Legal
MAR Legal Staff, 5/1/2016
I have just listed a home that has solar panels on the roof. What are some things that I should know about the panels?
The first thing to do is to determine whether the panels are owned by the seller or if the seller is leasing them from the solar company. This will make a big difference in their value and any possible complications that may arise.
My seller has told me that the panels are owned by the seller. What does this mean?
Since the panels are owned by the seller, they should be factored into the price of the home just as any other asset would be. It would be prudent to search for comparable homes with owned solar panels as well.
A solar renewable energy credit (SREC) also should be considered when valuing the asset. 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. Some solar owners use SREC brokers to handle the sale, so if you have a seller who is part of a ten year SREC Program they may consider selling their 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, on the other hand, should be asking sellers if they are part of an SREC program and whether the SRECs will be transferred with the panels. If they are, a buyer also would want to know what the average annual output of the panels has been so that they can properly value them.
My seller has told me that the panels are leased. How does this change my analysis?
If the panels are leased, it can be a bit more complicated. When representing a seller with leased solar panels, agents should 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. The solar company may reference a UCC-1 that has been recorded with the property. A UCC-1 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.
In the end a seller has three options when dealing with leased solar panels: they can buy out the lease; transfer the lease to the new buyer; or attempt to transfer the panels to their new home, although this option may only be available in rare occasions.
I am representing a buyer who is interested in buying a home with leased solar panels. How will this affect the sale?
For those REALTORS® representing buyers interested in a home with leased solar panels you want to remind your clients to factor the monthly lease cost when determining whether or not they can afford the home. The buyer’s lender is likely to consider this when making a determination on their loan. Also, buyers should review their 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.
Remember to always use caution when advising clients about solar panels. The Attorney General published the following helpful informational sheet on solar panels: http://www.mass.gov/ago/news-and-updates/press-releases/2016/advice-to-homeowners-considering-solar-panels.html. You can also call the MAR Legal Hotline at 1-800-370-LEGAL