Solar Panels on Foreclosure

27 Replies

Question for everyone in the forums. What is your experience with solar panels and how the bank handles them? I'm assuming these would be a lien on a property like any other lien? The only reason I ask, is they don't seem to be being handled that way, but it could just be the rep I'm dealing with at the solar company.

Currently under contract on a property from Auction.com and there are solar panels. The company is Vivint. I was wondering your experiences if any when dealing with solar. We are at the finish line and obtaining the UCC release, and I'm not sure if the rep for Vivint is just not used to investors or what, but he's making it seem like we are assuming responsibility for the payments of the solar? He mentioned purchasing the panels or prepayment of the power.

If you need more information I'm happy to share but just curious as I'm expecting a ton of foreclosures over the next 3-5 years having solar, so this is my first experience with these. Thanks all in advance!

Check with a real estate attorney/title company to verify, but......I would assume the UCC lien holder was named and served in the foreclosure auction and was wiped out as a junior lien holder. I doubt they have the right to remove them also.

Of course if you call and ask, they will tell you that you still owe them. 

Originally posted by @Wayne Brooks :

Check with a real estate attorney/title company to verify, but......I would assume the UCC lien holder was named and served in the foreclosure auction and was wiped out as a junior lien holder. I doubt they have the right to remove them also.

Of course if you call and ask, they will tell you that you still owe them. 

Thank you Wayne. My title company is on it. We have been awaiting the transfer docs and UCC from Vivint for over a week. Once we receive those I'm sure that will lend the info we need. 

So a quick update, after climbing up the flagpole at Vivint yesterday I finally got an answer to my situation. The previous owners seemed to have a Power Purchase Agreement before foreclosure. There are two options per the representative:

1- early payoff of the panels - a total of roughly $15,700 that they will be able to negotiate down for a discounted price. I would own the panels free and clear and be able to transfer to the end buyer after my rehab.

2- Vivint will come out and remove the panels, make sure the roof is watertight etc and the system would be taken down.

My question now is, we went under contract through Auction.com on a pretty standard agreement of sale. There is nothing in there that says I am responsible for the solar panels. This is my first transaction dealing with solar so I'm wondering if anyone has any insight as to my next steps. I am obviously desiring to keep the solar system as this would be a huge perk to the end buyer when I list the property - hugely discounted energy for a system they haven't had to pay for.

I can't get any UCC paperwork without signing transfer documents, and I'm not transferring any systems into my name until I know exactly what is going on with these panels. Sorry for talking in circles, I just figured with logic that the bank would be handling this lien. Thanks in advance!

It’s very uncommon for a solar company to come across a situation like this (I’ve worked in solar for over 15 years and haven’t encountered a client’s property being foreclosed on), mostly because the credit threshold to lease solar panels is fairly high, above about 650 for most companies. Perhaps it will become more common as solar proliferates and the barrier to entry is lowered with newer financing products. Anyway my point is I’m not surprised that there is confusion with the bank and the folks at Vivint, as it’s likely the first time they’ve encountered this scenario. I would negotiate hard with Vivint and get a really good price on the system. They would much rather take some money for the system and get it off their books than lose money by coming out to remove it and repair the roof. They also probably won’t be able to resell the equipment as only new equipment qualifies for the tax credit and there isn’t much of a market for used solar equipment so you’re in a good position to negotiate. I’d start at something like half what they say the early buyout price is and go from there. 

Originally posted by @Steve K. :

It’s very uncommon for a solar company to come across a situation like this (I’ve worked in solar for over 15 years and haven’t encountered a client’s property being foreclosed on), mostly because the credit threshold to lease solar panels is fairly high, above about 650 for most companies. Perhaps it will become more common as solar proliferates and the barrier to entry is lowered with newer financing products. Anyway my point is I’m not surprised that there is confusion with the bank and the folks at Vivint, as it’s likely the first time they’ve encountered this scenario. I would negotiate hard with Vivint and get a really good price on the system. They would much rather take some money for the system and get it off their books than lose money by coming out to remove it and repair the roof. They also probably won’t be able to resell the equipment as only new equipment qualifies for the tax credit and there isn’t much of a market for used solar equipment so you’re in a good position to negotiate. I’d start at something like half what they say the early buyout price is and go from there. 


