July 9, 2021 • By Dennis Beaver
Today’s story will be of special interest to anyone who owns acreage —typically agricultural — in areas of the country which receive plentiful sunlight or wind, ideal for the construction of a solar or wind farm.
Unless you are careful, some smooth talking representative of an energy farm developer could have you walking into quicksand.
Never, never, never trust the nice people from these companies to have your best interest in mind. They do not, as “Dr. Jim” discovered.
The Baltimore surgeon owns 20 acres near the town of Tehachapi in eastern Kern County, and was contacted by the solar subsidiary of a major Asian electronics manufacturing company. They sent him an “Option to Lease” agreement, told him it was “standard,” requesting that he sign it.
Fortunately, recognizing his lack of knowledge in this area, Jim contacted my office.
It is their business ethics and hideous customer relations that turns my stomach. Here is a telling example:
Some years ago they and other manufacturers began selling Smart Televisions with Skype that required purchasing a $49 webcam only usable on their TVs.
In 2016, after thousands of customers from around the world had purchased their TVs and webcams — because of Skype — the manufacturer removed the Skype app, would not provide a driver so that you could use the camera on some other device, and refused to offer a refund.
It was a total rip off, and I wrote about it in my column. The company could not have cared less.
Real Estate Attorneys Look at Option Contract
I ran this option contract by two real estate attorneys, each with years of experience, Fawn Dessy of Bakersfield, and Ron Jones from Hanford.
“An option is a contract that gives the optionee a right to do something – such as buy or lease land – for a specified period of time,” Dessy explains. “It does not give you an interest in the property, only the right to lease or buy it later. For projects as complex as solar or wind farms, options may last for up to two years, allowing time for due diligence before work is started.”
Jones point out, “There is nothing simple about an option contract for one of these projects, and the devil is in the details – details which can hurl the landowner into horribly expensive litigation.”
I referred Jim to Ms. Dessy, and, after reading the contract, she said, “They are passing this off as very typical and fair. It is anything but! It is a complete abomination and landowners across the country need to be extremely cautious if a ‘land agent’ comes calling. I have been in law practice 42 years and have never seen anything like this. It is just horrible.”
“They are so smooth about how ‘this is the way it’s done and we’re are going to make you a lot of money.’ But the way it is worded could easily get you sued and this company, in their option agreement, has no obligation to protect you.”
What’s wrong with the agreement?
Dessy and Jones listed a few of the many dangerous flaws in the agreement:
1 – Their term of five years is excessive. At most two years is adequate to explore soil, environmental, zoning, cost to put in utilities, etc.
2 – They intend to begin pulling building permits before exercising the option and actually lease the property. This is completely wrong.
3 – Leasing the property, they want the owner to remove the land from farmland preservation which gives a significant tax break. This is totally wrong.
4 – There is no requirement for workers compensation or liability insurance, no duty to hire licensed contractors, or bonding. This puts the landowner at significant risk of suit for injuries that could occur on the property even before the option is exercised.
5 – These types of developments predictably lead to lawsuits against owners. The contract does not address this likely event, meaning that attorney fees will be at the owner’s expense.
6 – One of the most clearly misleading paragraphs states, “This agreement creates a valid and present interest in the property in favor of us.” This is completely contrary to law. An option is merely an offer; it does not give the optionee an interest in the real property.
Both attorneys offered these cautionary words of advice to anyone approached by a company wanting to turn their vacant land into a solar or wind farm: “Seek the advice of experienced real estate counsel at once.”
Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.