By: Attorney Patricia E. Alexandre| Associate
If you are considering signing a lease agreement for the installation of solar panels from a solar company, BEWARE of the financial risks attached when it comes to selling or borrowing against your home once you sign the agreement.
Consumers who have entered into long-term lease agreements for solar panels attached to their home are finding they may not have complete financial control over their home. Consumers are experiencing increased difficulty in re-financing, obtaining equity loans or reverse mortgages as a result of entering into these long-term lease agreements.
Furthermore, homeowners are finding they cannot sell their home UNLESS the solar company approves the prospective buyer. As a result of entering into a long-term lease with a solar panel company, the Federal Housing Administration (FHA) has strict regulations regarding leased solar panels which could prohibit the FHA from approving a homeowner’s loan.
Some solar panel agreements require you to obtain the solar company’s approval of a prospective buyer making the homeowner’s ability to transfer their home limited. If the prospective buyer is not approved by the solar company, the owner is faced with purchasing the solar panels and equipment, in order to get out of the lease, before they can sell their home which could cost consumers approximately $20,000.00.
“Some solar companies who have leased a solar system or who have entered into a power purchase agreement are making a Uniform Commercial Code financing statement (UCC-1 filing) in the real estate records for the house where they have installed the system. This is a legal form that a creditor files with the Registry of Deeds to give notice that it has or may have an interest in the personal property of the debtor. The UCC-1 filing acts as notice to anyone who might perform a title search on the address where the system is located that a third party has rights to a solar energy system installed on the property.”
A UCC-1 filing acts as a lien or an “encumbrance” your property, making the homeowner essentially responsible for the lease. This means that if you sign a long-term lease agreement with a solar company and later decide to sell, re-finance, or obtain a second mortgage on your home, you MUST receive permission from the solar company BEFORE you sell, refinance or get another mortgage on your property. Furthermore, there is NO requirement that the homeowner be sent notification of the filing.
The filing protects the rights of the solar photovoltaic (PV) system’s owner against a mortgage on the real property. In other words, if the lender who holds the mortgage forecloses on the consumer’s home, the UCC-1 filing prevents the mortgage lender from taking ownership of the PV system when the mortgage company forecloses. Similarly, if you sell your home, the UCC-1 filing gives notice to the new homeowner and lender that they are not taking ownership of the PV system.”
Homeowners who already have solar panels installed on their homes should contact the Customer Service Center at the Registry of Deeds, where the deed for their home is recorded, to find out if a UCC Financing Statement has been filed by a solar company against their home.
Before signing a lease with a solar company, it is important to do your research. If you are still weary check out the Massachusetts Attorney General’s website for advice to homeowners considering solar panel installation.
The attorneys at Wynn & Wynn, P.C. can help review your agreement and help you understand the implications involved in installing solar panels. Call our office today at 1-800-852-5211, or request your free consultation.