Paugh’s Laws | The property has solar panels, now what?

This fall, the FCAR Forms Committee accomplished a major task—creating a Solar Panel Addendum to assist Buyers and Sellers through a transaction in which the property contains solar panels.  The Addendum, now available on zipForm, clarifies each party’s responsibility when it comes to solar panels and what needs to be done to ensure a proper transfer.

Recognizing that more and more homeowners are turning to solar energy to power their homes, it is crucial to understand the steps from disclosure to the transfer of solar panels, and the legal obligation that the Buyer undertakes as part of the transaction.  What follows is a brief introduction to some of the issues that the parties must address when a home is sold with solar panels and how to avoid delays in settlement.

Disclose the Material Fact

No matter what, in a contract for the sale of residential property, a Seller is always required to disclose material facts, and solar panels are certainly one of them.  A Buyer should also disclose to their lender that the property contains solar panels and that the Buyer will be financially responsible for lease payments, if applicable.

Does the Seller Own or Lease the Solar Panels?

If the Seller purchased the solar panels, and therefore, owns them as personal property, the transaction becomes less complicated and the costs to the incoming Buyer are less.  While the Buyer, as the system owner, will be responsible for operations and maintenance, the Buyer gets the benefit of the electricity produced by the panels at no additional cost.  In the alternative, if the Seller leases the panels, the Buyer will be responsible for the remaining payments.

The Buyer Must Do Their Homework

In order for a potential Buyer to decide whether they want to own a house with solar panels, they must be given the opportunity to review all relevant contracts and other information the Seller has, including but not limited to: the Lease, warranty, and energy bills, if applicable, not to mention research the numerous other ownership considerations in relying on solar energy.  If after reviewing this information, the Buyer rejects the solar panels, and the Seller cannot remedy the Buyer’s concern, the Buyer has the right to declare the Contract void.

Realtors Are Not Experts in Solar Panels

Realtors are not held to the standard of an expert in solar power, and reasonably so.  A Buyer’s Agent should educate their client on how they can obtain more information on solar energy and assist them in obtaining all relevant documentation in the Seller’s possession.  However, it is the Buyer’s responsibility to research the advantages and disadvantages of solar energy and solar panels and decide whether to proceed with the Contract (and therefore assume the legal obligation, costs, etc. associated with the solar panels) or provide notice of intent to terminate the Contract.

A Seller’s Solar Panel Lien Must Be Released Before A Buyer Takes Title

Assuming that the solar panels are leased by the Seller, filed in the Land Records is a UCC Financing Statement in which the solar energy company has indexed the solar panels and their ownership interest in them.  Doing so—the filing of the UCC Statement—creates a lien against the property that must be released before an incoming Buyer may take ownership of the property and assume the existing Lease, sign an entirely new Lease, or purchase the panels outright. The Release, releasing the Seller of their legal obligation regarding the solar panels, must be obtained and provided to the Buyer’s settlement company BEFORE closing.  The Solar Panel Addendum clarifies the Buyer’s responsibility to work with the solar energy company to assume the Seller’s Lease (or sign a new Lease), and the documentation to provide to the Seller. 

The Solar Panel Addendum is available to FCAR Members through ZipForms.

FOR MORE INFORMATION ON SOLAR POWER, SOLAR PANELS, AND THE FINANCIAL AND LEGAL ISSUES YOUR CLIENT SHOULD CONSIDER, FCAR IS HOSTING FREE CLASSES ON DECEMBER 6, 2018 at 5:00 p.m. and DECEMBER 18, 2018 at 1:00 p.m. with guest speakers Brianne Paugh, Esq. of Village Settlements, Inc., and David L. Comis, Energy Program Manager for the Maryland Energy Administration

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Brianne Paugh is an Attorney with Village Settlements, Inc. and The Law Offices of Parker, Simon, Hahn & DeLisi, LLC, in Frederick, Maryland, and is an Adjunct Professor of Real Estate Law at Frederick Community College. Brianne was selected as the 2017 Affiliate of the Year by the Frederick County Association of Realtors.