Farmers urged to check solar decommissioning terms

Farmers considering leasing their fields for solar farms have been warned to check the terms around decommissioning the equipment at the end of the agreement – or potentially face a huge bill to return the land to its original state.

Leasing farmland for renewable energy projects can produce a valuable income stream – but Zoe Smith, Head of Commercial Property at ORJ, has warned that some farmers are not adequately prepared for what happens at the end of the lease.

“It’s very important that the lease terms clearly state what will happen regarding decommissioning of equipment at the end of the agreement,” said Zoe.
“This involves removing the equipment and restoring the land, work that can cost tens of thousands of pounds. Solar leases tend to be long – sometimes even 50 years with various break points – so it might be tempting to not think ahead, but it’s crucial.
“A lot of the equipment will be secured to the ground – and much of it will require specialist disposal. You certainly do not want to be burdened with responsibility for the clean-up.”
The process for decommissioning should be clearly covered in the lease heads of terms, said Zoe.
It is also possible to negotiate for a pot of money to be put aside for the decommissioning of a site, which helps to protect against disagreements or bankruptcy.
Zoe said: “I recently acted on behalf of a farmer and the solar company agreed to a decommissioning bond. The cost of the decommissioning work will be regularly assessed over the course of the lease, with the required amount put away so it is readily accessible whenever required.
“This has offered my client a greater deal of protection and peace of mind. It means that even if the company did go out of business and no-one took on the site, at least the funds would exist to bring the land back into agricultural use.”

There are other considerations when leasing farmland for solar or wind projects, including capital gains tax and inheritance tax implications, while selling a portion of land for a solar farm could affect eligibility for agricultural tax reliefs or subsidies.
It’s also common for easements or rights of way to be created for renewable energy projects to proceed, which may restrict access to parts of the farm and hamper usual activities.
Zoe added: “Renewable energy projects can be an excellent way for farmers to diversify income streams, but expert legal advice is strongly recommended to ensure interests are protected.”

ORJ has been involved in agricultural property matters for more than 40 years. Email team@orj.co.uk or call 01785 223440 for information.