 Thank you very much Steve, and you're right. All of the clients and investor friends I have are learning through my experience right now. We foresee the next 3-5 years a lot of properties we buy having solar panels in our area. So, I guess it's a good thing we are going through this now. Your analysis is pretty much in line with my partner and I's right now. Which is to negotiate the price of the whole system down with Vivint. I guess where my biggest confusion is: the liens on title are paid off by the seller, the bank in this case, but I've been told conflicting info from everyone I've discussed solar with. Some say it is a lien to be paid by the bank, and others say it's a gray area and they can fight back and say no you bought the property as is. 

Any experience here?

You’re definitely breaking trail on this one. Technically it is probably a fixture filing not actually a lien, but my understanding is that banks consider it essentially the same thing as a lien (when it benefits them of course but apparently not when it doesn’t lol). I wish I had a clear answer for you but if the bank is pushing back not wanting to pay it off, it seems that settling with Vivint on a buyout price will be the most expedient route to resolving the issue. Definitely negotiate hard, their feet are kind of to the fire here seeing as the lessee defaulted on the agreement, so they’re likely not getting any income off the system (other than perhaps selling electricity back to the grid), and they’ll incur a loss coming out to remove and repair. I think you’re negotiating from a good position and have the chance to get a great deal on a system that will add some value or at the very least increase the sellability of the property. As a side note, leasing solar systems was only really popular for a few years, 2010-2013ish, before banks would lend on them. Now that low interest loans are available, more people are using financing instead of leasing. Financed systems don’t have a lien/fixture filing to gum up the works when the property changes ownership. There are definitely quite a few leased systems out there in the wild in certain areas though, like NJ apparently.

Thank you guys for this thread. I had no idea solar companies could have lien on the house. I have Vivint Solar on my primary residence without any payment. The contract I signed with them was with the house and not me personally. So the panels will stay on the roof for the contracted time no matter who the owner is.

Financing statements are used because these items are personal property, not realty. UCCs are not liens although they are specific exceptions on title insurance policies because the secured party generally has the right to access, maintain and remove the equipment, among other things.

You can assume the prior owner’s agreement if the terms make sense. If they don’t, the owner’s agreement with Vivint (now Tesla?) is NOT binding on a foreclosure purchaser because it does not run with the land.

I’m sure we’ll see different variations of the owner/solar relationship but if you find a UCC, this is why.

@Tom Gimer you’re thinking of Solar City (started by Elon Musk’s cousin and acquired by Tesla, rebranded as Tesla Solar). Vivint Solar is their largest competitor, an offshoot of the Utah-based home automation/ home security company Vivint. Their ticker is VSLR.

Appreciate everyone's input here. Glad to be a trailblazer and hopefully help others after this situation!


I guess my biggest confusion is why is the foreclosing bank (Deutsche Bank in this case) not responsible for satisfying this buyout number Vivint gave me to purchase the system outright ($15,763)? I understand it's not a lien, but the system was in the previous owner's name and I guess logic would tell me the bank is responsible for paying this off, just like the $26,000 Federal Tax lien that was cleared off title.

For future educational purposes to everyone, Vivint gave me THREE options:

(1) Buyout the system for the above $15,763. I will be negotiating HARD on this number and this is my most preferred scenario.

(2) Assume the roughly $150/month agreement which I would then have to pass on to the end buyer when I rehab and flip the home. IF THE BUYER DOES NOT WANT SOLAR, I WOULD BE REQUIRED TO REMOVE THE SYSTEM AND REPAIR THE DAMAGES OUT OF MY POCKET. I have no desire to go this route.

(3) Since this is a bank owned property, Vivint will remove this system and repair everything free of charge. I will go this route if I'm forced to, but the selling point to the end buyer of having no electric bill and roughly $2,000-$3,000/year in SREC is appealing obviously to the listing.

