There are nearly 2 Million houses in the U.S. with solar panels installed on the roof and that number was reached just 3 years after the 1 millionth installation. It can be perilous to fail to properly address rooftop solar panels at the time of sale of a house.

With home sales reaching lofty heights during this pandemic, among the most often made inquiries to this law firm are those arising from the failure to correctly transfer installed solar panels.

We have for years assisted real estate owners and those acquiring property in positively leveraging the constraints and finding advantages in matters involving solar power, often including new approaches and possibilities in this emergent area.

Today, the contracts for the sale and purchase of a house are often provided through a multiple listing service usually by a local board of realtors and most of the forms in common use do not adequately address the admittedly new and only now evolving issues arising from a sale with rooftop solar panels. A form that may be the most widely utilized in the country only provides,

SOLAR PANELS: Solar panels are devices that convert light into electricity. If solar panels are installed on the property, Buyer is advised to inquire about the terms under which the solar panels were installed, how to transfer the ownership or lease, and any costs associated with the transfer.

That language accomplishes next to nothing for the seller or buyer and may only serve to mitigate risk for the real estate brokers.

There is of course no one homogeneous solar panel ‘deal’ with contract terms including ‘who owns the panels’ vary from one transaction type to another, and these installations are governed by checkerboard of state laws.

That observed, many residential solar panel ‘leases’ contain language similar to, ..

You agree that the solar panel system is the Company’s personal property under the Uniform Commercial Code.  You understand and agree that this is a lease and not a sale agreement. The Company owns the solar panel system for all purposes.

Obviously that language creates issues when selling a house with solar panels installed on the roof that belong to someone else. But despite that language, in many states the so called 20 to 25 year leases are not actually leases of fixtures attached to the land because they are not recorded and a lease of real estate and improvements of 7 years or more (the length of time varies from state to state) that is not recorded is not enforceable.

But it is also common that those residential solar panel leases, really adhesion contracts, contain language similar to, ..

If you sell your home you can transfer this lease and the monthly payments.

The person buying your home can sign a transfer agreement assuming all of your rights and obligations under this lease by qualifying in one of three ways: (1) the home buyer has a FICO score of 650 or greater; (2) the home buyer is paying cash for your home; or (3) if the home buyer does not qualify under (1) or (2), if the home buyer qualifies for a mortgage to purchase your home and the home buyer pays us a $250 credit exception fee.

Or, if you are moving to a new home in the same utility district, then where permitted by the local utility, the system can be moved to your new home. You will need to pay all costs associated with relocating the system, ..

So, as a threshold matter, issues of timing need to be considered when entering into a contract to sell a house,

You agree to give the Company at least 15 days but not more than 90 days prior written notice if you want someone to assume your lease obligations.

Some of the companies engaged in this business (.. but not all and maybe not even most) file a UCC-1 financing statement of filing in the land records that puts third parties on notice to their rights in the system. That fixture filing is in most states a lien or encumbrance against the system. But because in many residential transactions, title companies do not search the UCC-1 indexes (.. that are primarily used for business purposes), solar leases are regularly missed, if they are filed at all.

However, the express language of solar system leases cannot be missed,

EXCEPT AS SET FORTH IN THIS LEASE, YOU WILL NOT SUBLEASE, ASSIGN, SELL, PLEDGE OR IN ANY OTHER WAY TRANSFER YOUR INTEREST IN THE SYSTEM OR THIS LEASE WITHOUT OUR PRIOR WRITTEN CONSENT.

That accepted, as suggested by the solar lease language above, there are options and fertile, enabling and desirable business terms that can add significant value to the real estate. The solar lease, as well as any power purchase agreement need to be considered in light of federal and state law (including tax laws) that stimulate new possibilities including create profit.

Maybe not surprisingly, this dark underbelly of the solar industry is not only a residential problem. This firm regularly receives inquiries arising from commercial real estate transactions that have not adequately addressed matters of solar panels, PPAs, tax credits and the like.

And while it might appear there is little litigation in this area, such is deceptive. Most residential real estate contracts contain mediation provisions, if not also mandatory arbitration provisions, so these disputes and differences are often resolved without judicial redress. But those contracts also usually contain fee shifting clauses such that the prevailing party in the mediation is entitled to attorneys’ fees.

In 2020, when cursed energy is “out” and dark energy is “in” leaders in the solar industry have projected there will be more than 2 Million new solar installations this year alone. Concomitantly, the issues related to the sale of houses will get much larger, faster.

Selling a house with solar panels is fraught with peril. There can be real legal jeopardy and significant dollar liability for the seller and buyer, failing to address the issues associated with solar power. As more solar panels are installed each year and those houses now being sold, with home sales surging in a market reshaped and accelerated by the pandemic, we are seeing a sudden, rapid increase in the opportunities to turn the environmental risk, that is a solar power, into an opportunity.