A Guide to Buying a Foreclosure with Solar Panels

Buying a foreclosed property can be complicated at times, but it gets even more so if there are solar panels installed. If you buy the property, who owns the solar panel, and what will happen if there is a lease?

Solar panels attached to a house are considered part of the property and belong to the buyer. Most solar panel leases are after the bank mortgage has been recorded so the solar company has no legal rights to claim it unless there are payments left, In that case they have to go after the previous owner, not the buyer.

What Happens to Solar Lease After Foreclosure?

The solar company can legally claim ownership of the solar panels if it is not fully paid. They can seek payment from the previous owner or remove the solar panels. However they cannot go after the buyer because the lease agreement was signed with the seller ore previous owner.

The legal process will vary by state as there are different interpretations of the law. The legal framework will also depend if it is a residential or commercial property. The following information is for residential foreclosed properties.

There are two points to consider, how the solar panels were financed and how they were installed. If the solar panel was bought by the homeowner, it will be considered a property fixture and subject to house foreclosure laws accordingly.

If the solar panel was already paid for, it belongs to the buyer. If the solar panel is not fully paid, the lender has a right to seek payment. However their claim will be subordinate to that of the mortgage holder.

Leased solar panels may be considered part of the property if the lessor had waived off their right to reclaim it in case of foreclosure. If you are renting solar panels to tenants and your property is foreclosed, any unpaid bills will be your responsibility, not your tenants.

Majority of homeowners in the US lease their solar panels through a power purchase agreement with a solar company. In most cases the solar provider reserves the right to reclaim the solar panels if the homeowner fails to make payments under the agreed upon conditions. Or they can go after the previous owner for payment or settlement.

Note that it is the right of the solar provider to remove the solar panels, it is not obligatory on their part. If the solar panels are old and the warranty has expired, the company may deem it not worthy to reclaim the panels anymore. The cost of removing the panels, repairing the roof and transporting them may not be worth the trouble. If the company waives its rights to repossess the solar panels after foreclosure – even if it not fully paid – the buyer owns the panels.

Here is another scenario: if the homeowner personally installed the solar panels without getting a permit and plans to sell it, then they must inform the buyer of this. Not doing so could get them in legal trouble. If the solar panel was installed by a contractor, then it has a permit and considered part of the property.

Tips For Buying Foreclosures with Solar Panels

The general assumption is that if the solar panel is paid for, you keep it as part of the property. If it not, the solar company reserves the right to obtain payment from the original owner or just remove the solar panels. This includes all components installed like inverters, batteries, charge controllers etc. The fact is there are different opinions on this matter. Even states have varying interpretations, so here are some suggestions.

Inspect the property. If there are solar panels installed, ask the seller for a copy of the lease agreement. Inquire if it is fully paid or not. If it is, you become the owner after buying the property. If there are payments left, you have options.

One, ask the seller to pay for the solar panel lease. If the seller can no longer pay, you have two choices. Assume ownership of the lease and pay the remaining amount. Doing this will allow you to keep the solar panels. If you do not want to pay, you or the seller must inform the solar company. Tell them of your decision. Doing this will clear up any confusion and avoid having to go to court to settle the dispute.

Read the lease agreement, and pay attention to the fees and contract term. This is crucial if you want to buy the lease and assume responsibility for the payment. The key here is to remain in constant and open communication with the seller and the solar company to avoid misunderstandings.

Solar Panel Lease FAQ

Seller Wants Me to Assume Lease. What Should I Do?

If you are the buyer, get a copy of the lease agreement. Go through the details and if necessary consult a lawyer or talk to the solar company. Are you willing to pay for the solar panels? Is it worth it? That depends on whether the benefits of solar panels are worth paying for in your view.

If you are the seller and have come to an agreement with the buyer, have everything in writing. Even if a buyer verbally agrees to take over the lease but it is not in writing, and they fail to pay, the solar company can go after you.

Before you close the deed of sale for a property – foreclosed or not – the solar company must provide a document stating the buyer has assumed responsibility for the lease.

What Happens if You Buy a House with Leased Solar Panels?

You can buy out the lease if there are payments left. If you don’t want to keep the solar panels, inform the solar company so they can remove it. The solar company may also ask payment from the seller. You are not obliged to pay for the lease unless you bought it out. In short, what happens depends on the lease situation between the seller and the solar company, and if payment is complete.

Should I Take Over a Solar Lease?

Only you can answer this question. If you cannot afford the payment, let the seller and solar company know. How the seller and the solar company resolve the payment is their concern, not yours. If you are happy paying your current bill, there is no reason to spend hundreds of dollars paying for something you won’t use. But if you want to save on electricity bills, compute how much it will cost.

How Much is a Solar Lease Per Month?

The average cost is $50-$250 a month. The actual cost may vary widely depending on how many solar panels are installed and if there are interest rates incurred due to late payments. Taking over a lease is a serous matter so make sure there are no hidden fees. Also check the condition of the solar panel and the other components.

How Much Does it Cost to Buyout a Solar Lease?

The total cost will depend on several factors, but it will probably be lower than paying monthly. This is something you need to discuss with the owner if you want to do a buyout. For instance, if the total bills are about $15,000, a buyout may be in the $10,000 range. However this is just an estimate and will come down to negotiations between you and the owner.

Can You Get Out of a Solar Lease?

This is very difficult to do, whether the property is foreclosed or not. That is why you should go over the terms carefully before buying a house with an existing lease. You may be allowed to get out of the lease if the panels turn out to be defective, someone else assumes ownership, or the solar company violates the lease agreement. But other than that, you will pay a fine to get out of a lease contract.

Is There a Tax Credit For Leased Solar Panels?

All tax credits are given to the solar panel owners. If you took over a lease or power purchase agreement, the solar company retains ownership of the panels. The company is the owner and will receive the tax credits. An analogy would be that you are a tenant and the solar company is the landlord. You pay a monthly fee for the use of the solar panels, but the company retains ownership.

Conclusion

As solar power evolves, so do the laws that govern them. States may have different or updated laws concerning solar panels and foreclosure, so the best recourse is to consult a lawyer and talk to the seller.