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This module covers:
- How and why to develop a Memorandum of Understanding
- What to look for in writing and when
The main lesson to learn from this module is not to be daunted by legal matters! By thinking of issues from the outset, you should be able to approach them and deal with them.
Once you have a community group in place for processing the funds, it is vital that you ensure your group has the legal power to receive and administer funds. In particular you should check that this complies with your group’s rules and constitution. Please revisit Module - Structure of Community Group if necessary.
Memorandum of understanding
You may have already been presented with a Memorandum of Understanding (MoU) by the developer at the beginning of the process. If so, now may be the time to revisit it.
Otherwise, we recommend approaching the developer at this point to discuss drawing up a MoU. This is not a binding contract, so neither you nor the developer should feel tied in, but it is certainly worthwhile firming up some details before you go too far down the road.
Look at the scale of your aims and activities in your development plan – do you have ambitious plans for the community? Do you have long-term needs and the resources to implement them? Or do you have little resource and a lack of coherent plans? Try to come to an agreement with the developer on
- How much you will receive
- Who will hold the funds
- When the money will be paid and by what process
- What will happen if the money is not spent
- The arrangements of any nominal loans
- What happens if the project is sold on to another party
- A third party who purchases the project may not be bound by any agreement entered into between your group and the developer. Will the developer ensure any third party abides by the terms of the agreement?
- What happens if your group has any constitutional changes
- What happens at the end of the project’s lifetime
- Will you be bound to undertake any publicity for the fund?
- Does the developer require anything else in return?
- Whilst Communty Benefit negotiations and the planning process are to be kept separate, you may still wish to consider how any Community Benefit Agreement may affect any planning consent for the project.
We recommend you meet with the developer to discuss these points and come to a mutually agreeable document. If the developer has already provided a MoU, suggest meeting to confirm or amend any details.
This gives you a good basis to go on and work out the specific legal and financial issues facing your group.
Once an agreement is made it is important to ensure any offer is legally binding and the group will have clear control over the funds for local benefit. Accordingly a formal Community Benefit Agreement should be entered into with the developer. Whilst these agreements are relatively straightforward, it is important that they are legally binding.
Having this formal agreement in writing will give you a degree of confidence that you have something in place. If the financial model for the developer changes, or if the plans for the development change etc, ensure that both entities realise you may have to revisit the agreement.
Look thoroughly at any terms and conditions - do they seem reasonable, do you understand them?
What to look for in writing
Ensure you keep minutes of all community meetings. The Community should be kept updated as much as possible on the discussions with the developers.
Are there legal issues specific to the community structure you have selected? Ensure everyone in your group fully understands how the organisation functions and what the risks are. Are there any risks of individual liability?
You will find at this stage that you may be reliant upon the resources in your community. If you know of any skilled community members, for example retired lawyers, this is a resource which you should try to benefit from.
If you need impartial lawyers, get a quote, and then ask the developer if they might be interested in funding some of your legal fees.
The Memorandum of Understanding will be built into a formal agreement once you have confirmed all details, i.e. the process, the nature of the group, who is involved in it, and so on.
What will happen if the turbines are faulty and spend a period of time not producing any energy? Ensure that you have talked these issues through with the developer and then had the chance to discuss with your community.
We anticipate that you will have ongoing legal queries, and you may come against issues at any time until you start receiving payments.
If you are undertaking a joint project with the developer, note that you will have to be aware of more issues, for example:
- Ownership and leasing
- Management and financial control
- Early exit process
- End of project process
- Dividend/profits distribution
- Division of running costs
- Ownership of external agreements