Solar panels are the new rage in Massachusetts. As we FINALLY enter the warm summer months, I anticipate a slight rise in the installation of these panels. I’ve seen them more throughout Boston. I feel like I’m approached by new vendors weekly. Everyone is selling it. I think it’s great but I’m a little overwhelmed by the sheer number of vendors out there selling it, I usually ask how many actually use it and then… silence…. on with my day.
For clients interested in purchasing or selling a home with solar panels, it’s all about knowing the lay of the land. At The Mandrell Company, we try to be pro-active to avoid problems that can cause delays in the transaction with some preparation in advance:
Are the panels leased or owned? The first thing we determine is whether you own the panels or lease them from the solar company. If you own the solar panels, then they should be factored into the price of the home just as any other asset/ selling feature would be.
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. This is a huge selling feature so if you do not already have this agreement set up, consider setting this up prior. You will want to speak with a SREC broker. If you are part of a ten year SREC Program you may consider selling your future credits through such a broker and we would then value your solar panels based on the energy savings provided. Buyers will want to know what the average annual output of the panels has been so that they can properly value them.
If the panels are leased, you will need to contact the leasing company right away to let them know that you 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.
It is important to remember that a leased solar panel may disqualify some buyers as it may take them over their purchasing power and affect how much they can offer on the property. The buyer’s lender is likely to consider this when making a determination on their loan.
In the end as the seller, you have two options when dealing with leased solar panels: buy out the lease or transfer the lease to the new buyer.
While solar panels are amazing energy and money saving options, it matters whether they are leased or owned. Leased panels can lower the offers you are presented because the buyer will also have to account for this additional monthly leasing cost with their mortgage and they will also have to qualify for the solar panel loan.