Man that’s a nice SREC contract. ~$200/mo revenue from a power plant on the roof in addition to reduced utility bills will definitely be a selling point for the home, once you've removed the UCC/lien issue of course. Some hoops to jump through here, you'll have to clear up the lien and transfer the SREC contract but you're well positioned to negotiate a good deal on a valuable system. I would also negotiate to include a transferable warranty from Vivint, that might be important for a buyer to know the system is under warranty. 

@Joe Onorato

I would have them remove the panels would buy new one and an inverter and find a roofing company to have the new panels installed and an electrician to have the new one installed if it would bring in an extra 200 per month...

Just my 2 cents

Looks like your questions has been answered, so ill leave it as is


But I've been doing solar for 3 years in NJ so if you have any questions id be more than happy to assist :)

Y'all have been awesomely helpful. Quick update with where we are at. This was a purchase agreement we found out finally. Vivint has been incredibly discrete and secretive with giving us any information, and literally will not transfer me from the one person we have been dealing with. Extremely frustrating. 

We have received the amount of payoff for the system and are now aggressively negotiating with the bank on who will be paying this amount. Nothing in our contract says anything about us being responsible for the panels IF THERE WAS A BALANCE. So we are aggressively negotiating here. I have also made it known to Vivint the amount of unnecessary work, stress, time and effort they would need to go through if they needed to remove the system and repair the roof. I am doing all I can to get that $15,763 number down, and seeing what, if anything, the bank would be willing to contribute to get this off everyone's books and get to closing.


If for whatever reason we cannot find a reasonable number, we'll be having Vivint remove the system and repair the roof and siding where the system is. I will keep everyone updated. If anyone has any other advice, greatly appreciated.

Originally posted by @Joe Onorato :

Appreciate everyone's input here. Glad to be a trailblazer and hopefully help others after this situation!


I guess my biggest confusion is why is the foreclosing bank (Deutsche Bank in this case) not responsible for satisfying this buyout number Vivint gave me to purchase the system outright ($15,763)? I understand it's not a lien, but the system was in the previous owner's name and I guess logic would tell me the bank is responsible for paying this off, just like the $26,000 Federal Tax lien that was cleared off title.

For future educational purposes to everyone, Vivint gave me THREE options:

(1) Buyout the system for the above $15,763. I will be negotiating HARD on this number and this is my most preferred scenario.

(2) Assume the roughly $150/month agreement which I would then have to pass on to the end buyer when I rehab and flip the home. IF THE BUYER DOES NOT WANT SOLAR, I WOULD BE REQUIRED TO REMOVE THE SYSTEM AND REPAIR THE DAMAGES OUT OF MY POCKET. I have no desire to go this route.

(3) Since this is a bank owned property, Vivint will remove this system and repair everything free of charge. I will go this route if I'm forced to, but the selling point to the end buyer of having no electric bill and roughly $2,000-$3,000/year in SREC is appealing obviously to the listing.

Since this was not a lien it was therefore not a junior lien that would be extinguished, if properly noticed, by a foreclosure. It is definitely not Deutsche Bank's problem.  

And unfortunately it sounds like you did not pull title on this before you bought. Had you done so you would have discovered the solar UCCs and researched this fully before bidding... so you are stuck with this as part of the cleanup. The FTL was clearly junior to the mortgage if "cleared"... it was not paid by Deutsche Bank.

@Joe Onorato If you tell me more about the system details (modules, racking and inverter brands, system size, date installed, SREC contract details, time remaining on that contract should be plenty) I’d be happy to give you my opinion on value if you’d like. Also curious if the system warranty will remain in place if you end up going the early buyout direction. Because that would be something I would want to have as a buyer, I would view that as critical for adding resale value. Sorry this is adding a layer of complication for you. As a solar professional and advocate I have never been a big fan of leasing/PPAs or even the PACE program or anything involving a fixture filing/lien for this reason. It certainly doesn’t help that the big national leasing companies tend to have one-star customer service.

