By: Scott Elkind, Chief of Litigation Strategy
Solar contracts cause enormous impediments to persons needing to refinance, sell their homes, or arrange reverse mortgages.
With most solar contracts, the solar company will place a UCC-1 lien on your property to secure the cost of the solar panels. This is where the problem lies when a consumer wants to change any financial arrangement involving their property.
Refinancing
As consumers soon learn, the UCC-1 prevents them from refinancing their homes. There is possible relief as many solar companies will remove the UCC-1 for a short period of time to permit refinancing. Many of these companies charge a fee for this arrangement.
Reverse Mortgage
This presents a thornier problem as now you have another entity involved: the finance company brokering the reverse mortgage. As a reminder, a reverse mortgage is a financial arrangement whereby homeowners contract for periodic payments from their home’s equity. This means that as funds are withdrawn, the home equity is increasing worth less and less. This may present an uncomfortable situation for the solar company which wants a certain amount of equity remaining in the property to secure the cost of the solar panels and expected income derived from them.
For this reason, solar companies will be more reluctant to permit reverse mortgage arrangements for consumers.
Home Sale
The solar sales representative was so convincing when selling you the panels and telling you that they would enhance your property’s value and make a home sale easier.
This was far from the truth.
Trying to sell a home with solar panels on it is challenging. To accomplish this, you will need to find a buyer willing take on the solar contract. This may involve a three way agreement whereby:
- The property owner compromises by lowering the purchase price or pays a sum of money from the sale toward the solar contract; and/or
- The buyer consents to take on the solar on a compromised basis; and/or
- The solar financing company agrees to a discounted monthly fee and/or a reduced buyout amount for the solar panels.
Obviously, to get this done involves a bit of negotiation and compromise by all parties involved.
What the seller should NEVER DO is sell their property without transferring the solar contract to the buyer. By selling the property only, the seller remains on the hook for the solar contract and is essentially paying for the homebuyer to receive free electricity that they are financing. This is a precarious situation to be avoided.
When your property has a solar contract and you are seeking to sell, refinance, or arrange a reverse mortgage, before arranging a sales contract, you should seek legal advice in order to prevent a costly mistake.