SAMPLE DOCUMENT: Solar Land Lease Agreement
Disclaimer:
This sample solar land lease agreement is designed to educate non-profit organizations that might pursue investors for solar array installations. Neither Southface nor Agnes Scott College prepared this sample lease agreement and neither organization assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of this sample agreement by other parties. A non-profit organization interested in pursuing a solar lease should consult with legal counsel that is well versed in this matter.
NOTE: This sample lease document is for a ground mounted system in the state of Georgia. Consult with your legal counsel regarding modifications for use in another state and whether the word “roof” can be substituted for the word “ground” to make the lease work for a roof lease agreement.
LAND LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made and entered into as of the ____dayof______, (the "Effective Date"), by and between ("Landlord") and ("Tenant").
WITNESSETH:
WHEREAS, Landlord is the owner of that certain parcel of land known as ------having an address of ------and more particularly described on Exhibit A attached hereto and incorporated herein by reference (the "Land") together with all other structures and improvements situate on the Land (the "Improvements", and together with the Ground (hereinafter defined), the "Property");
WHEREAS, Tenant desires to lease from Landlord a portion of the Land constituting approximately --- square feet of space (the "Ground"), the same being more specifically described and/or depicted on Exhibit A attached hereto and incorporated herein by reference, along with other portions of the Land and equipment found on the Land (the “Premises, as hereinafter defined) for the purpose of installing and operating a solar photovoltaic electricity generating system on the Ground and in and around the Land (inclusive of the Equipment (hereinafter defined), the "System"), for the production of electricity and connection to the electricity transmission grid system (the "Grid");
WHEREAS, Landlord has agreed to lease the Premises to Tenant for said purpose, all subject to and in accordance with the terms hereinafter set forth.
NOW, THEREFORE, in consideration of $------and for the mutual covenants and conditions contained herein, and for other good and valuable consideration, Landlord and Tenant hereby agree as follows:
ARTICLE 1
DEFINITIONS
In addition to the terms defined elsewhere in this Lease, the following terms shall have the meanings set forth below:
1.01"Base Commencement Date" means the earlier of (A) twelve (12) months following the Commencement Date; or (B) the date upon which (i) the System is mechanically complete and operating, (ii) Electrical Output is delivered through the System to the Grid under local and state regulations, and (iii) the System is "placed in service" in accordance with the Code.
1.02"Code" means the Internal Revenue Code of 1986, as amended, and any successor statute, and all regulations promulgated thereunder.
1.03"Commission" means the Utilities Commission of the State or a comparable commission or agency of the State.
1.04"Commencement Date" means the day that is 10 days following the Effective Date of this Lease.
1.05"Electrical Output" means the total quantity of all actual net electricity generated by the System (measured in kilowatt-hours (kWh)) and delivered to the Grid, in any given period of time. Electrical Output does not include Environmental Incentives or Environmental Attributes.
1.06"Expiration Date" means the last day of the calendar month within which occurs (i) the twenty (20) year anniversary of the Base Commencement Date, or (ii) if applicable, the last day of the last extension in effect as described in Section 2.01(c).
1.07"Environmental Attributes" means the characteristics of electricity generation from the System that have intrinsic value, separate and apart from the Electrical Output, arising from the perceived environmental benefits of the System, including all environmental and other attributes that differentiate the System or the Electrical Output from energy generated by fossil-fuel based generation units, fuels or resources, characteristics of the System that may result in the avoidance of environmental impacts on air, soil or water, such as the absence of emission of any oxides of nitrogen, sulfur or carbon or of mercury, or other gas or chemical, soot, particulate matter or other substances attributable to the System or the compliance of the System or the Electrical Output with the laws, rules and standards of the United Nations Framework Convention on Climate Change or the Kyoto Protocol thereto or crediting "early action" with a view thereto, or laws or regulations involving or administered by the Clean Air Markets Division of the United States Environmental Protection Agency or any state or federal entity given jurisdiction over a program involving transferability of rights arising from Environmental Attributes.
