WIND FARM AND RENEWABLE ENERGY AGREEMENTS
Let us walk you through a scenario:
You are approached by a representative of a development company who wants to offer you a windfall for a wind farm development on your farm. The rep is making you an offer that seems too good to be true, a €5,000 payment to sign an option agreement for five years and a whopping €18,000 for each wind turbine every year for the next 25 years. All you have to do is sign the document and let them use your land. He’s even offering to contribute towards any legal or professional fees you might have. Sounds great right?
You have noticed that your neighbours have signed on the dotted line and you know that the IFA have agreed a set of minimum terms with these development companies. Things are a bit tough at the moment and the money would come in very handy, so why not sign the document and reap the benefits you ask? The quicker you sign, the sooner you get the money after all!
Wind Farm Solicitor Cork
Let me give you the facts before you sign any documentation, there are a number of both legal and financial implications that the development of a wind farm on your land can have.
It’s important to note that these guys are negotiating agreements on a consistent basis, most likely every day of the week in fact. This is most likely the first encounter you have had with such a representative. Do NOT sign anything without first seeking legal advice.
An option agreement is without doubt one of the most onerous documents you could sign. What you may not realise is that if your land is required by the developer this option agreement gives them the option to acquire your land and enter into a lease without any further negotiations. Once the document is signed they can legally insist that you enter into a lease at any time and can place one or more wind turbines on the land for at least the next 25 years. The developers legal team will ALWAYS draw up the option agreement and it will always favour the developer both financially and legally. It is vitally important that both the lease and the option agreement be scrutinised by a legal expert that represents YOUR best interests. You do not have to accept the terms of any draft agreements and it is certainly not in your interests to do so. Think of the draft agreement as a starting point for negotiations and talk to a solicitor immediately, I can not stress this enough… do not sign anything at this point. Wind farm agreements can impact on your property rights for decades into the future so you need to be making clear decisions.
- All agreements should be accompanied by a map to ensure you are fully aware of the exact land that will form the agreement.
- Your solicitors legal team can instruct an engineer on your behalf to review a map, this will avoid any future disputes.
- Have you any future plans for that land? Perhaps you were hoping to pass it on to a son or daughter in the future so that they could build a home for their family?
- Never include land in the agreement that is not necessary for the development project.
- Will the wind farm development impact on your own day-to-day farming activities, have you considered access and egress?
- Will any grazing land be impacted? Does the agreement require you to change the location of existing fences and gates?
Wind Farm Agreement Lawyer Cork
The terms of the agreement should be considered carefully and examined in great detail. If the terms are not acceptable to you, now is the time for negotiation. In general, we find that the developer looks for terms in the region of 5-7 years. If this is not acceptable to you or if the term is longer than this, milestone payments should form part of the agreement. We would also advise that a planning permission clause be inserted into the document, ensuring that if planning permission is not obtained within a certain timeframe, the terms of the lease/option agreement are voided.
Milestone payments are an effective way of ensuring you are compensated accordingly.
- Milestone payment calculations will vary from developer to developer and can be complex in their breakdown. Seek legal guidance at all times.
- The level of rent will be determined by the payment provisions.
- The payment received may be calculated based on the gross payment received for each turbine.
- Rental payment should be based on a minimum amount per megawatt of installed capacity, not exporting capacity.
- Your solicitor should also negotiate a percentage proportion of the operating proceeds for you. This can be calculated based on the amount of turbines on your land, the overall development or on a pro-rata basis.
It is important that your solicitor has a full understanding of wind farm development definitions to ensure you are getting the best deal possible. Here are some important questions you need to be asking:
- Will further payments be made if turbines are updated to more efficient models or if new technology becomes available?
- Do you need to seek a clause that entitles the developer to vouch the operating expenses by way of an auditors certificate?
- When the end of the lease is reached will all machinery be removed from your land?
- Will all accompanying infrastructure be removed from your land at the end of the lease?
- Will the land be fully restored to its original state when the lease is over? If not, will this be paid for by the developer?
- Do I need a bond to be put in place to ensure expenses are covered in the event that the developer fails to restore the area to its former state?
- Does this agreement impact on your ability to comply with Department of Agriculture schemes? Will it effect your entitlement to receipt of payments?
It is also vitally important that you seek professional advice from your Teagasc advisor, accountant and tax advisor to ensure there are no surprises further down the line.
It is important that you obtain an indemnity from the developer, this will ensure protection in any instances where you may lose entitlements as a direct result of the development on your land.
You should also be aware that quite a number of these agreements will contain a clause where the developer can have the benefit of the agreement assigned to a third party. Under these circumstances your consent is always required, and you should seek additional payment. Notice should always be given to you in writing and within an agreed timeframe. We would also advise that you make sure you are entitled to a copy of insurance certs on an annual basis.
In relation to claims that may arise from the developers use of your land, you should always ensure that you are indemnified by the developer.
In many instances you will find that there may be clauses that restrict your uses on adjoining land. Speak with your legal advisor about your rights to the use of surrounding lands for any agricultural activity. You should also have full use of all infrastructure (roadways, access and egress) that have been constructed by the developer.
Where you have plans for the land in the future, it is important to avoid any future problems by having the developer sign an agreement that protects these plans.
Termination clauses within your contract will normally be for the benefit of the developer and will be voluntary upon receipt of written notice. In instances where this clause is in place, a payment for voluntary termination should be included in the contract.
Once the agreement has been terminated, it is important to ensure that the developer does not retain any rights to your land.
An extension to the terms of your contract is not unusual, however, where a developer wishes to extend their lease, a renegotiation of terms and rent should be required. It is important to ask if it is essential for this option to be included in the original contract.
All legal expenses should be covered in full by the developer.
Keep in mind that it is also important for the developer, that you as a contract party receive independent legal advice prior to signing any contract.
All engineering fees and professional costs incurred by you should also be paid by the developer. You should not be at a loss financially as a result of this agreement.
Wind Farm and Renewable Energy Solicitors Cork and Dublin
Summary: It is important that a legal expert reviews and renegotiates this contract on your behalf. Some clauses that appear in the agreement may be unnecessary or unfair and it is imperative that questions are asked and terms negotiated prior to signing any documentation. This process is to ensure we find a fair balance between the needs of the developer and your rights.
There is no doubt that having wind turbines on your land can offer you with a new income stream, however it is important that you go into this process with your eyes open and ensure you are aware of any legal implications that may arise. We also find that many clients like to form groups with neighbouring landowners who may also be interested in wind farm development. This gives rise to an opportunity to negotiate collectively and will increase any negotiating power you may have. A collective or co-op will also strengthen relationships with neighbours and surrounding farm owners. There is no rush with the process, it is important to take your time and realise all aspects of the development deal. Do not let the developer pressure you into an agreement that does not represent your best interests. It is important to recognise that the development company is most likely more in need of your land than you are of their development.