The Construction Term is the phase of the Solar Lease when the company commences physical construction of Solar Facilities on the property. The Solar Company conducts on-site clearing work and constructs infrastructure within the project area. Solar infrastructure includes roadways, electrical easements, electrical transmission facilities, potential substations, as well as installation of solar panels and similar Solar Facilities.
A solar company typically requests a one-year Construction Term along with a company option to extend the Construction Term if required to complete the Solar Project.
Solar companies typically pay a higher compensation rate during the Construction Term Rent as the company is now fully committed to the project and has commenced construction of Solar Facilities under the lease for electricity generation and marketing.
As with all phases of a Solar Lease Agreement, the landlord must negotiate to maximize compensation and to minimize the term length of each phase of the lease. Landlords must seek to eliminate or reduce any options to extend Construction Term. The landlord must aggressively negotiate restrictions to identify limits in the construction operations on the property and identify what facilities are permitted in which areas of the property. For example, the landlord must not want to be surprised by an electrical substation sitting in their backyard when they believed the project only involved the installation of solar panels.
Construction Terms should be negotiated based on the size of the proposed project. A smaller project should require a shorter Construction Term whereas a larger project may require additional time to complete construction. Regardless, Construction Terms must be carefully negotiated by the landlord’s counsel to maximize payments, shorten allotted time for construction, and define the scope of the project.