDERSTAND THE TERMS & CONSEQUENCES!

COMMON ELEMENTS IN SOLAR CONTRACTS

Parties Names

Recitals

Development Activities

Leased Property Identification

Payment Terms

Interests Granted in Land

Duration of Use

Confidentiality

Warranties and Representations

Permits, Laws, Recordation

Land Improvements

Surface Damage

Hazardous Substances

Land Restoration

Quiet Enjoyment

Encumbrances and Liens

Remedies

Assignments

Indemnification

Condemnation

Force Majeure

Default

Consequential Damages

Choice of Law, Notice, etc.

Maryland Department of Agriculture


Delaware Department of Agriculture


Pennsylvania Department of Agriculture


Virginia Department of Agriculture and Consumer Services


New Jersey Department of Agriculture


New York Department of Agriculture and Markets


North Carolina Department of Agriculture and Consumer Services


University of Maryland Extension Services

https://extension.umd.edu/ University of Delaware College of Ag & NR

http://extension.udel.edu/ag/ Penn State Extension

http://extension.psu.edu/ Virginia Cooperative Extension


Rutgers/New Jersey Extension Services

https://njaes.rutgers.edu/extension/ Cornell/New York Extension Services

http://cce.cornell.edu/program/agriculture North Carolina State Extension


EXTENSION SERVICES RESOURCES

Presented on FEB. 9, 2017 at MIDATLANTIC WOMEN IN AGRICULTURE CONFERENCE by KATHLEEN J.P. TABOR, Esquire

www.ktaborlaw.com ~ (443) 454-2163 ~ [email protected]








https://extension.umd.edu/

http://extension.udel.edu/ag/

http://extension.psu.edu/



https://njaes.rutgers.edu/extension/

http://cce.cornell.edu/program/agriculture


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