What to do (and what to avoid) when your renewable energy project lease is ending
|Author: Travis Benn||Read time: 6 mins|
|Client type: All||Technology: all|
Many landlords find lease negotiations challenging. It’s often a stressful time, particularly if you’re unfamiliar with the process or have suffered through less than ideal circumstances with a prior tenant.
While we always recommend you seek expert opinions during the upcoming renegotiations, it’s equally as crucial to keep yourself equipped with some vital knowledge.
Here’s a closer look at some of the things to do (or avoid) when your lease is nearing its end.
Document your negotiations
We encourage landowners to carefully document all the discussions and negotiations during the lease renewal process. Keep detailed meeting notes, including everything that’s been considered and agreed.
There are instances where solicitors have made errors in the lease wording, resulting in the landowner receiving much less rental income than expected. Don’t let this happen to you! Mistakes can go unnoticed for years.
Identifying and correcting errors can be a painstaking process and can involve reviewing all past correspondence to evidence that there has been a meeting of minds or not between the parties involved, which has not been correctly reflected in the final version of the lease.
If you don’t have detailed meeting notes and correspondence, it’s far more likely you’ll struggle to show errors that may have occurred during the process.
Check the terms
We also strongly advise landowners to opt-out of legislation that could be a real headache further down the line. Remember to opt out of sections 24-28 of the Landlord and Tenant Act 1954.
Entering into a new lease without opting out of this clause will leave your tenants with much more rights than you want them to have.
The way the legislation works is by providing your new operator with the security of tenor (by default), leaving you with few options as a landowner eager to retain control over your site. As long as you ensure you opt-out, you shouldn’t be impacted by this however, there are certain formalities that must be followed strictly.
Carry out a land rent audit
A professional, comprehensive land rent audit is a crucial step for renewable energy projects nearing the end of their lease.
It’s not simply about checking payments. Ideally, the process will be carried out by an independent, knowledgeable expert, ensuring all payments are up to date before the new lease begins.
Without an audit, landowners could inadvertently waive their right to past compensation or income within a new lease, where mistakes have been and have gone unnoticed.
Here’s a closer look at some of the things to avoid when your lease is nearing its end.
Don't forget the past
Landowners should also be aware of any existing rights that the new lease will extinguish, or any previous entitlements under the old lease that they might be throwing away when signing a new lease.
Carrying out a thorough audit of the old tenancy agreements provides a handy way of contextualising the present – so be sure you know the history of the site before you sign off on a new lease.
We recommend taking a comprehensive look through the prior contract, to check for any clauses and contractual obligations or breaches that could become a problem and/or waiver any entitlements due to you.
Be careful about time
Your time is precious, so keep this in mind throughout all of your activities. There are a few important reasons to focus on good timekeeping during the end of a lease:
1. If errors are identified but you’re running out of time, there’s not long for them to be corrected.
2. Negotiations are often far lengthier than imagined.
3. Lease expiries during ongoing negotiations can lead to negativity and ‘bad blood’ put the tenant at risk of acquiring a protected business tenancy.
Remember how critical the time factor is, and help save yourself the headache of entering into negotiations too late or unprepared. You can help set yourself up for success by carefully exploring what happens when a lease ends.
Who is signing the new lease?
Lastly, make sure you’ve carefully assessed the new leaseholder. Landowners should be careful about entering into a new lease and make sure that the company they’re partnering with has the resources and assets to fulfil all obligations, including when dealing with special purpose vehicles of a larger group of companies.
We always recommend that landlords keep in the know, and assemble the right team to help support negotiations. Your site operator is critical to the success of the project itself, so to ensure a mutually beneficial outcome, take a closer look at who they are and if you are concerned about any aspects of the arrangement, speak up during the negotiation stage.
As we’ve outlined here, there’s no need to panic when it’s time for your lease to end. By making sure you have the knowledge you need, you can choose to either renegotiate with the existing tenant or find a new tenant who will better suit your future plans.
An expert team of advisors can also provide added insights, instead of everything falling to you.
Start your planning early, rather than allowing the end of the lease to creep up on you unexpectedly. This will put you in a much stronger position.