Buying a home with a solar lease agreement?

Buying a home with a solar lease agreement?

Flooring Contractor · San Diego, CA · Member since 2013 · 36 posts · 19 votes

I am in escrow on a property that has a solar lease agreement in place with a company called SunRun. The property was foreclosed, so the agreement appears to be null and void, though we have the option of assuming the contract if we want to. We plan to be in the home for 2-3 while remodeling it.

Here how it works. SunRun owns and maintains the solar equipment, which produces and average of 650 kWh per month, and we would be obligated to purchase ALL of the power [u]produced by the system at $.25/kWh. Our payments to SunRun would have nothing to do with the amount of energy the home consumes. Compared to the tiered rate structure of SDG&E, the breakeven point is at around 850 kWh per month. The company claims that they average historical usage of this home is around 1000 kWh/mo. I don't plan to use that much while living in the home, but maybe a potential buyer would, and would like to have the system in place, especially considering that SDGE's rates will likely increase over the next few years.

The main problem is that this contract is very difficult to get out of under normal circumstances. If we assume the contract and our potential buyer does not want the system, we would have to pay to have the system removed and roof repaired, or buyout the equipment at a cost of around $20k. As it is now, due to the foreclosure, SunRun has no recourse but to remove the equipment if we don't want to be in contract with them.

Also, this company does not have a great reputation. Plenty of horror stories pop up when you search their name online.

I'd appreciate any thoughts or advice on this issue.

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Temecula, CA · Member since 2016 · 1 post · 1 vote
10y

I am a real estate broker in California going through the same issue with a client selling his home. He is an investor who bought the property at trustee sale foreclosure auction.  The law states anything attached to the property becomes real estate and transfers to the buyer at auction.  If the solar panels are attached to the roof then they belong to the property. Sun run will fight you but the law is on your side do to the fact they are in 2nd position to the 1st mortgage and by law all and anything after the foreclosing mortgage is wiped out in California.  Some states are different so i would consult with an attorney. Our attorney is dealing with them now. Also it is recommended that you file a small claims case against them to remove the null and void lease agreement from title. For this specific reason of losing panels to foreclosure, Solar companys have started attaching themselves to the tax rolls which are senior to the foreclosing loan.  That makes them still in first position and there interest is not wiped out through foreclosure. 

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  • Real Estate Agent · West Sacramento, CA · Member since 2015 · 10 posts · 1 vote
    9y

    hi

  • Flooring Contractor · San Diego, CA · Member since 2013 · 36 posts · 19 votes
    9y

    I don't think I have any specialized knowledge with regard to this situation, so my opinion is probably worth what you'repaying for it. I doubt you have a legal argument against the validity of the contract. It seems to me that co-signers are most often not a part-owner of the thing being signed for, just a financial backstop that lessens the risk for the lender. It's entirely possible that your father was taken for a ride by the solar company, but there's probably not anything you can do about it now. 

    Looking forward, it seems you probably just need to market the lease to prospective buyers as best you can. That may mean having a separate document that attempts to show how much a buyer might save per month compared to a similar home without solar. While it may be a tougher sell for many buyers, as most people of suspicious/fearful of things they don't understand, you just might find a buyer who views a pre-existing PV system as a positive. 

    That buyout figure is ridiculous, but I suppose it wouldn't hurt to negotiate. For $30K, either the system is extremely overpriced, or they offered a system is too big for a 1,200sf home. Our home is 2,300sf, and we could purchase a system that would zero us out for less than that. 

    So I'm not sure if any of this is helpful. But I'd rather be Captain Obvious than withhold something that you might find helpful. Hopefully some other members will chime in as well. Best of luck!

  • Real Estate Agent · West Sacramento, CA · Member since 2015 · 10 posts · 1 vote
    9y

    UPDATE! So the solar company just told me that they checked into my file and saw that in order to lease the solar system they ran my dad's girlfriend's credit to purchase the system and she isn't on the title to the house. The representative said that they will fwd my request to have the solar system removed from the house and see if an exception can be made. I will find out what happens by January 10th. I need some good vibes and wishes please people. I promise to update everyone. Thanks!

