A letter arrives in the post from a wind-farm development company, proposing to erect a windfarm on your lands.
A few days later, a smartly dressed representative from the company approaches you, and he promises you the sum of €5,000 to sign an Option Agreement for five years.
After that, he will give you €18,000 for every wind turbine that is erected on your land.
Sounds great, doesn’t it? Hold on. It gets better.
He promises that your daily farming life will not be interfered with, and that you will have the first payment within a month. All you have to do is sign on the dotted line.
There’s an old adage, “If something sounds too good to be true, it usually is”.
If I had to give one single piece of advice to farmers and landowners that find themselves in this situation, it would be to take your time, do not rush into signing anything, and seek expert advice.
There has been much coverage in the media surrounding the financial, social, health and environmental implications of wind-farms.
But it’s the legal issues to look out for that I address in this article.
An Option Agreement is one of the most onerous documents you can sign.
It allows the developer the option to acquire your lands and enter into a lease if your lands are required by the developer in the future.
If the developer requires the land, the developer is entitled to insist that you execute the lease, and you will have one or more wind turbines on your land, for 25 to 35 years, normally.
When the option agreement is signed, you have also agreed the terms of the lease.
The lease cannot be re- negotiated later.
The term of the Option Agreement needs to be considered. Generally the developer looks for a five to 10-year option period. This may not be acceptable to you.
If the term is longer, it should be accompanied with milestone payments. You should also consider inserting a clause that Planning Permission should be applied for by a certain time.
Last week, a farmer approached me with an Option Agreement that would have bound him in, allowing the developer an exclusive right to develop a windfarm on his land over a 10-year period and take a lease of his land for 35 years.
The document had the potential to tie his land up for almost half a century!
The farmer took my advice and did not sign, and currently we are negotiating with the solicitor for the windfarm development company, to insert terms that are more favourable to the farmer.
The option is generally triggered with the windfarm development company obtaining Planning Permission for a minimum number of turbines, and obtaining the connection into the national grid.
If the development cannot go ahead, the option is not exercised, and the Lease does not become operative. Consequently, the option payment may be all that is received by a landowner.
It is up to you to negotiate terms that suit you, and ensure that you are fairly compensated for the risk and onerous terms.
Windfarm Agreements can affect your property rights far into the future. Both the Option Agreement and the Lease need to be examined closely.
The windfarm developer is negotiating these agreements in his sleep, at this stage.
This will be your first encounter.
Developers tend to have their own standard Option and Lease Agreements.
These are drafted in the interest of the developer, not the landowner.The developer’s solicitor will draft the Agreement.This does not mean you have to accept the terms in the draft Agreement.
It is a starting point.
My standard advice to landowners is to sign no documentation, however informal it looks, before taking independent advice.
The Irish Farmers Association negotiated minimum terms with two major windfarm development companies (Element Power Limited and Mainstream Renewable Power Limited) in 2012.
The outcomes were:
1. Annual payment during the option period of €1,000.
2. Minimum annual lease payment of €6,000 (per MW) and €18,000 (per turbine).
3. Payment of 3% of energy price and green credits up to the year 2015, rising to 5% thereafter.
4. With regard to forestry:
(a) full compensation to be paid for grants/premia paid and remaining to be paid.
(b) the windfarm development company taking on full replanting obligations.
(c) landowners are to receive full crop rotational value for any felled forestry.
5. With regard to agricultural schemes, full payment for any losses in REPS, area aid and / or single farm payments.
6. Consultation regarding location of access and roads, and fixed payment on receipt of Planning Permission of €10,000 to €18,000.
These basic terms provide a valuable starting point.
See walshandpartners.ie/blog for more!
Go to www.windfarms.ie for advice when entering into a Windfarm agreement!