When a developer identifies a suitable site for, say, a wind farm, the developer wants to ensure that it has the right to use that site. The developer will probably not want to buy / lease the site – with the associated costs of doing so – until it has for example planning permission and a grid connection offer in place.
The developer might enter into a conditional contract with the landowner either to buy or lease the site at a future date. The conditions might include, for example, the developer obtaining the required planning permission and a grid connection offer. When the developer has obtained the necessary planning permission et cetera, meaning the contract is no longer conditional, the developer might be obliged to purchase / lease the site.
Alternatively, the landowner and the developer might enter into an option agreement. The terms of the option agreement will be largely the same as the conditional contract but an option agreement will usually give the developer the right to terminate the option agreement at any point. Even if the developer has all the necessary consents et cetera required to develop the site it should not be obliged to exercise the option.
So, in general terms, the option agreement route gives developers more flexibility than entering into conditional contracts.
If you’re interested in obtaining options over sites or have been approached by a developer to enter into an option agreement, contact your usual Brodies’ contact or one of the Brodies’ renewables team, who will be delighted to assist you.
Look out for the upcoming blogs on “Points to consider when entering into an option agreement”.
On March 20, 2012