A number of years ago I inherited about 100 acres of land. It is a poor quality hill farm and would not provide a decent living through traditional farming methods. Recently I was approached by a Wind Energy Company who expressed an interest in installing Wind Turbines on my land. It seems like an interesting proposition but I am wondering are there any pitfalls?
Such a proposition from a Wind Energy Company could be a very positive and fortunate thing to happen to you, particularly for the type of land which you describe. However there are a number of important factors that must be taken in to consideration before entering in to any arrangement with this Company.
Arrangements entered in to with Wind Energy Companies are usually by way of Option Agreements. The Agreement will set out the terms and conditions of the contract between the Company and the land owner. Under the Agreement the Company is exclusively given an initial fixed period of time known as an ‘Option Period’ in which it can survey your land to see if it is suitable for development as a wind farm. If it obtains the necessary planning permission and decides to go ahead it can then exercise the option and call on you to grant a Lease of the sites of the wind turbines and rights of way and way leaves to them. The length of the term of these Leases is usually at least 25 years. . It is also important to consider whether you might have any other future plans for your land because if the erection of the wind turbines goes ahead, your the land could be tied up for decades to come.
The Option Period allows the Company sufficient time to determine whether the land is suitable for the installation of wind turbines. The duration of this period is usually between 3 and 5 years. In this time the Company will have the right to enter on the land to carry out various works and tests to see whether the project is possible and financially profitable. Factors that will be taken in to account by the Company will include the wind quality, ease of access to the site, possibility of obtaining planning permission and so on. The Agreement will usually contain a right for the Company to extend the Option Period to allow for unexpected delays such as obtaining planning permission or a connection to the electricity grid. You should ensure there is a limit to this extension period or you could find yourself in the situation whereby your land is tied up indefinitely
The financial aspects of the Agreement are all important. You should negotiate for payment by the Company for the exclusive right to access and to carry out works on the land to test for it’s suitability Payment must also be considered for a possible extension of the option / test period. Most importantly, the rent to be paid under the Lease if the project goes ahead and the Company exercises it option to take the Lease must also be set out. There are various ways in which the rent can be calculated. A percentage of the income received by the Company for electricity generated by the wind turbines subject to a minimum amount is common.
Other important matters to consider in the Agreement are the works which will be carried out on your land. You should ensure that it provides that the land will be restored to it’s former state should the project not go ahead. Liability and Insurance – any claims arising out of the project by third parties should be taken against the Company’s Insurance and not yours. An indemnity should be given by the Company for your protection against any such claims and the Company must have insurance to be able to meet those claims. It is vital therefore that you receive proper legal advice with regards to the contents of any Agreement, before entering in to such a contract, so as to ensure your best interests are protected.