1.08"Environmental Incentives" means all financial rights, credits (including tax credits such as the Federal Investment Tax Credit), rebates, benefits, reductions, offsets, allowances, grants and entitlements of any kind, arising from the Electrical Output or otherwise from the development or installation of the System or the production, sale, purchase, consumption or use of the Electrical Output.
1.09"Person" means the United States of America, any state government or political subdivision thereof, any governmental agency or authority, an individual, partnership, joint venture, limited liability company, corporation, trust or other business or non-business entity, and the heirs, executors, administrators, legal representatives, successors and assigns thereof.
1.10"REC" means the set of non-energy attributes directly attributable to the Electrical Output, specifically including "renewable energy certificates." A "REC" is an Environmental Attribute and includes capacity credits, tradable generation rights, benefits, emissions reductions, pollution/emission credits, offsets and allowances, including any and all air quality credits, benefits, emissions reductions or avoidances, off-sets or other benefits, howsoever entitled, as may be created or which may exist under any existing or future statutory or regulatory scheme (federal, state or local), for such purposes by virtue of or due to the System’s actual electricity production or the System’s electricity production capability because of the System’s environmental or renewable characteristics or attributes. “REC” does not include (i) all investment tax credits, any local, state or federal production tax credit, depreciation deductions or other tax credits providing a tax benefit to Tenant or any other Person based on ownership, tenancy or a security interest in the System, or Electrical Output from any portion of the System, including any investment tax credit expected to be available to Tenant or such other Person with respect to the System, including any tax credit available under the Code, and (ii) depreciation deductions and benefits and other tax benefits arising from ownership or operation of the System unrelated to its status as a generator of renewable or environmentally clean electricity.
1.11"State" means Georgia.
1.12"Utility" means Georgia Power Company, its successors and/or assigns, and/or any other Person which is the direct purchaser of the Electrical Output.
ARTICLE 2
TERM; CONDITIONS PRECEDENT
2.01Term. The term of the Lease shall be as follows (collectively the "Term"):
(a)Initial Term.Commencing on the Commencement Date and continuing until the Base Commencement Date (the "Initial Term").
(b)Base Term.Commencing on the Base Commencement Date and continuing until the Expiration Date (the "Base Term").
(c)Extensions.The initial twenty (20) year Base Term of this Agreement shall automatically extend for two (2) additional five (5) year periods on the same terms and conditions in effect upon the commencement of the Lease, unless either Landlord or Tenant provides the other with written notice of its intent not to extend this Lease at least ninety (90) days before the end of the applicable or extended period of the Base Term.
(d)Termination by Tenant.Tenant shall have the right at any time to terminate the Lease on ten (10) days’ written notice with no further liability to either party if Tenant determines in its reasonable discretion that performance of the Lease is commercially inadvisable or technologically impractical for any reason whatsoever.
2.02Conditions Precedent.The parties acknowledge and agree that the following are conditions precedent to the effectiveness of the Lease of the Premises:
(a)Due Diligence/Engineering Studies.Tenant’s receipt of satisfactory due diligence inspections, reports and studies relative to the Premises, the Land and the System, including (i) a report from a licensed engineer that the Ground will support the aggregate weight of the Ground Equipment, and (ii) certifications on title to, and the zoning of, the Property. All costs and expenses whatsoever of due diligence activities shall be Tenant’s responsibility.
(b)Financing.Obtaining (i) suitable and acceptable financing for the purchase and installation of the System, and (ii) a commitment from an equity investor(s), in each such case in such amounts as Tenant deems sufficient in its sole discretion.
