NC State Extension Publications

Threshold Issues

  • Can you provide good title?
  • Are your future land use plans compatible?
  • Are there restrictions on your property that are incompatible?
    • Zoning
    • Security for indebtedness
    • Unique features of property
    • Existing encumbrances
  • Proximity to three-phase power line & substation

Due Diligence

  • Who is the developer?
    • For Profit
    • Nonprofit
    • Leasing agent
    • May the lease be assigned?
  • Registered to do business in North Carolina
  • Financial condition
    • Financial statement
    • Third party reporting
      • Better Business Bureaus
      • Dun & Bradstreet (fee-based)
        • www.dnb.com

Typical Clauses

  • Confidentiality (reject)
  • Choice of law (should be North Carolina)
  • Choice of forum (generally should be county where property is located)
  • Attorney fees clause (is it one-sided?)
  • Arbitration/mediation clause

Compensation

  • Percentage of revenues
  • Fixed payment
    • Indexed
  • Renewable energy credits included in compensation formula?

Project Footprint

  • Footprint
    • Entire facility
    • Concrete pads
  • Land for access
    • Location of access specified in contract?
  • Reimbursement for damages
    • How calculated

Provision for Project Failure/Termination

  • Insolvency/bankruptcy clause
  • Provision for removal of equipment
    • Bond or escrow?
  • Restoration of land

Taxes

  • Payment of property taxes
    • PUV rollback
  • Income tax issues
    • Ordinary income
    • Capital gain treatment

Liability

  • Compliance with regulations
    • who is responsible?
  • Liability insurance
    • Who pays?
    • Is the landowner a third party insured?
      • How do you know?
      • Successors in interest
  • Indemnification
  • Trespassers

USDA Programs

  • Is lease land included in any USDA programs?
    • Are there any incompatibilities?
    • USDA loans?

Law Specific to Conservation Easements

  • Conservation and Historic Preservation Agreements Act
    • Avoid common law restrictions
    • Avoid Real Property Marketable Title Act
    • Complies with requirements of federal tax law

Disclaimer

This information is not intended to constitute legal advice. While every effort has been made to ensure the accuracy of this information, its accuracy cannot be guaranteed. Readers are encouraged to consult a private attorney for their individual legal questions. Since this information is changing rapidly, readers should note the publication date. This factsheet is a working paper and represents research in progress. For any comments, please contact Ted Feitshans, taf@ncsu.edu.

Author:

Extension Specialist (Economics-Ag/Environmental Law)
Agricultural & Resource Economics

Publication date: May 13, 2016

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