Acting for landowners – battery storage leases
Leave a CommentThis post will cover the following aspects of battery storage leases:
- What is battery storage?
- What is required for battery storage?
- Legal process
- Option agreement
- Lease
- How we can help
What is battery storage?
Production of renewable energy such as solar and wind produced energy results in energy being produced intermittently and at differing levels, which can result in more energy than that which is required. Somewhere to store this energy is necessary so that it’s not lost. This storage can be achieved using battery storage developments.
What is required for battery storage?
An expanse of land, preferably near a grid connection. Landowners with suitable land may find themselves being contacted by developers interested in using their land for battery storage.
Legal Process
Developers will usually want to negotiate the use of the land via a commercial lease arrangement. However, prior to the completion of a lease, the developer will want to ensure that satisfactory planning permission can be obtained for its proposed use of the land. Therefore, they will often require the landowner to enter into an option agreement in respect of the land prior to completing a lease.
Option Agreement
This will provide the developer with various rights over and in respect of the land with a view to securing planning permission for the proposed use. These rights are likely to include the right for the developer to carry out site investigations etc. on the land. The option agreement will last for a fixed period, often extendable in certain circumstances when satisfactory planning permission has not been granted at the expiry of the initial option period.
As a landowner, legal advice should be sought to ensure that the option agreement grants only the necessary rights over the land, exercisable in the appropriate manner. It should also grant that the option period and any circumstances where it can be extended are correct and acceptable, and that the agreement contains adequate provisions for the reinstatement of the land. This is in the event the developer does not exercise the option and the lease is not completed.
It is often the case that the landowner is to receive a non-refundable option payment on completion
of the option agreement and care must be taken to make sure this is provided for in the option agreement.
Lease
If the option is exercised, the landowner will be granting a lease of their land to the developer. This is for the use of the land for a battery storage project.
The lease will often be a long-term lease (20+ years is not unusual) and it is critical that legal advice is sought to make sure that the agreed terms of the lease are correct and that the arrangement works for the landowner.
In addition to the usual lease considerations for the landowner, they must also consider rental income, rights to be granted to the tenant, and the ability for the tenant to transfer and underlet the lease or terminate the lease. Also, due to the nature of the use of the land, care must be taken to ensure the lease includes adequate decommissioning provisions for when the tenant vacates the land in the future.
Landowners should also be aware that if their land is mortgaged, their lender’s consent will be required to the terms of the option agreement and lease.
How we can help
We have experience acting on behalf of landowners in connection with the preparation, negotiation, and completion of option agreements and leases for these types of projects. We also have good working relationships with local land agents involved in negotiating the terms of the transaction.