Solar farm - any advise?

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    Solar farm - any advise?

    I have no experience of commercial lets. A company has approached us to build a solar farm on our land with a long term lease. It's currently agricultural so there is no rateable value.
    1. How do I find out what business rates will be payable?
    2. They want to set the rent now and increase by cpi/rpi. Although it looks good now it probably won't in 30 years time. Is there a way to conduct a rent review with an independent body setting the rate? If so, who?
    3. If anyone has any experience of solar farms I'd be grateful for the opportunity to discuss it.

    #2
    Are you basing your "wont be good in 30 years time" thought on the cost of energy increasing?

    Surely your concern is with simply the money you could earn from a piece of land - and if you're happy with the rate then any cpi/rpi change is going to mostly be positive over 30 years.

    I don't think you can expect any windfall when energy rates increase.

    I'd be more concerned about who is responsible for removing the panels/infrastructure and disposal either at end of life or if the company does under.

    An enquiry with the NFU might be a good place to find experiences.
    My views are my own - you may not agree with them. I tend say things as I see them and I don't do "political correctness". Just because we may not agree you can still buy me a pint lol

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      #3
      It's mostly based on increase in PRS rents which far exceeds inflation. I wouldn't consider letting a house for 30 years with no possibility of increasing the rent if it fell below market rates. I believe some pay a percentage of turnover but they haven't offered this. They will pay into a pot for removal - any suggestions for securing any shortfall if they bust?
      I'll try the NFU but apart from pointing out the obvious I doubt they will able to help (you've heard what else NFU stand for?)

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        #4
        I think its probably an OK idea because if the tenant goes bust you are sitting on the panels. Get the lease checked out by a very experienced lawyer with relevant commercial property experience not some residential conveyancer and the commercial lease will typically render the tenant liable for rates and any other property outgoings. Keep a small corner of the field unlet and reserved to yourself if you can because you might want it for a 5G mast and to have a legitimate reason to keep an eye on whats going on I think you are better off with some sort of indexed income because the output of the panels may fall over time. My own mindset is some sort of commercialisation of the land, ie with solar panels is step one towards development which could raise the value of the land by many many thousands of percent.

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          #5
          No proper contract yet as they have to get planning permission first but good advice to get an experienced lawyer, thanks. The initial one has us liable for business rates which is what set off the alarm bells. If this doesn't change I think we will pull out. Paying rates and IHT (due to loss of agricultural status) on it will probably means the gain and inconvenience isn't worth it but it's hard to calculate when I have no idea how much rates could be.
          It's rural and off a narrow road so is unlikely to become development land. We can graze sheep on it once it's built so will be there frequently to check them, putting the infrastructure in is more likely to cause damage.
          What sort of indexed income is possible? Is there anything better than RPI?

          Comment


            #6
            I have experience of solar farm leases and rent review.

            I was involved behind-the-scenes for the landlord in a recent court case involving a solar farm - Monsolar IQ Ltd v Woden Park Ltd 2021 [ [2021] EWCA Civ 961, [2021] PLSCS 115, [2021] All ER (D) 06 (Jul) ] - the case report would be worth reading for what works the landlord required of the tenant for using 15 acres of bare agriculture land for a solar farm.

            Otherwise, my detailed experience is of battery storage facility so the process might be different for solar farm, but if you follow though my suggestions then you should be able to find out if or how different.

            Generally operators will not commit to leases longer than 25 to 30 years, with rent reviews which depending upon the agreed terms may be annually or at regular intervals, either index-linked or cap-and-collar or linked to increases in the rate per MW. The operator may also want a break clause at or after 10 years.

            Normally, what happens with such projects is that a solar farm developer (or an intermediary consultancy) approaches a landowner to ascertain willingness. Whether the intermediary acts for the developer or the landlord depends upon what is agreed at the outset. Often an agreement for lease would be entered into. An agreement for lease is a legal device where the grant of the lease is conditional upon something in this case obtaining planning permission and grid connection rights. A draft finalised lease is attached to the agreement which would be completed when the condition has been satisfied.

