In spite of recent changes to the subsidy regime and receiving a rough ride from both local communities and planning authorities, land is still being sought in earnest up and down the country for renewable energy development projects. We are still seeing considerable interest from landowners as the rental income (which can be around £1000 per acre) continues to make renewable energy developments an attractive revenue generator. However, regardless of the immediate financial inducements, it is crucial that all elements of the agreement between the developer and landowner are scrutinised, not least the easement agreements covering the connection with the national grid.
Scrutinise your agreements closely
It is the developer’s responsibility to negotiate the connection with the national grid, but it is the landowner who grants the ‘right’ or easement allowing the cables to traverse his/her land. Landowners should consider the proposed route of the cabling carefully, bearing in mind any future plans for the affected land as well as operational requirements once the development is complete. Regardless of whether an easement is granted for the length of the renewable project lease or in perpetuity, remember that it is, in essence, a right to lay the cables along a defined route and thus cannot be altered unilaterally; therefore it is prudent to consider incorporating a ‘lift & shift’ provision within the agreement.
Lift & Shift
A ‘lift & shift’ clause would enable the landowner (defined to include successors in title) to alter the path of any cabling (or pipework too if a housing development is proposed) - on the assumption, of course, that an alternative route is available. Failing to include a ‘lift & shift’ clause could seriously hinder future attempts to develop or sell the land and may cause problems if the land is part of a complex ownership structure, such as a family trust, where flexibility is important.
If the ‘lift & shift’ clause is activated at a future date, then it is important to extinguish the easement over the old route and re-register it at the Land Registry for the new route, while retaining the ‘lift & shift’ provisions for future generations.
A standard ‘lift and shift’ clause may give the beneficiary of the easement the right to decide that the cost of diverting the easement route is prohibitive and instead pay compensation to the landowner. This may sound perfectly reasonable – either the cables or pipe are moved so that you can develop your land or you receive compensation. However, the compensation is often limited to the cost of moving the cables/pipes and would not compensate you for the often considerable increase in value of the land if it could be developed.
The same principle applies if you sell your land for a residential development: it is quite possible that the utility companies will need to lay electricity cables and water and sewage pipework across your land; again the flexibility to be able to move the routes of cables and pipework is necessary in order to avoid compromising future operations on the land.
The payments for agreeing an easement with a utility company and compensation payments if the apparatus is not relocated under a ‘lift and shift’ clause can be considerable -but not compared to the sums generated by potential development land for housing; thus it is advisable to keep the bigger picture in mind when negotiating access and lease agreements with renewable energy providers. Last, but not least, don’t forget that land on which utility or transport works are taking place may mean it is not eligible for BPS although compensation may be negotiable from the organisation carrying out the works.