As fossil fuels become more scarce and more expensive, the energy sector has been moving toward renewable energy sources, such as solar and wind. These renewal energy sources often require large areas of land. Some private property owners and real estate developers have been profiting off this trend by entering into lease agreements with energy companies. These leases can take many forms. Some leases are designed for rooftop solar panels whereas others are for raw land solar farms, battery storage facilities or wind turbines.
Battery storage companies strive to make the urban electric grid more resilient, reliable, “green” and affordable for consumers. They accomplish this by developing properties into community-scale energy sources. They typically involve energy storage in batteries, solar power generation, vehicle charging and other types of alternative energy generation.
The alternative energy company may contact a landowner with a proposal to lease or buy their property if the property meets their criteria in terms of size, access, zoning, location, and other factors.
The purpose of this article is to highlight a few issues that often arise in the context of negotiating these types of leases. As detailed herein, we suggest involving an experienced real estate attorney early in the process to help identify any legal issues.
- Define the Demised Premises. The landowner may wish to specify precisely where the alternative energy tenant’s demised premises will be located on the land, how the tenant will access the premises, and whether any other areas outside the demised premises will be utilized for construction or future maintenance. The tenant may provide a survey of the property showing the limits of the demised premises the access easement and any other areas that require access. For example, the landowner may have future plans for developing a portion of the property which could potentially conflict with the location where the utility company preferred to locate its facility. Therefore, it is important to define the demised premises early in the process in order to ensure that the parties are in agreement as to where the battery storage facility will be located.
- Rent Commencement. Utility companies often wish to delay full payment of rent until the utility company has received government approval, including zoning permits which are necessary to construct the facility. The landowner typically prefers to have some assurance that rent will commence as of a specific date. To the extent that these terms are not ironed out in the Letter of Intent, the landowner should consult with an attorney in order to fully understand how the rent commencement date is defined in the lease agreement.
- Environmental. The utility company may ask the landowner to make certain representations and warranties about the environmental condition of the property. The utility company will most likely be conducting its own due diligence and the landowner should review its records and consult with their attorney before agreeing to make any such representations or warranties.
- Zoning/Land Use. Battery storage facilities will require zoning permits from the local municipality. The lease agreement may allow the utility company to conduct certain due diligence to ascertain what permits are required, and the likelihood of obtaining said permits. The lease may also address (i) the level of involvement by the landlord, if any, in the zoning process; (ii) the landlord’s cooperation with the tenant’s zoning application; and (iii) a contingency in the event that the tenant us unable to obtain or maintain of its government approvals. The landlord may also take into consideration how the tenant’s proposed facility may impact future development and use of the property as a whole, as well as a potential subdivision of the property.
- Insurance and Indemnification. Landowners may be concerned about their exposure if the batteries leak or catch fire. The lease agreement will typically include certain insurance and indemnification clauses. The landowner should consult with their attorney in order to fully understand the terms of the agreement and ensure that the landowner is “covered” in the event that a third-party commences an action against the landlord with respect to the battery storage facility.
For more information on alternative energy/real estate issues in New York, please contact us at (914) 338-8050 or send an e-mail to firstname.lastname@example.org. We look forward to hearing from you.
Betensky Law PLLC
118 N. Bedford Road, Suite 302
Mount Kisco, New York 10549
This is ATTORNEY ADVERTISING. This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of an attorney/client relationship. Prior results do not guarantee a similar outcome.