Buying a property with solar panels

As a result over the past few years, many householders have been tempted by the prospect of long-term free electricity and, in some cases, an income generated from selling electricity to energy companies. There are several reasons why solar panels have proved popular with homeowners:

• Environmental benefits of using renewable energy rather than fossil fuels
• Cheap or free electricity for the home
• Feed-In Tariffs that pay the homeowner for the green energy they generate

When Feed-In Tariffs were introduced in 2010 they were very generously funded. With this incentive, it’s estimated that over 900,000 solar panels have been installed across the UK. But the Feed-In Tariff has been reduced significantly since 2012 and has been abolished altogether for new installations.

The number of houses with solar panels means that they increasingly crop up when homes are sold on. However, the process of buying or selling a home with a solar rooftop array is more involved.

The problem with solar panels

The business model for solar panels is a complicated one. In most cases where solar panels were installed in recent years, the panels were provided free of charge by a solar power company. The homeowner then leased the panels to the power company, usually for a 25-year term. The solar power company then took the benefit of the Feed-In Tariff. 

The homeowner had low energy bills plus the prospect of the Feed-In Tariff after 25 years.

However, over time, some drawbacks have become apparent - especially as the financial benefits of solar panels have been lost with the abolition of the Feed-in Tariff, which has caused the collapse of many solar power companies, but not of the obligations homeowners may have taken on.

Many mortgage lenders have issues with the fact that a large part of the roof is technically leased to a solar power company, rather than owned outright by the homeowner. Some will believe that this actually makes the property unmortgageable. In some cases, the solar power company might actually have the right to lease the roof space indefinitely. If they have not opted out of the 1954 Landlord & Tenants Act (which states that a commercial tenant has the right to remain even after the agreed term of a lease has ended) then, legally, they could continue to rent the roof area beyond the 25-year term.

The terms of the lease with the power company may mean that the homeowner has to gain their consent to extend the house or even to sell it. There may also be a clause that means the homeowner has to pay compensation for lost revenue if the solar panels have to be temporarily removed for roof repairs.

If the power company has assigned the management of the panels to an agent, which was a common practice, the agent may charge a fee when the house is sold.

However, if the homeowner owns the panels outright, these problems will not apply. 

Lending on a property with solar panels

At Rangewell, we can help if you wish to buy a commercial property, or residential property for use as an investment, that has solar panels.

We know the lenders who will be able to provide funding and the various extra steps you will need to take during the application.

These can include:

• Sight of the agreement under which the panels were supplied and fitted, and whether this was a sale or the industry-standard 25-year term lease.
• Details of any planning and building regulations consents that would have been required, and evidence that they were complied with.
• Confirmation that any requirements of the seller’s mortgage lender were met when the original deal was done.
• Confirmation as to whether there have been any breaches of the terms of the agreement from either side.
• Details of any payments made for the solar panels and who insures the panels.

At Rangewell, we work with lenders across the market and we can call on the expert knowledge you need, even when there are problems with your property sale. Our knowledge means that you have the commercial property finance solutions you need when you are considering a business purchase. Our knowledge can not only help you secure the most appropriate funding - and it can save you a great deal of cash.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.