Solar land lease

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Ginny'sMom
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Joined: Sun May 27, 2018 1:13 pm

Solar land lease

Post by Ginny'sMom » Sun Jan 27, 2019 9:25 am

Does anyone have any experience with leasing land to a solar company? Just got a 3rd letter from National Land Realty and trying to figure out if it is worth pursuing. Thanks

riverguy
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Re: Solar land lease

Post by riverguy » Sun Jan 27, 2019 9:46 am

No real experience but I would basically consider it a sale. You aren’t going to be able to use that land again unlike oil & gas or wind. Sure seems that the negotiated price would need to reflect that.

Topic Author
Ginny'sMom
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Re: Solar land lease

Post by Ginny'sMom » Sun Jan 27, 2019 11:12 am

Thanks for response. Can you explain what you mean by not use the land again? I didn't know that solar would damage the land? Thanks

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OAG
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Re: Solar land lease

Post by OAG » Sun Jan 27, 2019 11:21 am

Ginny'sMom wrote:
Sun Jan 27, 2019 11:12 am
Thanks for response. Can you explain what you mean by not use the land again? I didn't know that solar would damage the land? Thanks
No damage to the land in the very long run. The problem is they will want a really long lease (maybe 50-100 years) and occupy a lot of the land during the lease period making it unusable in the usual sense.
OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979 21 years of service @ 38.

Cmnilz87
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Re: Solar land lease

Post by Cmnilz87 » Sun Jan 27, 2019 11:35 am

Look up a picture of a solar farm on agriculture land. It really depends on how big they want to make the farm.

I’ve seen solar farms that take up a whole section of land, they basically make roads all over and rut up the roads. I work for a wind/solar company. Here’s some things to take into account.

1. Smallest solar farm is 2 acres usually or 100k sq ft., but you need an extra 2-3 acres for service roads and such.
2. They may want to de boulder or deforest any shelter belts to increase sunlight
3. I’m not super high up the chain, but on average based on where you live you can get anywhere from 2500-5k/acre for rent. Profits for solar company can reach 20-30k (per acre) due to the 30% income tax credit for putting in a grid. So remember that for negotiating purposes.
4. Solar company will pay off original cost of CL structuring in 5-10 years and it’s then pure profit afterwards. So that’s why they try to lock you in for a 30 year lease or longer.

5. It’ll take a while to rehabilitate that land if you do cut the lease eventually, but the profit alone for the solar company after 10 years is enough for them to keep you leasing as long as possible. Renegotiate afterwards, I know a couple farmers who are very involved in their land still and others hang it up and chill cause they’re bringing in 300k in rent a year on 200 acres


Like OAG said, it’s a long term lease which is almost selling it. You won’t be able to do anything else with it, and you won’t be able to sell it

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Ginny'sMom
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Re: Solar land lease

Post by Ginny'sMom » Sun Jan 27, 2019 11:53 am

Thanks, that helped a lot. We aren't currently doing anything with the property anyway, However, the property has been passed down from children to grandchildren and tying it up in a long term lease would likely make things even messier.

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willthrill81
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Re: Solar land lease

Post by willthrill81 » Sun Jan 27, 2019 12:02 pm

Ginny'sMom wrote:
Sun Jan 27, 2019 11:53 am
Thanks, that helped a lot. We aren't currently doing anything with the property anyway, However, the property has been passed down from children to grandchildren and tying it up in a long term lease would likely make things even messier.
Would all/most of the land be tied up in the lease?

If you aren't doing anything with the property, then it's costing you every year in the form of property taxes. At least offsetting that expense is worth considering. But losing the option of being able to do something else for possibly the rest of your life and maybe your heirs' as well is big.

So these are the factors that I would consider:
1. How much of your land would be tied up in the lease?
2. How long would the lease be?
3. Are there any exit clauses from the lease for you or them?
4. How much income will the lease provide?
5. How much are the property taxes on the property?
6. What other uses could the land have, and how inclined are you to pursue them either now or in the future?
7. What does your family, especially your heirs, think of all this?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Watty
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Re: Solar land lease

Post by Watty » Sun Jan 27, 2019 12:27 pm

The longer the lease is the more you have to worry about if the company will actually be around that long.

In some industries doing a strategic bankruptcy to get out of unfavorable leases is not uncommon and they may do business as smaller sub-companies that can individually go into bankruptcy without affecting the main company.

In addition to ending the lease early they could also leave non-functioning equipment on the last that you would need to pay to remove.

This does not necessarily make it a bad deal but you would just need to have the contracts written to handle this scenario.

You also need to consider how large power lines will cross your land to get the power from the solar panels. These could have a bigger impact the the solar system itself.

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