Have you noticed? Solar panels are popping up on roofs all over! We think it’s great. Solar panels are good for the environment, and they save you money on your electric bill. Even better, in many cases, the panels are installed without costing the homeowner a dime.
If you’ve had solar panels installed for free, there are a couple of things you need to be aware of. How do these free solar panels affect your homeownership? When you’re ready to sell or refinance your property, there is now an additional step you need to take care of before you complete your closing.
Let’s start by looking at how these companies can install them for free – and still make money. Installing solar panels is not cheap; why would these companies do it for free? What’s actually happening is that you’re leasing the solar panels from the installation company, and they will charge you a monthly amount to pay for them. The benefit for you is that the lease payment and the cost of your new, lower electric bill is still less than what you were paying for electricity before you had the panels installed.
To secure the expense of your panels, the solar company will have you sign a lease agreement, which will be recorded in the land records secured against your property. This agreement is called a UCC Financing Statement, and it’s kind of like a mortgage. It ensures that the company loaning or leasing you the panels is reimbursed for their loan. If you don’t make the payments, it gives the solar company the right to come and remove the panels from your home.
What happens if you decide to sell the property? The new buyer will be required to either take over the lease agreement by transfer, or the panels will have to be taken off. The buyer needs to be made aware of this requirement. The lease agreement will need to be transferred before closing. This must be done so that the closing company will agree to insure the title for the new buyer.
The buyer’s mortgage provider has a stake in this, too. The lender is not going to want to loan the buyer the money for the house unless the lender gets to be secured first for that property. Because there’s a UCC Financing Statement for the solar company already attached to the house, the lender can’t be first. The solar company must agree to release and refile their UCC Financing Statement or to sign an agreement stating they will go into second position on the property.
The agreement with the solar company is like a lien against your home, and it must be addressed before ownership can be transferred or before any additional mortgages – like a refinance – are recorded against the property. Lenders want to make sure they are in first place to ensure that they have the ability to recoup their losses if anything changes in your circumstances or the home. The lender wants to be sure they don’t have to go through any other company to get the most out of your home should you default on you loan and go into foreclosure.
It sounds complicated, but it’s really not. It’s just an additional step you and the buyer will need to take before you can close on the property. Many homeowners don’t realize when they lease solar panels that the documents they sign are secured by their home, and that extra steps need to be taken if they want to transfer the home. Foote Title Group can help buyers through these extra steps in the process to make sure everything goes smoothly during your closing.