This blog post is the first in a series of blog posts that will discuss some of the nuances of Louisiana property law relating to solar leasing. With solar companies entering the Louisiana market, many of which having no prior experience in Louisiana, it is important to identify and avoid some pitfalls that may not be immediately obvious to the common-law practitioner.
Whether it be out of habit or comfort, when navigating solar leasing issues, the first instinct of landmen and practitioners alike may be to reach for the Louisiana Mineral Code. It bears stating the obvious that solar energy is not a mineral. Consequently, the provisions of the Louisiana Mineral Code do not apply to solar leases. Instead, solar leases are governed by the Lease chapter of the Louisiana Civil Code.
The first step in the lease acquisition process is determining the proper party to lease. This may sound like a straightforward endeavor, but there are several issues that could arise. This post will address a few of those issues.[1]
Community Property
Louisiana is one of nine community property states. In Louisiana, property acquired by either spouse during the marriage is presumed to be community property owned jointly by both spouses.[2] There are many exceptions to this presumption, including property acquired through inheritance or donation or property acquired under a so-called “double declaration.”[3]
Classification of property as “community” or “separate” is important because immovable property (real property under common law) that is part of the community property regime may not be leased without the concurrence of both spouses.[4] A lease of community property without the concurrence of both spouses is relatively null, even as to the signatory spouse’s community interest.[5] This relative nullity may be cured by obtaining the concurrence of the other spouse. If the target tract of land is potentially community property, it would be prudent to have both spouses execute the lease and any subsequent instruments.
Successions
Property may be tied up in a deceased owner’s estate for many years. It is important to be able to identify the proper party to lease the deceased owner’s interest.
The first step in determining who to lease is to figure out if the succession has been opened. If the succession has been opened, then generally the succession representative is the proper party to execute the lease, but this will require court approval.[6] But there is a large caveat, Louisiana Code of Civil Procedure article 3226 gives the succession representative the right to lease the property of the estate with court approval, but limits the lease term to one year unless the heirs and interested legatees consent to a longer term. Solar leases are long term endeavors having terms much longer than one year. Accordingly, acquisition of a solar lease from an open succession will likely require the acquiescence from the succession representative, approval from the court, and the consent from all heirs and interested legatees. Louisiana Code of Civil Procedure article 3226 makes a special exception for mineral leases, but no such exception is made for solar leases. This represents one of the many deviations from the law governing mineral leases.
If the succession is under independent administration, the independent administrator may generally lease the immovable property of the estate without court approval, assuming all necessary steps were taken to subject the estate to independent administration.[7] However, independent administration merely dispenses with the requirement for court approval. It does not dispense of the necessity of obtaining the consent of all heirs and interested legatees for leases with terms longer than one year. Accordingly, even if the succession is under independent administration, the solar lessee will need to lease the independent administrator with the consent of all heirs and interested legatees.
If the succession has not yet been opened, then the successors are authorized to exercise their ownership rights, including the right to lease the property, until a succession representative is named.[8] For an intestate succession, this means leasing the heirs of the deceased. For a testate succession there are some additional complications. Prior to probate, it is unknown whether the testament under which legatees claim their interest is valid. This may not present an issue if the legatees under the testament are the same as the intestate heirs. But, if the legatees and heirs differ, it might be prudent to provisionally lease both until the testament is probated.
Usufructs
Those unfamiliar with Louisiana law may not recognize the term “usufruct,” but it should not scare foreign practitioners. A usufruct is similar to a life estate in common law jurisdictions. Usufructs are most commonly created when a spouse dies owning community property. Assuming the deceased spouse died intestate, the surviving spouse is entitled to a usufruct over the deceased spouse’s one-half share of community property, subject to the naked ownership of the deceased spouse’s descendants. This is commonly referred to as the “surviving spouse usufruct.” Usufructs can also be created through traditional conveyances, but these are less common.
Louisiana landmen and practitioners are familiar with the unique challenges a usufruct presents in the mineral lease context. One issue that frequently arises in the mineral lease context is whether a usufruct of land includes the rights to the minerals. The Mineral Code contains several provisions dealing with this issue. Fortunately, these complexities are not present in the solar leasing context. Under the Civil Code, a usufruct of nonconsumables—like land—entitles the usufructuary to execute leases.[9] Louisiana Civil Code article 568.2 also provides that the lease granted by the usufructuary may survive the termination of the usufruct. Due to the lengthy term included in most solar leases, it is likely that the usufruct will terminate during the term of the lease, but Civil Code article 568.2 provides a safe harbor.
Co-owners
Co-ownership presents a unique set of issues for solar leasing. Civil Code article 801 provides that “the use and management of the thing held in indivision [co-owned] is determined by agreement of all the co-owners.”[10] This is yet another deviation from mineral leases. Under the Mineral Code, a mineral lessee only needs 75% of the co-owned mineral interest to consent in order to conduct operations, provided the that the mineral lessee made an attempt to locate and contact all co-owners and, if contacted, offered all co-owners to contract on substantially the same terms.[11] The absence of a relaxed standard for solar leasing could present some challenges if co-owners are difficult to identify or locate or one or more co-owners refuses to execute a lease.
These are only a few of the issues that may arise when trying to identify the proper party to execute a solar lease. Special consideration should be paid to the nuances of Louisiana property law. If you have any questions or comments regarding solar leasing, contact Caleb Madere by email (cjmadere@liskow.com) or phone (337-267-2326).
[1] Because solar energy is not a mineral, it is generally not necessary to lease the mineral owner. However, it may be prudent to enter a surface use agreement with any mineral owners to stipulate surface ownership issues. This issue will be the subject of a subsequent blog post in this series.
[2] La. Civ. Code art. 2340.
[3] La. Civ. Code art. 2341 and 2342. A spouse may acquire property as separate property if, in the instrument of acquisition, the spouse declares that the property is being acquired as separate property and with separate funds. This is the so-called “double declaration.”
[4] La. Civ. Code art. 2347.
[5] La. Civ. Code art. 2353.
[6] La. Code Civ. Proc. art. 3226.
[7] La. Code Civ. Proc. art. 3396.15.
[8] La. Civ. Code. art. 938.
[9] La. Civ. Code art. 568.2.
[10] La. Civ. Code art. 801 (emphasis added).
[11] La. R.S. 31:166.
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