Before you get involved in Solar energy – please do your homework. Whether you are the buyer or seller in this transaction, there are important things to consider when it comes to the transfer of ownership of your home.
Do you Lease or Own the panels?
OWNED PANELS: If the panels are owned by the seller, then they should be factored into the price of your home just as any other asset would be. This can usually be accomplished by searching comparable homes with owned solar panels.
A Solar Renewable Energy Credit (SREC): An SREC is created for every megawatt hour (MWh) of electricity produced by a solar generator. SRECs allow a seller with a solar array to use electricity that is produced by the panels and then separately sell the SREC to a utility company. You should factor in an SREC when valuing the asset.
Some solar owners use SREC brokers to handle the sale, so if you are a seller who is part of a ten-year SREC program you may want to consider selling your future credits through such a broker. If a seller does this, they would then value their solar panels based on the energy savings that they provide.
Buyers need to ask sellers if they are part of an SREC program and whether the SRECs will be transferred with the panels. If they are, a buyer would also want to know what the average annual output of the panels has been so that they can properly value them.
Leased Panels: If the panels are leased, it can be a bit more complicated. When a seller has leased solar panels, it is recommend that the seller contact the leasing company right away to let them know that they are planning to sell the home. In fact, some solar companies have set up departments specifically to work on lease transfers.
What’s a UCC-1: The solar company may reference a UCC-1 (Uniform Commercial Code – 1) that has been recorded with the property. A UCC-1 is a legal form that acts as a lien against the solar equipment on the property and is used by the solar companies to protect their interest in the leased panels. These finds should be recorded at your local registry of deeds. It is important to know whether or not a UCC-1 has been recorded with the property, because some lenders may have concerns that the UCC-1 will take priority over the mortgage in the event of a bankruptcy. Some companies will remove the UCC-1 filing and then replace it when the new mortgage is recorded.
Home Buyers: Buyers who are interested in a home with leased solar panels may want to remember to factor the monthly lease cost when determining whether or not you can afford the home. Your lender will most likely consider this when making a determination on your loan. Also, buyers should review your credit scores because the solar leasing companies are going to ensure that the buyer can assume the costs of the lease before they approve a transfer.
LEASED PANELS: A seller client has three options when dealing with leased solar panels:
1. They can buy out the lease;
2. Transfer the lease to the new buyer; or
3. Attempt to transfer the panels to their new home, although this option may only be available in rare occasions.
As you can see Solar panels can at the very least complicate the purchase and sale of a house, and at the most stop the transfer all together if the item is not handled properly from the get-go! Please use caution when buying or selling a house with solar panels.
Got questions? I’ve got answers – please feel free to contact with your house Purchase and Sale concerns!
Tori Denton, PSA, Realtor®
Need more information?
The Attorney General published the following helpful informational sheet on solar panels:
Source: Shining the Light on Solar BY MAR LEGAL STAFF July/August 2016