Whether you are listing a house for sale or have a buyer with a house under contract – if there are solar panels involved, you have some work to do, and it’s best to get it figured out quickly and accurately.

When it comes to Real Estate professionals and solar panels, as the old saying goes, there are only two types of agents – those who have dealt with solar panels and those that will soon. Consumer acceptance continues to grow, and the courts have opined homeowners’ associations cannot limit solar panel installation. So, whether you love them or hate them, Solar Panels are here to stay.

Homeowners have many alternatives to cover the cost of installing and maintaining solar panels other than just a cash purchase of the panels. Popular methods include solar loans and leases; power purchase agreements are a subset of solar leases. All financing methods will impact your transaction. However, solar leases and power purchase agreements are the most popular and least expensive methods to obtain solar panels; therefore, they are what you will likely encounter and…you guessed it, they require the most work on your end.

For the listing agent, step one is to dig in and immediately understand the nature of the solar panel situation and if there is an agreement. There is a good chance your seller won’t have a firm handle on the exact nature of their agreement, or their obligation. Tesla, Sunrun (who purchased Vivint) and Palmetto are popular companies operating in this space. All companies will require addressing their agreements before the sale of a home (e.g., assumption, transfer agreement, etc.). In addition, solar panels are typically secured, usually through UCC filings (which creates a lien on the property) resulting in additional tasks on the title side of the transaction.

The first step is to identify which company is collecting the payments and understand the current and future terms of the agreement. Next, it’s time to develop a strategy to address the solar panels in the transaction.

In most cases, sellers rarely execute their option to buy out the remaining terms of the agreement and prefer to transfer the agreement and obligation to the new purchasers. The assumption/transfer process involves all three parties: buyer, seller, and the solar panel company. The buyer’s lender may also become involved.

The parties will join in an assumption or transfer agreement, and any security agreements (including UCC filings) will have to be released, and new instruments executed and filed.

For the selling agent, make sure that your buyer fully understands the assumption terms, both now and in the future at the time of writing the contract. For example, contracts may contain escalation clauses leading to increased future costs; in some cases, increases have made or could make solar panels more expensive than standard utility costs.  Other times, the panels do not produce enough energy to power the home resulting in additional energy costs. Your buyer deserves to know the exact terms of the agreement they are assuming, and its potential short and long-term impact on their finances.

So, if you have a transaction on the horizon with solar panels involved – don’t wait until the last minute to dig into the details.

This article appeared in the January 2022 edition of Chesapeake Real Producers

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Barry DesRoches

Mr. DesRoches is the Director of Builder Services at Eagle Title, LLC. Mr. DesRoches graduated from the University of Maryland in 1980 with a BS in Business Management, and an M.B.A. in Finance from Loyola of Baltimore. As an active University of Maryland alumni, Barry served as President of the Robert Smith School of Business Alumni Association, a member of the school’s Board of Visitors, and was honored on the school’s 75th anniversary for his dedication. He has been a Terrapin Club member for over 25 years, served on its board of directors, and is a member of the Board of the “Friends of the University of Maryland Golf Course”. Equally active in his community, Barry served as President of the Rotary Club of Crofton, Maryland and was a recipient of their Rotarian of the year award, and is a former board member of the Crofton Chamber of Commerce.