There are numerous issues that need to be considered where a landowner is approached by a wind energy company. An outline of some of the matters are briefly set out below;
The Developer will seek for the Landowner to sign an Option Agreement. The purpose of the Option Agreement is to allow the Developer to determine whether the wind quality is good and the possibility of realising profits is sound. Where this is the case the Developer wishes to tie the Landowner into a long term Lease Agreement. The Option Agreement will provide for an option fee in order to secure the Contract legally, but, very often these fees are nominal or very low. In the case of smaller wind farms it is often the case that no option fee will be paid save for €1. However, Landowners should insist that their legal fees are discharged by the Developers.
The Option Agreement allows the Developer to enter the Landlords property to carry out research and investigations as they deem necessary and to install a meteorological mast. A typical agreement prevents the Landowner from being involved with any other wind energy Developer on the land or on other land owned by the Landlord. The Landlord is also prevented from carrying out any activity on the property which may interfere with the wind speed or wind direction over the property itself, or interfere with the development that the wind energy company wish to carry out. The agreement will provide that the the Landlord is prevented from doing this activity that is in the opinion of the Developer liable to damage or potentially damage the development or the wind flow. This is obviously open to interpretation and could cause a difficulty. For this reason, activities should be agreed at the outset. The Lease will include a clause not to allow any livestock from the Landlords land to interfere with the development. There will also be rights of way and wayleaves over the property in respect to general access and maintenance in respect of the development.
The Option Agreement will more than likely set out that the Landowner is prevented from applying for planning permission that might adversely affect the commercial development or operation of a wind farm. This will interfere with the Landowners freedom to deal with the lands as they may wish to. It will also compel the Landowner to assist the company to obtain suitable road and electricity grid connections to the lands of the proposed development. The Landowner should insist that the lands are reinstated to their original state on the expiration of the option period or the completion of the Lease.
In order to avoid a situation where the land is overrun with wind turbines it is advisable to insist on a restriction as to the number of wind turbines that can be installed under the Option and Lease Agreement.
The Option Agreement can stipulate that a Landowner will not apply for any planning permission without first requesting the Developers approval. This may include any development to your own family home so this must be considered.
Some Option Agreements seek to provide that the period can be extended if the Developer deems fit to allow them to make planning applications or connection to the electricity grid. This is obviously vague, could tie up the lands indefinitely and should be avoided.
The Lease and Option Agreement are dealt with at the one time. The Option provides that the Lease will commence on the service of notice by the wind energy company. At that point the Lease terms kick in. The term of the Lease is often in or around 25 to 30 years with the possibility of renewal. The automatic renewal should be avoided and the Landlord should be in a position to renegotiate the rent and other matters at the expiration of the term. This should be reflected in the Lease.
The rent payment itself may either be a flat rent or a proportion of the energy generated. Landowners should insist on the rental payment being the greater of the two and on transferring with respect to the calculation of the energy generated. The payment of rent should be linked to the consumer price index to allow it to increase with inflation.
The Lease should provide that insurance is set up and maintained by the Developer and an indemnity should be provided to indemnify the Landowner against all legal actions as a result of the development.
A clause will be included in the Lease to transfer the freehold interest of a portion of the land that will be deemed to be the substation by ESB networks. This is either in form of a long term Lease of 100 years or the actual freehold interest itself. The substation should be a very small area but this clause can amount to difficulties in that a Landowner does not want to simply give away some of their land to the ESB, but the difficulty from the Developers point of view is that the ESB require same and it is in effect out of the Developer’s hands.
It is important that Landowners consider what their long term intentions are for the land as wind energy is a long term investment and entering into long term agreements should not be taken lightly. A balance needs to be struck within those agreements to allow for the commercial activity of wind energy itself and preserving the Landlords interest/control over their property. It is essential to obtain the proper advice for signing any such agreements. Augustus Cullen Law have been advising agricultural lands for over 100 years. If you have any questions please do not hesitate to contact us and we will be delighted to talk to you.
If you have any further queries, please contact any of the following from our property law group:
- Ray Fitzpatrick, Associate Solicitor
12 September 2013