  • Lender · Roseville, CA · Member since 2011 · 205 posts · 86 votes
    9y
    Kelly Magreevy it's wonderful to hear that the company is attempting to work with you. I would have guess that you'd be out of luck since a co-signer is just security for the lender and doesn't necessarily need to own the property. If you do get stuck with it, dig up bills or maybe the solar company can provide you with some marketing materials to help you sell the future buyer. Typically the payments will have to be included in the buyers DTI unlike utility bills so you are best to find a cash buyer. Good luck!!
  • Investor · Wilmington, NC · Member since 2016 · 80 posts · 43 votes
    9y

    @Kelly Magreevy: any update on your request to have the solar system removed? I have a friend burdened with a similar situation...

    Thanks,

    Joe

  • Real Estate Agent · West Sacramento, CA · Member since 2015 · 10 posts · 1 vote
    9y

    Hey Joe A. and everyone else that has been following my story! So I got great news today! After the case went in front of the solar company's legal department they have agreed to remove the solar system and repair the  roof at no cost to my dad. I am not done! I want some sort of financial compensation for my dad for the money that he has  paid into the system. Not sure I will get it but hey you never know until you try. I am relieved that we won't have to deal with the solar system on the house! 

    Don't give up polite persistence got this done! I am very happy and will be marketing the house without a solar system HURRAY! Hey one other thing I wanted to tell you all! Some solar companies will NOT allow transfer to new buyer. The new buyer or seller has to buy out the system. I had no idea. I was told this by the title company that I always work with to be aware of some solar companies! Good luck everyone and thanks for "listening" to my story! 

  • Investor · Dundee, IL · Member since 2015 · 19 posts · 6 votes
    9y

    Great Info from everyone , I was looking at house with Solar panels from Solar City, The gentleman that Leased the system was in his 80's. and has since passed. There is 18 years left on the lease. From what I have learned about leasing is that the Solar Companies came up creative ways to sell there product during the housing crisis (leasing). The cost of out right purchase can be very high in some case not efficient. I was amazed that the solar company can attach the lease to the house title. On this house that I am interested in there has been 4 offers and all 4 pulled out over the implications of the solar panel leasing from Solar City. The Selling agent told me that she wishes that the House would just go away ! Nice

  • Marana, AZ · Member since 2017 · 14 posts · 4 votes
    8y

    just bought an reo that has solar.  Bank doesn’t seem to have any answers as to whether we would hear from the solar company or if we have any obligations.  Anyone dealt with this on an reo?  What questions should I ask?  Never dealt with solar yet.  Bought home for $180k, all in will be only $187k.  aRV at $235k. Only real caveat being solar.  Thanks!

  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Tris Rollins The solar equipment is likely subject to a security interest granted by the prior owner... which also permits the secured party the right to enter the property to maintain the equipment and/or remove it. Said UCC will be an exception on your owners title insurance policy so you (or your title company) may as well contact Solarcity/Tesla or whoever to transfer the agreement and security interest over. 

    Gimer Law516 Reviews
  • Flooring Contractor · San Diego, CA · Member since 2013 · 36 posts · 19 votes
    8y

    Hey @Tris Rollins, my thoughts on your situation are probably scattered through my other posts on this thread, but I'll recap here. I would wait for the solar company to come to you. You have no obligation to do anything proactive. Even though they may have the right to remove the system, they will incur some cost in doing so, and they will then have a used system to try to sell. So they are not in a good position.

    Once they contact you with an offer for assuming the lease, ask for the original contract for the system. If it's more than a couple years old, it's likely that they received tax credits that would have to be repaid if the system is not in service for 5 years. I have no idea how that's enforced, but in our case we were told that we couldn't purchase the system outright before the 5th anniversary. A system that was installed recently may have missed out on tax credits, so they may be able to remove it without issue. Also, the age of the system will determine how likely they are to be interested in exercising their right to remove it (should you decline all offers). In our case, the system was 3 years old, and we ended up paying about 20 cents on the dollar to buy out the remainder of the lease. 

  • Marana, AZ · Member since 2017 · 14 posts · 4 votes
    8y

    @tomgimer and @stevenstraughn...thank you both for sharing.  All angles to look at things is beneficial. 

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