(c)Power Purchase and Related Agreements.Obtaining contracts for (i) the sale of Electrical Output and all available Environmental Attributes and Environmental Incentives related to the System, in such amounts as Tenant deems sufficient in its sole discretion, and (ii) connection to the Grid (collectively the "Material Contracts"). Landlord shall provide reasonable cooperation to Tenant in this regard, to the extent required as the owner of the Leased Premises, including executing any documents, instruments and agreements which are in form and content reasonably acceptable to Landlord, to further the development, installation and operation of the System.
(d)Permits.Obtaining all permits, contracts and agreements required for ownership, installation, operation and maintenance of the System (collectively the "Permits").
(e)Regulatory Approval.Obtaining all necessary authorizations, certifications and licenses from the Commission and all other Persons for the operation of the System and the sale and delivery of Electrical Output therefrom (collectively the "Licenses").
(f)SNDA.The delivery to Tenant of an acceptable subordination, non-disturbance and attornment agreement from all mortgagees with respect to the Property.
2.03Satisfaction of Conditions; Waiver. Tenant shall use commercially reasonable efforts to attempt to satisfy the foregoing conditions as promptly as possible following the Effective Date. If the foregoing conditions are not satisfied or waived by Tenant prior to the date that is thirty (30) days prior to the occurrence of the Base Commencement Date (the "Termination Deadline"), either party may terminate this Lease by delivery of written notice to the other prior to the commencement of the Base Term, and neither party shall have any liability to the other except for those terms hereof which by their express terms or by practical implication survive the expiration or termination of this Lease. A failure to so terminate this Lease prior to the Termination Deadline shall constitute a waiver of the foregoing conditions precedent.
2.04Landlord Cooperation. Landlord agrees, at no cost or expense to it, to reasonably cooperate to assist Tenant in its efforts to obtain the Material Contracts, Permits and Licenses to install and operate the System, as well as to obtain any certifications, approvals and/or inspections by any necessary Person, including the Commission and Utility; provided however, except as expressly agreed herein, Landlord shall not be required to execute any document that would impose any financial liabilities or obligations on it not indemnified by Tenant or take or approve any action which would adversely affect it or existing tenants of the Land. Landlord further agrees, at no cost or expense to it, to reasonably cooperate, including executing a connection or similar agreement, which is reasonably satisfactory to Landlord, with the Utility or any other person or entity intending to purchase the Electrical Output.
ARTICLE 3
GRANT AND TERM
3.01Lease of Premises. All subject to and in accordance with the terms and conditions of this Lease, Landlord hereby leases to Tenant and Tenant leases from Landlord the following (collectively the "Premises"):
(a)Ground. The Ground for Tenant to install, operate, inspect, maintain, improve, repair, replace and remove (i) solar power generating panels and any additional equipment necessary to generate, monitor and transmit solar electrical power (the "Ground Equipment") and (ii) one or more inverters and any additional equipment necessary to generate and transmit solar power (the "Inverters", and collectively with the Ground Equipment, Connecting Equipment, and any other equipment, conduit or personal property installed on or placed upon the Premises and used in connection with the System, the "Equipment"); and
(b)Transformer(s).To the extent of Landlord's rights therein, any electric transformer in or on the Land, on the Property, or used by or connected to the Land (collectively the "Transformer") for Tenant to connect thereto to transmit electricity generated by the System to the Grid.
(The Equipment and Transformer are more particularly described on Exhibit B attached hereto and incorporated herein by reference.)
3.02Easements. Landlord hereby grants to Tenant, for the Term, a non-exclusive easement for ingress, egress and regress over and across and in and on the Property using existing or future constructed roadways and passageways as reasonably necessary, or otherwise without interference to Landlord or its agents, employees, invitees with respect to use and enjoyment of the Land and the Property, to enable Tenant to have vehicular and pedestrian access to the System for the purpose of installation, operating, inspection, maintenance, improvement, repair, replacement and removal thereof (the "Easements"). The use and enjoyment of the Easements shall be subject to the terms and conditions of this Lease, including without limitation, the provisions of Article 10 hereof.
