NATNews Blog > September 2017 > Solar leases and escrow

    Solar leases and escrow

    9/1/2017 7:23:57 AM
    By Barbara Pronin
     
    Rising utility costs and growing environmental concerns are boosting a commitment to solar energy. In fact, the number of houses with solar panels has increased tenfold in just the past seven years, according to the Solar Energy Industries Association.
     
    Because leasing solar panels helps homeowners avoid the upfront costs – typically around $20,000 –   many lease their solar energy equipment through independent solar energy producers.  
     
    The process is fairly simple. Approved homeowners sign a lease contract, typically for a 20-year term, and/or a Unified Commercial Code-1 (UCC-1) financing statement filed by the provider, and documents confirming the provider’s interest in the leased equipment are recorded in the county recorder’s office.
       
    But what is the impact of existing solar lease contracts when the subject property is listed for sale?
       
    First, the recorded documents confirming the existence of a solar lease/contract must be reported in the Preliminary Title Report.
     
    Second, the lease/contract must either be bought out on or before closing, or assigned to the buyer who is purchasing the property. In order for that to happen, the new owner must:
    • be willing to assume both the benefits and any remaining payment obligations of the lease, and
    • be approved by the solar energy producer subject to the same or possibly stricter requirements as the original owner.
     
    For several reasons, then, it is helpful to ascertain as early as possible whether a solar power lease is in effect, and what the requirements will be to assign it to the new owner. In some cases, when buyers have balked at assuming such a lease, owners have chosen to save the sale by crediting the buyer with funds to offset any remaining costs.
     
    In any case, as your escrow company, we will notify the real estate agent immediately when we are advised or otherwise learn of the existence of a solar lease. Agents can help avoid closing delays by advising clients to make arrangements for the required transfer or buy-out procedures in a timely manner. 
     
    Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade.
     
    This material is not intended to be relied upon as a statement of the law, and is not to be construed as legal, tax or investment advice.  You are encouraged to consult your legal, tax or investment professional for specific advice.  The material is meant for general illustration and/or informational purposes only.  Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy.   
     
    Reprinted with permission from RISMedia. ©2017. All rights reserved.