I would demand that if they remove the system then they replace the entire roof and section of siding where they damaged it. The way they install the panels there are only 2 ways to make it waterproof upon removal (for all the systems I have seen). #1 they remove the shingles they drilled through and replace them, leaving miscolored shingles that stick out like sore thumbs all over the roof #2 they cover the holes in silicone and insist they'll be waterproof, in a couple years they'll leak and the owner will have to replace the roof anyways. Tell them if they refuse you'll sue them for the cost of replacing the entire roof or you'll pay them $5k for the system. 

You should remember that when you negotiate the price for the solar panels, you also need to negotiate the power purchase agreement.  I do not know how your state works, but typically you need an agreement where they or a local utility company purchases the energy (the meter spins backwards giving you a credit).  There will be a rate at which they pay you for the energy that is purchased and a rate that they charge you for what you use off the grid.  

It does you no good to own a solar system and not be able to sell the energy or to store it on the grid.  Or to negotiate hard on the cost of the solar panels and not worry about the rate for the energy.  There is a balance in the cost for the solar system and the payment for the energy generated.  Would you want a free system, that can not hook into the grid?  If so you need batteries to store your energy.  Otherwise make sure you negotiate just as hard for the power purchase agreement.

And you need to have a transferable power purchase agreement that will fold in easily to the new owner after your rehab.

Since they are nt really forthcoming with information, I would be tempted to schedule a meeting with the company rep to get a free estimate on a system for another property just to get a copy of what they typically pay out for power, what they charge, if they are a direct buyer or the local utility is involved, etc.

Originally posted by @Lynnette E. :

You should remember that when you negotiate the price for the solar panels, you also need to negotiate the power purchase agreement.  I do not know how your state works, but typically you need an agreement where they or a local utility company purchases the energy (the meter spins backwards giving you a credit).  There will be a rate at which they pay you for the energy that is purchased and a rate that they charge you for what you use off the grid.  

It does you no good to own a solar system and not be able to sell the energy or to store it on the grid.  Or to negotiate hard on the cost of the solar panels and not worry about the rate for the energy.  There is a balance in the cost for the solar system and the payment for the energy generated.  Would you want a free system, that can not hook into the grid?  If so you need batteries to store your energy.  Otherwise make sure you negotiate just as hard for the power purchase agreement.

And you need to have a transferable power purchase agreement that will fold in easily to the new owner after your rehab.

Since they are nt really forthcoming with information, I would be tempted to schedule a meeting with the company rep to get a free estimate on a system for another property just to get a copy of what they typically pay out for power, what they charge, if they are a direct buyer or the local utility is involved, etc.

Lynette you're on the mark here overall but it seems you are using the term power purchase agreement (PPA:https://www.seia.org/research-...) interchangeably with what is actually an interconnection agreement/net metering agreement (https://irecusa.org/publicatio...). While the two are similar and even overlap, they are also very different so it is not entirely accurate to use them interchangeably. 

Any grid-tied form of generation needs to have an interconnection agreement/net metering contract with the utility in order to benefit from net metering. The interconnection agreement/net metering agreement is the contract that decides the rate per kWh that the utility credits the owner of the system for electricity generated. A PPA is similar to an interconnection/net metering agreement in that both are contracts to buy and sell electricity, however they are not the same thing. A PPA is not required for every grid-tied system like a net metering agreement is. A PPA is a form of project financing which allows a 3rd party (usually the developer of the solar project) to own and operate the system and sell electricity from it, sometimes back to the grid, sometimes to the occupant of the building, sometimes to both. Net metering is the basic contract with the utility, and typically only requires one meter which is a bi-directional meter or net meter that replaces the regular billing meter. A PPA is a contract that is separate from/in addition to the basic interconnection agreement. A PPA requires a second meter in addition to the net meter which measures the system production. A PPA is also similar and sometimes mistakenly used interchangeably, but different, from a solar lease: https://www.solarpowerrocks.co...

In this case the OP did say that the system was owned by Vivint through a PPA. OP is negotiating an early buyout of that PPA. The interconnection agreement is separate from the PPA and will run with the system and transfer from the current owner of the system (Vivint), to the OP assuming the negotiations to buy out the system are successful. Most interconnection/net metering agreements are 20 year contracts between the owner of the system and the local utility that operates the grid, and they are transferred to the new owner during a sale of the property. So the OP will need to transfer the interconnection agreement (usually just by filling out a form for the utility) as well as buyout the PPA (which will be negotiated between the OP and Vivint).

