- Daniel Dobbs (Mutual Home Mortgage)
THE REAL COST OF LEASING VS BUYING SOLAR PANELS
Updated: Feb 7
Many solar companies offer to install solar systems under a lease.
The Real Cost of Leasing vs. Buying Solar Panels (Consumer Reports)
The installation of a leased system on common-area roofs creates future problems for the HOA and subsequent unit owners; since the leasing company is not subject to the HOA governing documents.
After installing their system, leasing companies often sell the lease to finance companies. If the unit sells, the leasing company "may" consent to the new lessee.
This May or May or May Not Happen!
In reality, most leasing companies consent to another owner assuming a solar lease. The buyer needs 620+ Fico scores, and the leasing company must be willing to "subordinate." their lien (in 2nd position before the sale) to the new 1st TD loan! The subordination process adds ten days to a COE.
What is a "solar subordination agreement"?
The agreement assigns your new mortgage to the first lien position by granting permission from the second lien holder, making it possible to refinance the existing mortgage. The second lien holders and solar vendors typically provide the subordination agreement.
The unit’s seller will be liable for the lease cost if the buyer does not assume that liability.
According to Fannie Mae Lending Guidelines
“If a homeowner OWNS their solar panels, the new mortgage (buyer's) lender treats them as real property, that is, as part of the home — which means the panels can be valued in the appraisal.
In the case of a solar lease (which is always secured by a lien against the property), the lease MUST BE PAID OFF before lenders allow the incoming home buyer to record a new (1st TD) loan.
What to do If your Listing has a solar lease recorded against the property.
As an agent, when taking the listing, the best and most concise explanation is the “good news-bad news” analogy.
The Good News: “ Sellers, your solar system adds value to the sales price of your home” (be prepared to provide comps).
The Bad News: Is the buyer’s lender will require the lease to be paid off (reconveyed) as a condition of obtaining financing.”
Then wait for the blow-back as the seller has often (legal disclaimer) been led to believe when they leased the solar system that the lease “is assumable.”
Better to give the seller the whole story and prepare them for the COE scenario rather than lead them down the garden path to chaos.
Most HOAs Do Not Allow for Leased Solar Installations
Nothing in the state's applicable solar statutes requires any HOA to allow leased solar systems to be installed upon common area roofs.
The potential problems for the HOA and future owners can be prevented by not permitting leased equipment installed upon common area roofs.
** This post is for general information. Any and all questions should be directed to a licensed attorney.