Complications typically occur when the seller has a solar leasing deal in place—so the panels are effectively "owned" by someone else. Here's how to avoid problems.
There are more than a Million houses in the U.S. with solar panels installed on the roof, and that number is increasing. It can be difficult if not dangerous to fail to properly address rooftop solar panels at the time of sale of a house.
Among the most often made inquiries to this law firm arise from the failure to properly transfer installed solar panels.
We assist real estate owners and those acquiring property in positively leveraging the constraints and finding advantages in matters involving solar panels, often including new approaches and possibilities in this emergent arena.
But contract forms for the sale and purchase of a house are often provided by a local board of realtors and today those forms do not adequately address the new and only now evolving issues arising from a sale with rooftop solar panels.
There is no one homogenized solar panel ‘deal’ and the business terms including ‘who owns the panels’ varies from one transaction type to another, and in most instances these installations are governed by varying state laws. But commonly, residential solar panel leases provide language similar to, ..
You agree that the solar panel system is the Company’s personal property under the Uniform Commercial Code. You understand and agree that this is a lease and not a sale agreement. The Company owns the solar panel system for all purposes.
Obviously this creates issues when selling a house with solar panels on the roof that belong to someone else. It is common that residential solar panel leases provide language similar to,
If you sell your home you can transfer this lease and the monthly payments.
The person buying your home can sign a transfer agreement assuming all of your rights and obligations under this lease by qualifying in one of three ways: (1) the home buyer has a FICO score of 650 or greater; (2) the home buyer is paying cash for your home; or (3) if the home buyer does not qualify under (1) or (2), if the home buyer qualifies for a mortgage to purchase your home and the home buyer pays us a $250 credit exception fee.
Or, if you are moving to a new home in the same utility district, then where permitted by the local utility, the system can be moved to your new home. You will need to pay all costs associated with relocating the system, ..
Timing also needs to be considered when entering into a contract to sell a house,
You agree to give the Company at least 15 days but not more than 90 days prior written notice if you want someone to assume your lease obligations.
Many of the companies engaged in this business (.. but not all) file a UCC-1 financing statement in the real estate records that puts third parties on notice to their rights in the system. That fixture filing is in most states a lien or encumbrance against the system. But because in many residential transactions, title companies do not search the UCC-1 indexes (.. that are primarily used for business purposes), solar leases are regularly missed.
However, the express language of solar system leases cannot be missed,
EXCEPT AS SET FORTH IN THIS LEASE, YOU WILL NOT SUBLEASE, ASSIGN, SELL, PLEDGE OR IN ANY OTHER WAY TRANSFER YOUR INTEREST IN THE SYSTEM OR THIS LEASE WITHOUT OUR PRIOR WRITTEN CONSENT.
That accepted, as suggested by the solar lease language above, there are options and fertile, enabling and desirable business terms that can add significant value to the real estate. The solar lease, as well as any power purchase agreement need to be considered in light of federal and state law (including tax laws) that stimulate new possibilities including create profit.
Shockingly, this is not only a residential problem. This firm regularly receives inquiries arising from commercial real estate transactions that have not adequately addressed matters of solar panels, PPAs, tax credits and the like.
Selling a house with solar panels is not for the faint of heart. There can be real legal jeopardy and significant dollar liability for those failing to address the issues associated with solar panels. It we can assist you in positively leveraging the constraints and finding advantages in matters of transactions involving solar panels do not hesitate to contact the author.
Visit Stuart Kaplow's website.(Article reprinted here with express permission from the author) Photo: Andres Rodriguez