As solar energy projects continue to expand, landowners are increasingly approached by developers seeking to lease or purchase land for large-scale solar farms in Michigan. While these projects can provide long-term financial benefits, landowners must carefully evaluate contract terms to ensure their interests are protected. Here are four key considerations to keep in mind before signing an agreement:
- Lease Terms and Payment Structure
One of the most critical aspects of a solar contract is the lease duration and compensation structure. Solar leases often span 20 to 40 years, so understanding the long-term financial implications is essential. Landowners should review how payments are structured—whether through fixed annual rent, per-acre payments, or revenue-sharing models. Additionally, contracts should include provisions for rent escalation over time to account for inflation and market changes. - Land Use and Restrictions
Solar energy contracts typically include specific provisions on land use, which may impact a landowner’s ability to use or develop adjacent areas. Some agreements may limit farming, hunting, or other activities on or near the leased property. Landowners should clarify how much of their land will be utilized, whether access to non-leased portions will be restricted, and if there are limitations on future land sales or development opportunities. - Decommissioning and Land Restoration
At the end of a solar project’s lifespan, it is crucial to have a clear plan for decommissioning and restoring the land. Landowners should ensure that the contract includes a legally binding obligation for the developer to remove all infrastructure, including panels, wiring, and concrete foundations. Additionally, requiring financial assurances such as a bond or escrow account can help guarantee that decommissioning costs will be covered and that the land will be returned to a usable state. - Liability and Insurance Requirements
Solar projects come with potential risks, including property damage, environmental impacts, and liability for injuries. Contracts should clearly define who is responsible for maintaining insurance coverage and handling any legal claims. Landowners should require developers to carry sufficient liability insurance and indemnify them against damages or legal disputes arising from the project.
Of course, it is always wise to have a licensed attorney review any significant contract before signing. Many solar developers will cover at least some of the cost of a landowner who hires an attorney to review contractual language.
The attorneys at Dalton & Tomich have represented both developers and landowners in renewable energy deals. If you are considering becoming involved in a solar energy development, please do not hesitate to contact us. We would be happy to speak with you.