On top of all that, the OP also mentioned there is an SREC contract for this system as well, which is yet another separate contract, for the SRECs (Solar Renewable Energy Certificates/Credits). The SRECs are related to the net metering agreement, as the local utility has contracted to buy the SRECs produced by the system at a certain price in order to meet their Renewable Portfolio Standard (RPS). For every 1,000 kilowatt hours of electricity produced by solar, one SREC is awarded. In this case those SRECs are worth about $200/month (straight revenue, not just by offsetting the electricity needs of the building) and that contract will likely transfer to the new owner of the system. 

So there are a few pieces to this puzzle: 

1) The net metering agreement which is not complicated because those transfer any time a property with solar is sold, as simple as completing a form, no biggie. 

2) The PPA. This is the part that is gumming up the works because the agreement was between the utility, the developer of the system (Vivint) and the previous homeowner, who defaulted on the PPA along with their mortgage. The PPA was secured by a UCC fixture filing which is similar to a lien, and which the OP is arguing should have been cleared by Duetsche Bank as part of the foreclosure, but of course DB doesn't want to pay Vivint and now the OP has been given 3 options from Vivint: to buy the system for the preset "early buyout" price according to the contract, have them remove the system and repair the roof/siding, or assume the terms of the remaining PPA contract (take over the agreement from the previous homeowner). 

3) The SREC contract, which likely just goes along with the net metering agreement and will be a nice selling point for the home because this is ~$200/month straight positive cashflow from a power plant on the roof with a valuable energy contract, in addition to whatever the system is producing and selling back through the net meter because the SREC's are measured at the production meter. 


 

Originally posted by @Bryan Devitt :

I would demand that if they remove the system then they replace the entire roof and section of siding where they damaged it. The way they install the panels there are only 2 ways to make it waterproof upon removal (for all the systems I have seen). #1 they remove the shingles they drilled through and replace them, leaving miscolored shingles that stick out like sore thumbs all over the roof #2 they cover the holes in silicone and insist they'll be waterproof, in a couple years they'll leak and the owner will have to replace the roof anyways. Tell them if they refuse you'll sue them for the cost of replacing the entire roof or you'll pay them $5k for the system. 

 I agree. It's pretty much impossible to patch in shingles in a way that will be anywhere close to as good as a new roof, and simply sealing the holes with silicone is in no way an acceptable solution. I would want the entire portion of the roof where the solar array is located to be replaced, shingles as well as the tar paper/bituthene layer at a minimum, and possibly even the decking depending on how many penetrations there are and whether they actually hit the top chord of the trusses. If it comes to that, you might look into having an engineer or roofing company write a letter for you stating how the removal/repair should be completed according to engineering/roofing standards. 

Removing the system and repairing the roof should be the least-preferred option to all parties in my opinion. 

 

@Joe Onorato 2 things that weren’t mentioned here:

1. Ofcurse it saves u the money for electricity bill

2. A solar system can add up to 30,000$ value for a home, so think twice before removing them, honestly I wish my property had solar system!

Originally posted by @Steve K. :
Originally posted by @Lynnette E.:

You should remember that when you negotiate the price for the solar panels, you also need to negotiate the power purchase agreement.  I do not know how your state works, but typically you need an agreement where they or a local utility company purchases the energy (the meter spins backwards giving you a credit).  There will be a rate at which they pay you for the energy that is purchased and a rate that they charge you for what you use off the grid.  

It does you no good to own a solar system and not be able to sell the energy or to store it on the grid.  Or to negotiate hard on the cost of the solar panels and not worry about the rate for the energy.  There is a balance in the cost for the solar system and the payment for the energy generated.  Would you want a free system, that can not hook into the grid?  If so you need batteries to store your energy.  Otherwise make sure you negotiate just as hard for the power purchase agreement.

And you need to have a transferable power purchase agreement that will fold in easily to the new owner after your rehab.

