Shining the Light on Solar

by MAR Legal Staff | Jun 29, 2016
Are you representing a client who is selling a home with solar panels on the roof? Is your buyer looking to make an offer on a house with solar panels? If so, here is what you need to know to better prepare your client in advance.
OWNED PANELS: Are the panels leased or owned? 

Are the panels owned by the seller? Or is the seller leasing them from the solar company. If the panels are owned by the seller, then 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):  

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 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 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 omplicated. 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.  
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.

Buyer Clients:

If your buyers are interested in a home with leased solar panels you may want to remind them 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.

Seller Clients: 

Your seller clients have 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.

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 always contact the MAR Legal Hotline if 
you have any questions at legalhotline@marealtor.com or (800)-370-LEGAL.

Please note, a version of this article originally ran in The MAR Report, the official blog of the Massachusetts Association of Realtors®.