As rooftop residential solar systems increase in number, some homeowners are finding that home solar leasing problems can get in the way when it comes time to sell their house. Most of the increase in home solar has been driven by attractive lease deals that let owners install rooftop solar systems with no out of pocket expense. But there may be a catch.
Installing a solar system is a complex operation. Someone has to coordinate with local municipal officials to obtain the necessary permits and make arrangements with the local utility company to allow the excess electricity generated be fed back into the grid. The system itself involves obtaining the solar panels, installing them on the roof and setting up the inverter that makes the elecrticity coming down from the roof compatible with the wiring in the home and the electricity coming into the house from the pole.
There’s a lot of time and effort involved and, unless you are an expert with lots of knowledge about solar panels and inverters and building codes, it’s a daunting task. Then there is the issue of paying for the equipment itself.
Banks are, by nature, skittish about loaning money to finance newfangled things — like rooftop solar systems. Most of them don’t know any more about the business than the average homeowner. So when people started applying for loans to finance their spiffy new solar energy system, the banks typically said “No.”
The secret to residential solar is that it uses future savings to pay for current upfront costs. A large company like SolarCity can arrange for lenders who are willing to pay for rooftop systems if they can be guaranteed an adequate return on their investment in the long term. And that’s where the idea of leasing solar systems began.
But there is one built-in problem with leasing a solar system. It’s a lot like leasing a car. A new car lease is typically three years long. What if you want to get rid of that car before the lease is up? You see where this is going, don’t you? You either have to buy out the lease or find someone to step into your shoes and take over the lease payments.
That’s the same thing that happens with solar leasing. And some potential home buyers are scared off by having to go through the process of qualifying to take over your lease. Maybe their credit isn’t that great or they are stretching their finances as much as they can to pay for the house itself. There’s no room left over for making a lease payment on top of their mortgage.
According to the LA Times, some prospective buyers are refusing to enter into a purchase agreement unless the owners buy out the lease, which means the sellers wind up with lots less money in their pockets when the sale is completed than they expected.
Lynn Farris, a real estate agent with Windermere Hulsey & Associates in Vacaville, Calif., says disputes arising over solar panel leases are “becoming an increasing problem” for sellers and buyers, and because of the rising popularity of solar, “it’s going to get worse.”
But Jonathan Bass, vice president of communications for SolarCity, says working out smooth transfers of leased systems from sellers to buyers — or buyouts of systems — is a priority. SolarCity is the largest rooftop solar leasing company in the country. Bass says it has a 12-person team that already has arranged “close to 3,000” transfers.
More Good News
Solar power is coming to America and its progress will be swift. The best advice for people thinking of leasing a rooftop solar system is to make certain you understand what the provisions of the lease are before you sign it. In particular, be sure you know what you have to do if you want to sell your home before the lease expires.
One bit of good news in all this is that other ways of paying for solar systems are emerging. Conventional lenders are less wary of solar power that they were just a few years ago, so banks and credit unions are more willing to listen if you want to take out a loan to pay for a solar system. Many solar companies are now offering no money down loans to homeowners backed by large commercial lenders who see the business opportunities residential solar power has to offer. That may make solar leasing less common in the future.
Photo Credit: Helen Richardson, The Denver Post