Since they are nt really forthcoming with information, I would be tempted to schedule a meeting with the company rep to get a free estimate on a system for another property just to get a copy of what they typically pay out for power, what they charge, if they are a direct buyer or the local utility is involved, etc.

Lynette you're on the mark here overall but it seems you are using the term power purchase agreement (PPA:https://www.seia.org/research-...) interchangeably with what is actually an interconnection agreement/net metering agreement (https://irecusa.org/publicatio...). While the two are similar and even overlap, they are also very different so it is not entirely accurate to use them interchangeably. 

Any grid-tied form of generation needs to have an interconnection agreement/net metering contract with the utility in order to benefit from net metering. The interconnection agreement/net metering agreement is the contract that decides the rate per kWh that the utility credits the owner of the system for electricity generated. A PPA is similar to an interconnection/net metering agreement in that both are contracts to buy and sell electricity, however they are not the same thing. A PPA is not required for every grid-tied system like a net metering agreement is. A PPA is a form of project financing which allows a 3rd party (usually the developer of the solar project) to own and operate the system and sell electricity from it, sometimes back to the grid, sometimes to the occupant of the building, sometimes to both. Net metering is the basic contract with the utility, and typically only requires one meter which is a bi-directional meter or net meter that replaces the regular billing meter. A PPA is a contract that is separate from/in addition to the basic interconnection agreement. A PPA requires a second meter in addition to the net meter which measures the system production. A PPA is also similar and sometimes mistakenly used interchangeably, but different, from a solar lease: https://www.solarpowerrocks.co...

In this case the OP did say that the system was owned by Vivint through a PPA. OP is negotiating an early buyout of that PPA. The interconnection agreement is separate from the PPA and will run with the system and transfer from the current owner of the system (Vivint), to the OP assuming the negotiations to buy out the system are successful. Most interconnection/net metering agreements are 20 year contracts between the owner of the system and the local utility that operates the grid, and they are transferred to the new owner during a sale of the property. So the OP will need to transfer the interconnection agreement (usually just by filling out a form for the utility) as well as buyout the PPA (which will be negotiated between the OP and Vivint).

On top of all that, the OP also mentioned there is an SREC contract for this system as well, which is yet another separate contract, for the SRECs (Solar Renewable Energy Certificates/Credits). The SRECs are related to the net metering agreement, as the local utility has contracted to buy the SRECs produced by the system at a certain price in order to meet their Renewable Portfolio Standard (RPS). For every 1,000 kilowatt hours of electricity produced by solar, one SREC is awarded. In this case those SRECs are worth about $200/month (straight revenue, not just by offsetting the electricity needs of the building) and that contract will likely transfer to the new owner of the system. 

So there are a few pieces to this puzzle: 

1) The net metering agreement which is not complicated because those transfer any time a property with solar is sold, as simple as completing a form, no biggie. 

2) The PPA. This is the part that is gumming up the works because the agreement was between the utility, the developer of the system (Vivint) and the previous homeowner, who defaulted on the PPA along with their mortgage. The PPA was secured by a UCC fixture filing which is similar to a lien, and which the OP is arguing should have been cleared by Duetsche Bank as part of the foreclosure, but of course DB doesn't want to pay Vivint and now the OP has been given 3 options from Vivint: to buy the system for the preset "early buyout" price according to the contract, have them remove the system and repair the roof/siding, or assume the terms of the remaining PPA contract (take over the agreement from the previous homeowner). 

3) The SREC contract, which likely just goes along with the net metering agreement and will be a nice selling point for the home because this is ~$200/month straight positive cashflow from a power plant on the roof with a valuable energy contract, in addition to whatever the system is producing and selling back through the net meter because the SREC's are measured at the production meter.  

I agree with what you wrote, and that is the proper terms in most areas of the US.  I used the terms that the OP used as they are pretty commonly intermingled and used that way by the general population.  I was trying to explain it and make it easy to understand the part of the deal he was not addressing, but what you wrote is technically accurate.  And depending on how old the original agreement is, he may be able to negotiate more favorable prices. The again, the system may be so old it is already so outdated its not worth anything.

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