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Real Property & Development Review

Solar Roof Top Leasing

Posted in Environmental

Ikea Portland just completed a solar installation on its retail facility by powering up a nearly 500 kilowatt system. Ikea joins a growing list of companies, including Wal-Mart, Google, and Costco, that are also adding solar panels to their buildings. The question that often pops into my mind as I look out my office window is, “why don’t more buildings have solar panels on them?” I work in downtown Portland and am baffled by this question, especially on a sunny day. All this vacant prime roof-top space! You often hear answers such as “it costs too much” or “solar panels damage roofs” or, “my tenants pay triple net, so this isn’t a priority.” The truth is, these answers are short-sighted and many are missing the opportunity to increase profits. Landlords and building owners lease roof top space for other purposes, such as cellphone carrier antennas, so solar panels should at least receive serious consideration. Some landlords have covered every square inch of the roof tops with antennae, satellite dishes, and other uses. Therefore, why not solar panels? The same type of leasing concepts will apply.Don’t get me wrong, it is happening – leasing of roof tops, that is. But it has been very slow to catch on. “Come now,” you say, “You live in Portland. The sun rarely shines there, so that’s why you still see all those bare roofs.” Okay, true. The sun here is not the sun in Phoenix, but consider the yearly average sun hours (hours of pure solar radiation) for some cities:

Portland, OR: 4.00

New York City: 4.60

Phoenix, AR: 6.50

Tokyo, Japan: 3.26

Berlin, Germany: 3.06

As you can see, Portland gets more sunshine than Tokyo and Berlin, and Germany and Japan are the two leading countries in regards to solar generating capacity and leasing of roof tops.

Regardless of where you might be in the spectrum of solar worship, it’s good to be educated about the issues relating to roof top leasing so you know what to watch out for if a solar developer hands you a form lease to sign.

Here are a few tips:

  • You will want to have the company check the structural integrity of your roof for photovoltaics (PVs). You shouldn’t have to foot the bill for this, and try to include an agreement that they’ll provide you with a report from the testing. This way, even if they don’t end up leasing space, you’ll have a recent report about your roof.
  • You will need to keep in mind that a roof top lease is just like any other lease for space in your building. Look for provisions in your current lease and see if the same landlord protections are included, e.g. indemnities, maintenance responsibilities, and defaults regarding late payment.
  • You need to know what the solar developer’s ownership interest is in the PVs. In most cases, the developer will either lease them or finance to purchase them. If financed, the developer may have to provide collateral security for its lender. This will affect your rights as a landlord and you want to make sure you are not left holding the bag when the lender comes to rip the panels off the roof and your roof is badly damaged due to the lender exercising its rights.

Really, though, you should just call us when a solar developer comes knocking with a form lease to sign.