Before Signing a Texas Data Center Option Agreement

1 What Land and Rights Are Committed

Start with a reliable legal description and an exhibit showing the property. Identify whether the option includes all acreage or allows the developer to select smaller tracts later. Access, transmission, water, drainage, and fiber rights may extend beyond the future building site. A price stated per acre does not explain what happens to the remainder of the ranch if the developer selects its preferred parcel and leaves an awkward remnant.

2 What Is Paid for Exclusivity

Separate option consideration from the eventual purchase price or operating rent. Determine when each payment is due, whether it is refundable, and whether it is credited against later payments. Evaluate compensation against the length and breadth of the restriction, including opportunities the owner cannot pursue while the option remains outstanding. A substantial proposed closing price may never be received if the developer can walk away.

3 When Does the Option Actually End

Build a timeline with the initial term, every extension, payment dates, notice requirements, and final outside date. Look for automatic extensions tied to utility studies, permitting, title work, or events outside the owner's control. If additional time is negotiable, consider additional compensation and objective evidence of progress. Do not rely on an oral assurance that the option will last only a few months when the written extensions allow much longer control.

4 What Evidence Supports the Power Plan

A nearby transmission line is not a commitment to deliver the capacity the project needs. Ask which utility or transmission provider is involved, what studies have been requested, what written responses exist, and who bears upgrade and interconnection costs. ERCOT maintains a separate large load integration process and governing materials; site control alone does not establish that a project can energize on the proposed schedule. [1]

Translate the developer's power assumptions into contract milestones that can be verified. A milestone might require delivery of a specified study result or executed service document, rather than a statement that discussions are progressing. Applicable processes change, so an engineer and appropriate utility personnel should evaluate the actual power plan. The owner should not warrant power availability that the owner cannot control.

5 What May Happen During Diligence

Distinguish a walkover or survey from drilling, trenching, groundwater testing, equipment staging, or clearing. Address prior notice, approved access routes, insurance, contractor responsibility, livestock safety, and repair of damage. Decide who receives test results and how sensitive information may be used. The agreement should address restoration and payment obligations even if the developer never exercises the option.

6 What Is the Final Transaction

Do not postpone the central purchase or lease terms until exercise. Review the attached final form for price adjustments, closing conditions, permitted exceptions to title, environmental allocations, indemnity, default remedies, and continuing restrictions. For a lease, examine rent commencement, escalation, expansion rights, operating uses, and end of term obligations. Texas's statute of frauds generally requires signed written evidence for contracts to sell real estate and leases longer than one year, subject to applicable law and exceptions. [2] Important protections belong in the signed documents.

7 Who Is Obligated to Perform

Confirm the exact contracting entity and the authority of its signer. A familiar project brand is not necessarily the entity responsible for payment or restoration. Consider whether financial information, a deposit, a guaranty, or other security is appropriate. Review assignment provisions and changes of control: can the agreement be transferred to an affiliate, a purchaser, or a project lender, and does the original obligor remain responsible?

8 How Will the Retained Property Function

Map the ranch after the project is built. Preserve needed access to pastures, barns, working pens, homes, and water infrastructure. Address construction traffic, lighting, noise, drainage, fencing, and emergency access through measurable provisions where feasible. Determine whether easements are temporary or permanent and whether their locations can be changed without the owner's consent. A project boundary should not inadvertently cut off the practical use of land that is not being sold or leased.

9 What Other Rights Must Be Reconciled

Review existing mineral leases, utility easements, mortgages, grazing arrangements, and other recorded or contractual rights. The surface owner may not own every interest needed for development. Avoid promises to eliminate third party rights or obtain consents unless the obligation is understood and achievable. Identify who obtains and pays for necessary releases, subordinations, or accommodations, and what happens if they cannot be obtained.

10 What Happens If the Project Stops

The exit provisions should address release of any recorded memorandum, removal of testing equipment, restoration, unpaid damage claims, and the survival of confidentiality and indemnity obligations. Specify responsibility and timing rather than leaving the property encumbered while the parties debate whether the option expired. Preserve copies of notices and proof of delivery. Counsel should review any proposed termination or release before it is sent or signed.

Review the Commitment Before the Price

Bring the full option package, exhibits, proposed lease or purchase contract, title documents, and power correspondence to the initial review. A term sheet alone rarely shows the complete allocation of risk. The goal is to understand what the owner gives up now, what must occur before the larger payment is earned, and how the property is protected if the project does not proceed.

For questions about a proposed option or development agreement, learn more about Worth Thornton's data centers and infrastructure practice or contact Worth Thornton to discuss a document review. Do not send confidential project materials until conflicts and the appropriate intake process have been addressed.

Sources

• [1] ERCOT Large Load Integration and governing process materials
• [2] Texas Business and Commerce Code Section 26.01