Buying a home with active solar panel lease

3 years ago

Hello,

I am considering a property where the current owner has recently installed leased solar panels. A condition of the sale would be to transfer that lease over to the new owner - there is no option to decline it (I suppose there could be buyout/termination price in the contract).

I was told the terms of the lease - pay $x dollars per month for y years at 0% interest. If the panels end up generating enough output to cover usage, the cost is effectively the electricity bill - okay not such a big deal.

Now as this is a lease, starting to get the bank involved and it's all going downhill from here. They want to propose paying off the lease using proceeds from sale of my home, taking out a new loan with interest, binding the lease to the home mortgage (the panels are such a tiny percentage of the home value - they must be crazy thinking I would agree to this), and several hundreds of dollars to transfer the loan. I did not anticipate any of these costs.

I'd like to hear from others your past experience with a solar lease transfer. Is what I mentioned fairly standard practice and nothing I can avoid? Am I being unreasonable? I feel that the transfer of lease was misrepresented (making it sound simple and low cost) and as I learn more it's more money out of pocket which I again I did not anticipate and would have factored into any offer.

Thanks.

Featured Answer

Louise Smith

3 years ago

There is considerable information and discussion on the internet about this very issue: buying a house and having to assume the seller's lease for the solar panels.

The comments are generally negative about the added complications.

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Comments (7)

outpaientzero
3 years ago
last modified: 3 years ago
I'd move on to the next house I don't like if the terms of the deal do not appeal to you. Using this language "I feel that the transfer of lease was misrepresented" would only apply if you signed a contract without disclosure of the lease by the seller but it's obvious they did.
T B
Original Author
3 years ago
@outpaientzero - I'm not quite sure if you are taking a shot at me or why you would feel the need to.

Yes there was disclosure of the solar panel lease upfront and suggesting all "the good stuff" - 0% interest - monthly cost is essentially same as your electricity bill - just transfer it over. At this point in time the terms the bank holding that lease were not shared or disclosed ( sure I could have requested it up front - but I did not - I don't do this for a living and I have never considered a property with solar before).

I am asking if the bank lease terms are more or less standard industry practice or are these less favorable - for people who have actually gone through the process. These lease transfers are becoming much more common in the past few years.
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outpaientzero
3 years ago
Yes I took a shot but I removed a lot of it. I'm very judgemental and opinionated in my assessment of dilemmas brought forth on this forum and should be banned. Your wording of the issue suggested you tossed out a victim card without cause and without harm.

So now I got ya, and suggest telling your realtor to get the terms of the lease for you to assess your next step, and any reluctance of the realtor say "you're fired!". Talk is cheap so you need to see the terms of the lease in writing, including the small print clauses. About the bank, each and every bank has their own way of doing business so nothing is uniform or standard. After you get and read the lease agreement and assess the information and your bank won't budge on terms more favorable to you then go to another bank. I personally would submit an offer contingent the present owner pay off the panels with the proceeds from selling their house. A fraction you said, they can eat a fraction.
elcieg
3 years ago
last modified: 3 years ago
The transfer, as I understand it, must start with the homeowner contacting the company because the owner has to settle the "lien" one way or the other.

There is a critical part which needs to be solved before the home can go under contract....and that is the warranty for the panel system must guarantee that owner's system is free from material defects and quality issues. "It’s a legally binding contract, and it’s essential to follow specific steps to ensure that the transfer of ownership runs smoothly for the buyer, seller and solar company."

Solving this issue is not your responsibility, nor can you do anything about it.

I'm surprised that both agents aren't up to speed on the process of selling homes with leased solar panels.
homechef59
3 years ago
It's a basket of worms. Many buyers are starting to encounter this issue. The lender holding the lease wants to get paid, either in full or by assignment of the lease to the new buyer. The new lender can't issue a new loan with a lien against the property. That's what that lease is, a lien on the subject property.

What's to be done? The seller needs to pay off the lien. They need to do this either prior to transfer or as a condition of the proceeds of the sales. Then the title company will declare the property lien free and be willing to declare the property free, clear and ready to transfer.

What can the buyer do? Insist that the lien be paid off or walk away. You don't care. Just pay it off so you can buy the property at a mutually agree price. This is when some negotiation will occur.

The bottom line for the buyer is to stick to your guns. The bottom line for the seller is they need to clear the lien before anyone can buy it, unless they are paying cash. Leased solar systems are a real thorny issue in property sales. Best of luck in your negotiations. Your agent should have covered this with you upon learning about the leased solar installation.
bry911
3 years ago
Since this thread popped back up… Many banks will allow you to subordinate the lease and transfer it.

Typically, you pay a subordination fee to the solar panel lease company. They will then give you a subordination letter which allows the new mortgage lien to go into first place. This is something that many/most banks will do, but I suspect few loan officers suggest it.