Summer’s here! If you have solar panels, that should be great news. But if you are also trying to sell your house, it may not be good news at all. In fact, we were recently involved with a client whose dream home purchase turned into a bit of a nightmare, when they discovered that the solar panels fitted, rendered the property almost un-buyable. Do you see yourself in this situation?
There are two basic ways to buy solar panels
1) Upfront – so you own them (and can remove them).
2) A long lease (where the provider owns them).
With the first option provided, you got the proper planning consents to install them – no problem. However, not everyone can afford the capital cost of £20K plus [drafting note check figures], so the more popular option is to rent out your roof to a solar panel provider and “buy” the panels over 25 years. Reputable providers will have fairly standard looking leases, but as always it’s the small print which can catch you out. Here’s how:
As with most types of alterations or material building works to your property, if you have a mortgage you should always make sure your lender either consents or at least is aware of what is proposed. Granting a 25 year lease on your property potentially prejudices their interest – so you absolutely need their consent. There is an organisation called the “Council of Mortgage Lenders” or “CML” who are the regulating body of the banking industry, and they issue guidance from time to time. Back in 2012 they confirmed what they need to see in all roof leases for solar panels [drafting note link to guidance].
All well and good for our client, the property they were looking at had a lease which looked on the face of it, that it was within the guidelines; even better, the existing mortgage company had countersigned the papers and looked as if they had given their consent. However, the problem was this: The 25 year lease travels with the property. In other words, on a sale you would buy the property, subject to that lease (unless you wanted to pay the 10K to buy out the remainder of the lease). It was the buyer’s own mortgage company which had the problem with the lease, and particularly a clause which dealt with what happens, if the borrower (our client) fell into arrears.
On a normal property without a solar panel lease, if a borrower defaults, then the lender becomes the “mortgagee in possession” (i.e. it forecloses on your loan and then sells the property). The problem our client’s lender, and apparently a number of lenders in this market had was that the lease said that if the “mortgagee in possession” wanted to sell the property and terminate the roof space lease, it had to wait 3 months and demonstrate that the roof space lease was damaging the sale prospects. Also the mortgagee would have to pay the solar panel company the capital owed on the solar panels, which could be anything up to £20k. Understandably, lenders don’t really like that “standard” clause. So here’s the interesting thing: Lenders have made a public policy statement in 2012, supporting the concept of being environmentally friendly – frankly back then, what else could they say? So on the back of that, no doubt everyone had additional comfort, rushed out and signed up these deals. But now there are only a few lenders [drafting note quick research on who would lend] who are willing to lend where the property has them installed. So sellers have a very stark choice – wait 25 years before selling or stump up the cash to buy out the leases. Never a great choice to have to make. So while a sunny summer should be fun – it may not be for everyone.
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