Frequently Asked Questions about Solar Leases
Q: How long does a solar lease last?
A: The term of a solar lease is typically between 20 and 30 years
Q: What effect will the solar lease have on my property?
A: If you currently receive a special tax valuation (in Ohio a “current agricultural use valuation,” in PA a valuation under Act 319) you may lose that status and have your real estate taxes increase. There may be a recapture of previous taxes that were foregone. Finally, the installation of the solar facility may trigger a personal property tax. The lessee should agree to pay these assessments.
Q: What does a solar array involve?
A: A solar array involves row after row of dark panels mounted on posts. There might also be associated equipment and access roads installed to service this equipment. The panels may be fixed, or they may be motorized to track the sun. They are connected by wires, which are buried.
Q: Once a solar array is installed, will that land have any further agricultural use?
A: Probably not. However, in theory “low” animals like sheep (not goats) could graze underneath. This should be negotiated with the solar company.
Q: If I sign a solar lease, can I later sign an oil and gas lease?
A: Yes, however, the solar company will require the oil and gas lease be “non-drilling” so that no oil and gas operations will be conducted on the surface. (This is not a problem in these days of horizontal drilling…)
Q: If I sell my land, can I keep future payments generated by the solar array?
A: Yes, if your lease is written properly.
Q: How much will I be paid for signing a solar lease?
A: Payments for landowners signing a solar lease are typically one of two options: either a percentage of the electricity sold (but beware “Hollywood” accounting), or a per-acre fee annually. A third option might include a combination of these two options.
Q: What is the per-acre annual payment for signing a solar lease?
A: Presently (i.e. August, 2019) landowners in Ohio and Pennsylvania are being offered about $600 per acre and up. The price received depends on the distance to the utility sub-station (the closer the better), the flatness of the land, the size of the farm, the proximity to a market, and of course, the amount of sun the property receives. For context, in sunny South Carolina, a 10-acre parcel next to the sub-station was leased for $2,000 an acre.
Q: What effect does signing a solar lease have on on surrounding non-leased land?
A: The solar company will want the right to take down trees or other obstacles that block sunlight on non-leased land. Depending on what use the landowner contemplates for non-leased land, the lease should be negotiated accordingly.
Q: Why does the solar company need to option my land for a period of time, instead of just installing the arrays immediately?
A: A solar company needs to test for solar “irradiance” to make sure the proposed site will be profitable. This typically takes one year.
Q: Can I use roads that the solar company will install?
A: Probably, but this should be negotiated with solar company and written into the lease.
Q: Can I still sign a solar lease if my property has a mortgage on it?
A: Yes, but the solar company will ask the landowner to obtain a mortgage subordination that gives the solar company priority over the mortgage. The landowner can certainly try to obtain the subordination on their own, but final responsibility should be on the solar company.
Q: Who maintains the land subject to a solar lease?
A: The solar company is typically obligated under the lease to maintain the land with solar arrays on it.
Q: What if someone becomes injured on the land?
A: The landowner should require the solar company to comply with Workers Compensation statutes and to carry a minimum amount of insurance coverage and to name the landowner as an insured.
Q: What happens when the solar lease expires?
A: It depends on what the lease says. Ideally, the lease should obligate the solar company to remove all equipment, foundations and roads not wanted by the owner. It might also require the solar company to test the soil to ensure that heavy metals included in the solar array have not leaked. The solar company might agree to post a bond to insure complete clean-up and removal of the equipment.