            There are two more stages. Firstly obtaining an offer of grid connection rights: such an offer is made by the local electricity company The cost of the works consists of two separate prices: the non-contestable price charged by the electricity company regardless; and how much the electricity company would charge to do all the works. Whether cost-effective to get the electricity company to do all the works would depend upon estimates from others.

            Secondly: obtaining planning permission. Planning consent should be for as long as possible, ideally not less than the term of the lease. The local planning authority might prefer a short consent.

            If the landowner can afford to, it is not necessary to wait for a potential developer to make the first contact, The landowner can be proactive by obtaining both the grid connection rights and the planning consent before offering the proposition to the market, invite competing bids from a number of the best developers.

            It is guessed that the planning consent would be renewed: renewable energy initiatives have UK Government support. The capital cost of the Grid connection works having been expended, an operator would not have to incur a repeat other than perhaps refurbishment.

            I suggest contacting commercial property surveyors with experience of solar farm projects: for example, Avison Young, (London office); or Strutt & Parker. Or consultancies, for example Roadnight Taylor, an Independent Power and Energy Consultancy - www/roadnighttaylor.co.uk


            You should also consult a solicitor experienced of solar farm leases. Osborne Clarke in Bristol acted for Monsolar IQ Ltd in the case i've mentioned above

            --

            I should be surprised if the VOA were to provide an estimate of Rateable Value before completion of the project. You might be able to estimate the RV yourself (and hence the business rates which are calculated by multiplying the RV by the UBR (Rate in the £) subject to any reliefs that might apply. You would need to trawl though the VOA non-domestic RV lists on-line. https://www.tax.service.gov.uk/busin...es-find/search. Suggestion: find on-line the postcode of an existing solar farm and enter that postcode for your search of the VOA site. The advanced search the VOA site includes a drop-down list of VOA special category codes but I do not know which code would apply to a solar farm perhaps 094.

            ---

            "I think its probably an OK idea because if the tenant goes bust you are sitting on the panels." Panels have a life-expectancy!

            Comment


              #7
              I would caution you about solicitors fees. I have some agricultural land and on 3 occasions over a 40 year period I have been approached by organisations who wanted a contract for something to do with the land and on every occasion after my solicitor had drawn up a lease or a contract the deal fell through. I realised that after the last time the people who had approached me were not "Principals" who make the decisions.
              The first occasion was a Subsidiary of a Local Authority who wanted a "yard" to store building materials to do with improvements to a network of footpaths/bridleways. I was approached by an employee and we "verbally" agreed a rental figure, my solicitor drew up a lease and when we sent it to the Authority they had found somewhere else. (Cost to me £375 in 1990)
              The second occasion, Another Local Authority wanted a Vehicular Access Agreement, a meeting was arranged with 3 Officers of the Council, myself and my solicitor where "terms were agreed" that the Council would pay my Solicitors fees for creating the document. When the agreement was sent to them, they ignored it, and sent me their own agreement which was totally different. So the agreement fell through.and I had to also pay my Chartered Surveyors Fees.as well as my solicitors fees.
              Third occasion (perhaps more pertinent to your query) I was approached by a Land Agent (Scout?) who said that he represented a House Builder who wanted to buy the land. But we never met the Owner of the house building company) Our solicitor drew up a contract and they then tried to change the deal by saying would we accept a deal where as a house was sold we would get paid a percentage, So that deal fell through I think the solicitors fees for that contract was about £2000.
              So only deal with principals. And you or your surveyor set Heads of Terms.
              Good Luck.

              Comment


                #8
                "I would caution you about solicitors fees"

                I agree. The solution is to always get an Undertaking on Costs from the other party's solicitors before preparing / sending any documents. The Undertaking should require the costs to be payable whether or not the transaction completes, unless the landlord/ seller withdraws.

                Where a transaction / letting is on the basis that each party is to be responsible for its own costs, an Undertaking on Costs can still be obtained with the proviso that on completion the seller /landlord would not require payment of its costs.


                Before providing such an Undertaking, the landlord / seller's solicitors would have to provide the other side with an estimate of the likely costs..The other side's solicitors would have to be put in funds beforehand otherwise that solicitor would be liable to pay. A serous buyer / tenant is unlikely to object.

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