Chapter 6 – Negotiating an agreement - NSW Farmers Association

Negotiating an agreement 6This Section outlines the different types of agreementslandholders may enter into with developers, and thecommercial considerations which commonly need to be takeninto account when negotiating an agreement.6.1 Obtaining legal and financial adviceInformation in this section is only indicative and each windfarm development is different. It is highly recommendedthat you get independent legal and financial guidancefrom qualified personal with experience in wind farmdevelopments.Your developer may agree to reimburse the expenses youincur in obtaining this independent advice.6.2 Typical contract arrangementsThere are a range of different legal agreements which canbe used at different stages of wind farm developments.However the most typical arrangements are summarisedin Figure 13 below, whereby landholders enter into initialaccess agreements and/or option to lease agreements duringthe early stages of development, leading to an eventuallease agreement once the development is approved andconstruction begins.SITE SELECTIONPROJECTFEASIBILITYDETAILEDASSESSMENTPLANNINGAPPLICATIONCONSTRUCTIONOPERATIONDECOMMISSIONINGFigure 13 Typical contract arrangementsACCESS AGREEMENTOPTION TO LEASE AGREEMENTLEASE AGREEMENT6.2.1 Access agreementsAn access agreement is usually a short term agreement toallow the developer site access to conduct wind monitoringand feasibility studies. This agreement is optional anddevelopers might want to move directly to an option to leaseagreement which can provide more certainty (see Section6.2.2 below).6.2.2 Option to lease agreementsAn option to lease agreement will normally allow a developerto access the property to assess the wind farm feasibility withan option to move into a lease agreement at a later stage.Lease agreements are usually triggered when developerscommence construction on the site.An option to lease agreements is usually binding on thelandholder following execution, whereas developers maywithdraw at any stage before construction commences (whenthe lease becomes binding). Landholders should keep in mindthat there may be little certainty about when (or if) a windfarm developer will be granted planning approval and beginconstruction.Option to lease agreements can be negotiated at any stage ofdevelopment between site selection and planning application.Agreement can contain as much or as little detail as thelandholder and developer wish to agree upon, for inclusionin the final lease. A common approach is for landholders anddevelopers to agree on the key conditions, while leaving someroom to finalise minor operational issues as the developmentprogresses. This approach provides landholders with a level ofcertainty about the final value of the lease, pending the resultsof feasibility assessments.Other landholders have chosen to negotiate an option tolease agreement covering all conditions of the eventual lease,thereby removing the need for further negotiation.The precise wording of the agreement is a matter fornegotiation between the landholder and the developer.More commonly the developer prepares the first draft ofthe agreement, although in some instances landholdershave preferred to take responsibility for this drafting(notwithstanding the time and expense this may entail).Once a first draft has been prepared either party can proposefurther revisions before the agreement is finalised - subjectto some legal constraints, the terms of the agreement are amatter for commercial negotiation between landholder andwind farm developer.Wind Farm Guide for Host Landholders21