Understanding Solar Lease Agreements in Maryland

A solar lease agreement is a long-term contract that can generate substantial income for Maryland landowners. Understanding the key terms, payment structures, and negotiation points is essential to maximizing your returns and protecting your interests.

What is a Solar Land Lease Agreement?

A solar land lease agreement is a contract between a landowner and a solar developer that allows the developer to install, operate, and maintain solar panels on your property in exchange for regular lease payments. These agreements typically span 25-35 years, with options for renewal.

In Maryland, solar leases have become increasingly attractive due to the state's renewable energy goals and favorable policies for community solar projects.

Key Components of a Solar Lease Agreement

1. Lease Term and Duration

Most solar leases in Maryland have an initial term of 25-30 years, with one or more renewal options that can extend the agreement for an additional 5-15 years. Understanding the full potential duration helps you plan for the future use of your land.

2. Payment Structure

Solar lease payments typically come in several forms:

• Per-acre annual payments: The most common structure, ranging from $800 to $2,000+ per acre annually in Maryland
• One-time upfront payment: A lump sum at signing, often combined with smaller annual payments
• Revenue sharing: A percentage of the electricity sales revenue
• Hybrid structures: Combinations of the above options

3. Escalation Clauses

Most well-negotiated leases include escalation clauses that increase your payments over time. Common escalation structures include:

• Fixed percentage increases (1.5-3% annually)
• Consumer Price Index (CPI) adjustments
• Step increases at specific intervals

4. Land Use and Access Rights

The agreement should clearly define:

• Exact acreage being leased (leased area vs. total property)
• Access roads and easement requirements
• Your continued rights to use unleased portions
• Restrictions on activities near the solar installation

Important Clauses to Negotiate

Decommissioning and Site Restoration

One of the most critical aspects of any solar lease is the decommissioning clause. This should specify:

• Who is responsible for removing equipment at the end of the lease
• Timeline for removal (typically 12-18 months after termination)
• Financial security (bond or escrow) to guarantee removal
• Soil restoration requirements

Property Tax Considerations

In Maryland, solar installations may affect your property taxes. Your lease should address:

• Who is responsible for any increased property taxes
• Whether you maintain agricultural tax assessment on remaining land
• How tax exemptions or abatements are handled

Insurance Requirements

The developer should carry comprehensive insurance, and your lease should specify:

• Minimum coverage amounts for liability and property damage
• Your status as an additional insured party
• Workers' compensation requirements

Red Flags to Watch For

When reviewing a solar lease agreement, be cautious of:

• No escalation clause: Your payments should increase over time
• Vague decommissioning terms: This could leave you with removal costs
• Excessive option periods: Long option periods with minimal payments tie up your land
• Broad easement language: Ensure access rights are reasonably limited
• One-sided termination rights: Both parties should have clear exit options

The Option Period Explained

Before the main lease begins, most developers require an option period (typically 2-5 years) to secure permits and financing. During this time:

• You receive smaller "option payments" ($25-100 per acre annually)
• The developer conducts feasibility studies and permitting
• You cannot lease to other developers
• The developer has the right, but not obligation, to proceed

Assignment and Transfer Rights

Solar projects often change ownership during their lifetime. Your lease should address:

• Whether the developer can assign the lease to another party
• Notification requirements for ownership changes
• Your rights if the original developer sells the project
• Protection of your lease terms through ownership transitions

Why Work with Experienced Developers

At Matrix Solar, we believe in transparent, fair lease agreements that benefit both parties. Our approach includes:

• Clear, straightforward contract language
• Competitive payment structures with built-in escalation
• Comprehensive decommissioning bonds
• Respect for your continued agricultural operations
• Local presence and long-term commitment to Maryland

Getting Professional Review

Before signing any solar lease agreement, we recommend:

• Having an attorney experienced in energy or agricultural law review the contract
• Consulting with your tax advisor about implications
• Speaking with other landowners who have signed similar agreements
• Comparing offers from multiple developers