Solar Lien Removal Options for Auction Property

Austin, Texas
Real Estate Deal Analysis & Advice
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Solar Lien Removal Options for Auction Property

Fawad Chohan
Member since 2021 · 2 posts · 1 vote

Hi, all

I am looking at a 2nd chance foreclosure (auction) property. I need help with dealing with either removal of the solar lien or a negotiated pay off.


Timeline:

June, 2023 - House was built, and Deed of Trust was signed. Owner took out a FHA loan.

August, 2023 - Owner took out a solar loan to finance solar panels. UCC 1 (Sunnova filed a UCC Solar lien, backed by Pinnacle financing). It's a personal property lien for the PV system itself and not against the house. 

2024 - I am assuming owner stopped making mortgage payments as well as solar loan payments sometime in 2024.

March, 2025 - Substitute trustee deed was filed. House was foreclosed on. 


The solar lien is junior, and solar company cannot enforce loan payments on me (the new owner), but they can drag it out/play hardball/not respond. The other issue is solar loan must have ballooned by at least $10K since 2024, due to unpaid payments and other fees. My estimate for the initial solar loan is $30K, adding in additional $10K makes it a total of $40K. 

I plan to get a private loan for 1 year (as far as title goes, insuring over UCC, endorsement, no Sch B exceptions) and close on this. Within the 1 year of private loan, I plan to engage solar company and negotiate a payoff somewhere in the middle to get rid of this and make title fully clear permanently.

Q1) Should I go for a payoff? Is there another option to remove it?
Q2) Is it common for solar companies to agree to negotiated payoffs, especially for foreclosed homes?
Q3) If yes, what % of the balance they agree to for payoff?


Suppose, solar company does not agree to anything within a year. Then exit routes are/are not

1) Flipping does not work, as buyer/buyer's lender would demand a clean title. 
2) DSCR loans are off the table, because they require fully clean slates.
3) Come the private loan maturity in 1 year, I try to refinance into a conventional DTI loan, with the junior solar lien still standing. I know it would affect my personal finances, and scaling would be an issue. But that's the only exit plan that I can think of. Also, this is kicking the can down the road and not solving the problem (removing the solar lien). At some point, I will have to settle a payoff with them and get the lien removed.

Will a conventional DTI lender lend with junior solar lien in place?

Thanks for helping me out!



Edited: 

* I am in Texas.

* UCC's expire in 5 years here, but I expect Sunnova to keep refiling them.

* Read that Sunnova is going through bankruptcy. I don't expect the lien to drop, but operationally, they would get even slower to respond. 

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  • Ricardo R.Pro Member
    Property Manager · Michigan Ctr, MI · Member since 2016 · 663 posts · 581 votes
    11mo

    Hey Fawad,

    Good on you for digging this deep before jumping in — solar liens can be sneaky little landmines in foreclosure deals. I’ve run into this same issue before, and your instincts are mostly spot-on. Sorry for the long post in advance, but tried to organize it a bit.

    Here’s how this usually plays out:

    1. Payoff vs. removal — what’s realistic:
    Since this is a UCC-1 filing, it’s a lien against the equipment, not the real property itself. That’s both good and bad news. The good news is, it doesn’t “run with the land” like a deed of trust — meaning Sunnova (or whoever holds the loan) can’t come after the house itself. The bad news is, they still technically own the panels until it’s paid off, so you can’t sell the home with “clean title” while it’s hanging out on record.

    So yes — a negotiated payoff is your best play. You’ll want to start that conversation after you close, since trying to get an answer before you own the property usually goes nowhere. Solar companies do accept discounted payoffs, especially when the original borrower defaulted and they know recovery will be tough. I’ve seen settlements land anywhere from 30–60% of the outstanding balance, depending on how aggressive or patient you are.

    2. Negotiation tactics that actually work:
    When you reach out, keep it simple and factual — you’re the new owner, the borrower defaulted, the panels are abandoned collateral, and you’re willing to settle to make this clean. Don’t open with your max number. Let them come to you with a figure and work it down. Mentioning that their lien is effectively worthless without your cooperation often speeds things up.

    3. What if they don’t respond or refuse?
    If Sunnova drags their feet or ignores you (which, given their bankruptcy, is pretty likely), you’ve still got options. You can bond off the lien through a title company or your attorney — basically post a surety bond equal to the lien amount so you can move forward with clear title. It costs a bit upfront but gives you flexibility. The UCC also expires in five years unless refiled, so there’s a small chance it lapses if they go belly-up or disorganized.

    4. Financing impact:
    You're right that you won't get a DSCR or flip loan with the lien still there — lenders hate anything showing up in Schedule B. Some conventional lenders might still work with you if the title insurer issues a clean endorsement and you explain it's a non-property lien, but it'll vary case by case. Expect pushback and delays if it's still open.

    If you can snag this deal at a big enough discount to account for a $15–20K “headache buffer,” it’s worth the effort. But build that payoff (and time) into your numbers. These solar lien negotiations move slowly — months, not weeks.

    My advice:

    • Yes, go for the payoff, but lowball it.

    • Expect a 30–60% negotiated discount if they play ball.

    • Have a plan B (bonding off the lien or sitting tight until expiration).

    • And bake in the time value — title cleanup might take the better part of your 1-year loan term.

    This deal can still make sense if the numbers support that $15–20K risk window — but make sure it’s priced accordingly. Fawad, I really hope this helps you a bit, again sorry for the long post, I sent you a DM on BP... it's one of the reasons I do this, I hope you can assist. Thank you in advance. 

    [email protected]810-844-1104
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  • Fawad Chohan
    OP
    Member since 2021 · 2 posts · 1 vote
    11mo

    Thanks, Ricardo. Really valuable and insightful stuff on how to mitigate these risks. I am just getting my feet wet in the REO/auction landmine and figuring out what can blow up, how it will blow up, and how I can be ready for it.
    Thanks again!

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