Rooftop Solar Leases: Due Diligence, Negotiation, and Drafting Considerations for Landlords and Tenants

Description

Solar panel rooftop leases have become increasingly popular as the demand for alternative energy sources, including solar energy, continues to grow, and commercial building owners (landlords) consider the additional income that may be generated by leasing out this minimally used space to solar power providers (tenants). Landlord and tenant counsel should understand the considerations unique to these types of leases to minimize risk for their clients.

Due diligence considerations for landlords include the financial stability and expertise of the tenant as the term of rooftop solar leases is often 20+ years, and detailed plans and specifications of the tenant's project. Landlords should also consider the impact the lease and equipment may have on property valuation and any potential future property sales. Tenant due diligence includes site evaluation confirming the roof's ability to support the requisite equipment, as well as regulatory and licensing considerations.

Key lease provisions for both parties include: (1) lease term and structure, allowing for rent increases over the lengthy term; (2) a clear description of the leased premises since the tenant is leasing only a portion of the building; (3) responsibilities for roof maintenance and repairs over the course of the lease; (4) right of assignment; (5) easements granted to the tenant; and (6) lease termination and equipment removal.

Listen as our expert panel discusses marketplace trends for rooftop solar leasing. The panel will examine key due diligence considerations for landlords and tenants and address how to negotiate and draft rooftop solar leases to help minimize the likelihood of future legal disputes.