The blue contract for solar projects

Owners of agricultural plots of land which are essentially inactive, are increasingly showing interest in entering into the well-known blue contract, for the installation of solar parks for the production, transmission and distribution of electricity. The duration of such a lease is usually for a period of 30 years and provides income to the owner.

The agreement and the lease created under it may be registered as an encumbrance in the land registry under article 65B of the Immovable Property Law, Cap. 224, at the initiative of the lessee, who pays the stamp duty and the fee for the registration. The lessor secures the tax release certificate – including N.313 from the Tax Department, and the relevant receipts for payment of community fees, water consumption and sewerage charges. He also arranges for the cancellation of any impediment to such registration and consents to the mortgage of the plot by registering a mortgage or other encumbrance on the long lease and the tenant’s interest created thereby.

Rent and obligations payable

The rent paid by the lessee to the lessor for the licencing period is a nominal amount, plus VAT, based on the extent of the plot. It is payable quarterly in advance, with an increase from the third year to take into account inflation based on the annual consumer price index of the Republic of Cyprus. If the CPI is positive the rent increases accordingly, but if it is negative the rent stays the same. The lessee withholds from the rent and pays to the state the special defence contribution of 2.25 per cent, as well as the 2.65 per cent contribution for Gesy. Utility bills are paid by the lessee, while taxes, levies and fees relating to the ownership are paid by the lessor.

Landlord’s representations

The lessor makes representations to the lessee that they are the exclusive beneficiary of the plot and retain exclusive possession of the plot, which is handed over to the lessee upon signing of the contract. Representations are also made that the plot is free from any encumbrances, charges, notes on the registration, rights for the benefit of another plot or person, no prohibition affects it and there is no trust in force and there is no pending action, legal proceedings or arbitration involving the plot.

Applications

The lessor authorises the lessee and consents to the submission of all applications deemed necessary before the competent authorities for the use of the plot for commercial purposes, for the construction, installation and creation of one or more solar parks and/or stations of any capacity, for the production, sale and supply of energy generated through solar panels from renewable energy sources, or for any other supplementary or supporting use for the project.

For this purpose, the lessor grants a power of attorney to the lessee and declares that he agrees that any personal data will be used for the lessee’s purposes as required by the General Data Protection Regulation EU2016/679 and the privacy agreement signed between the lessor and the lessee.

Termination

The lessee shall have the right to terminate the contract by written notice to the lessor and be released from it, without any right or claim against him, in particular in the event of rejection of an application or a negative response to the issuance of any permit in respect of the project or its permitted use by any competent authority or if the construction of the project on a significant part of the plot is impossible or inadmissible or if the cost of connecting the project to the EAC network or the Distribution and Transmission System is in the lessee’s opinion undesirable.

Specific Performance

The contract is eligible for specific performance and may be ordered specific performance under article 76 of the Contracts Law, Cap.149 and/or the Sale of Land (Specific Performance) Law, L.81(I)/2011.

George Coucounis is a lawyer practicing in Larnaca and founder of George Coucounis LLC, Advocates & Legal Consultants, [email protected]