Since the day Poland entered the energy transition, the number of distributed energy installations has been steadily increasing. More and more wind and photovoltaic power plants, energy storage, and biogas plants have been appearing in the landscape of agricultural areas.

The nature of large-scale power plants and restrictions on the agricultural real estate transactions mean that land for such investments is leased.

Nature of the contract between the parties

Any typical lease agreement for installations used for renewable energy has formally the character of an unnamed contract. This is because, from a pure linguistic interpretation of the now very age-old lease provisions, a lease contract can only be concluded for the purpose of deriving benefits (such as agricultural crops) from the leased property. Since the typical energy investor does not cultivate the land, they could theoretically only enter into rent agreements. That is why, court case law has led to a relaxation of the outdated requirements of the Civil Code and allows the conclusion of a non-named contract similar to a lease agreement, for which the provisions on a lease agreement will apply.

As such, the agreement (for the sake of simplicity I will refer to it as a lease agreement) governing this type of investment must be drafted carefully, in a manner that deviates as little as possible from the model lease agreement provided for by the Civil Code. This is, in fact, the only civil law agreement that determines the due durability of the legal relationship.

Rent and the lack of rent

The payment of rent to the owner of the property belongs to the basic obligations of the tenant. In view of the above formal limitations of a lease, the element of rent must be present for the entire period of use of the leased property. The only permissible time for the lease to continue without the obligation to pay rent would be any period prior to releasing the leased property into the possession of the lessee, which would have to involve no use of the leased property. Important is the fact that releasing the leased object is not a prerequisite for the effectiveness and validity of the agreement. It is difficult to have rent-free use of the leased property for the rest of the term of the agreement, even in the period before the start of energy production.

In the absence of rent, the parties are simply entering into a valid agreement, which is a non-named agreement similar to a lending agreement. This type of agreement would also have to be respected, while for the party making the property available, there is an additional basis for terminating the agreement pursuant to Article 716 of the Civil Code. Pursuant to this provision, if the property becomes necessary for the lender for reasons not foreseen at the conclusion of the agreement, the lender may demand return of the property, even if the agreement was concluded for a definite period. At present, it is difficult to find a situation in which a serious investor does not pay at least a token rent. Yet this type of inaccuracy and concluding lending agreements may apply to small-scale investments in which the investor looks for every possible saving.

In a situation where the agreement is concluded for a significantly long period, a contractual provision on the valorisation of the amount of rent is a must. Indeed, given the possibility of claiming judicial valorisation under the Civil Code, the simple principle of increasing the rent, if only by the annually published inflation index, is beneficial to both parties.

An element that will be beneficial for the lessor is securing rent payments, for example, through a guarantee provided by the owner of the company leasing the land. This type of security provides greater comfort for the lessor. However, it is important to remember banking requirements and business practice force energy companies to set up separate project companies. In practice, therefore, assets, experience, and financial stability are only achieved at the stage of the project company owner.

The rent itself is a product of the negotiating capacity of both parties, which is most often influenced by the productivity of the plant in question. By far, the highest rents may apply to wind farms, whose productivity, in relation to investment and the necessary area, significantly exceeds that of other renewable energy sources.

There is no reason the rent should not be determined not as a fixed amount, but as a result, for instance, by indicating a mechanism for calculating the rent. It is worth noting that under Polish regulations, most electricity generators pay a concession fee, which is calculated as the product of the energy company's revenue and a factor defined in the regulations. An analogous way of determining the rent payable to the landowner is therefore incredibly simple, especially as the energy entrepreneur is required to submit specified forms on the amount of the concession fee to the Energy Regulatory Office.

Lease term

In principle, a lease agreement can be concluded for any period. Even an agreement for a period of 50 years would not violate the general principles of civil law, provided that such period of the planned investment can be justified. A certain limit for lease agreements may be constituted by, for example, the principle that the parties may establish a legal relationship at their discretion, as long as its content or purpose does not contradict the character of the relationship. Therefore, an artificially long lease period of, say,100 years, for an equipment that would be out of use after 10 years should be considered contrary to the nature of a lease as a temporary transfer of an item for use by another party.

In practice, the most common formula is to conclude this type of agreement for an equal period of 30 years. This follows from the wording of Article 695 of the Civil Code, which indicates that a lease concluded for a period longer than 30 years is deemed to have been concluded for an indefinite period after the lapse of this term. Since the permanence of the legal relationship is essential for energy investments, a lease period in which the landowner could freely terminate the agreement after those first 30 years is unacceptable. However, there is no basis for the prudent conclusion of agreements for 29 years and 11 months or any other period close to, but not exceeding, 30 years. Fortunately, it seems that the market has already abandoned the view, or rather the silly superstition, that an entity paying rent to the owner could acquire the leased land after 30 years and become its owner.

The period of execution of the agreement itself is divided into at least two, and sometimes three, periods. There is the initial period of investment preparation, the production period, and, finally, the termination period consisting of dismantling the installation and returning the leased property to the owner.

There is no reason the date of delivery of the leased item should not be postponed. However, this means that the lessee cannot take possession of the leased item and benefit from the protection afforded by Article 678 § 2 of the Civil Code.