3.03Solar Access.
At Tenant’s request, Tenant may prepare and Landlord shall execute for recordation by Tenant in the real property records of DeKalb County where the Premises are located a solar easement instrument (“SolarEasement”) in substantially the form attached as Exhibit C. The form of Solar Easement recorded must contain, at a minimum the following information:
(a)A description of the dimensions of the easement expressed in measurable terms, such as vertical or horizontal angles measured in degrees, or the hours of the day on specified dates during which direct sunlight to a specified surface of a solar collector, device, or structural design feature may not be obstructed by Landlord, or a combination of these descriptions.
(b)The restrictions placed upon vegetation, structures, and other objects that would impair or obstruct the passage of sunlight through the easement.
(c)The terms or conditions, if any, under which the easement may be revised or terminated.
Landlord shall not take actions, or allow others to conduct activities either materially inconsistent with the Solar Easement or otherwise, that cause shading of the System to an extent that materially impairs or reduces the Electrical Output of the System.
3.04Landlord Laydown Area.
Landlord will use commercially reasonable efforts to provide sufficient space in close proximity to the Premises for the temporary storage and staging of tools, materials and equipment and for the parking of construction crew vehicles and temporary construction trailers and facilities reasonably necessary during any installation, operation, inspection, maintenance, improvement, repair, replacement or removal of the System. Landlord will also provide Tenant a reasonable area for construction type laydown and staging. Landlord and Tenant will coordinate and cooperate in determining the amount of space required for such purposes.
3.05Environmental Attributes and RECs.
Tenant acknowledges that any Environmental Attributes and RECs belong to Landlord. Tenant shall cooperate with Landlord in any applications for Environmental Attributes or RECs; provided, however, that Tenant is not required to disclose proprietary information in connection with completing such applications.
3.06Environmental Incentives.
Landlord acknowledges that any Environmental Incentives belong to Tenant. Landlord shall corporate with tenant in any application for Environmental Incentives.
3.07Publicity Rights.
Landlord shall retain publicity rights with respect to the System. Without the express written consent of Tenant, which shall not be unreasonably withheld or delayed, Landlord shall not make or publish any public statement or notice regarding any Environmental Incentive relating to the System or the Electrical Output of the System. Subject to Tenant’s consent (not to be unreasonably withheld), Landlord shall have the right to publicize that it is serving as a "site host" for the System and to display photographs of the System in its advertising and promotional materials, provided any such materials shall not identify Tenant as the owner and developer of the System without the express written consent of the Tenant. Without the express written consent of Landlord, which Landlord shall not unreasonably withhold or delay, Tenant shall not make or publish and public statement or notice, or publish any advertising/promotional material, that (i) mentions Landlord, (ii) uses any marks or intellectual property of Landlord, or (iii) uses any photographs or visual depictions of Landlord or the Property.
Article 4
DELIVERY OF PREMISES; INSTALLATION OF SYSTEM
4.01Delivery of Premises. Landlord and Tenant agree that the Premises will be delivered to Tenant on the Commencement Date in an "AS IS, WHERE IS, WITH ALL FAULTS" condition, and Landlord makes no representation or warranty, express or implied, as to the condition of the Premises or the Property. Tenant agrees that it will accept delivery of the Premises in said condition, and that its use or occupancy shall be deemed a representation to Landlord that it has inspected the Premises and the Property and constitutes and finds the same satisfactory for its intended use.
4.02 Placement of System Components.
(a)Initial Placement. The System and Equipment shall be installed and/or placed on those portions of the Premises as depicted (or to be depicted) on the attached Exhibit B. Notwithstanding anything contained herein to the contrary, the System and Equipment shall be installed only in the locations and by methods that have been approved in advance by Landlord, and all costs and expenses associated with the same shall be borne by Tenant. Except as otherwise set forth in this Lease, Tenant shall have no right to access or utilize any other parts of the Land or the Property.