Transferring a Solar Panel Contract When Buying a Home
When purchasing a property with solar panels, there are several ways the ownership and financial responsibilities can be handled. The solar panels may be leased, owned outright, or owned with an outstanding lien. If there is a lien, the seller may choose to pay it off with proceeds from the closing or from their own funds, or the buyer may agree to assume the lien and continue making payments. Determining the exact situation is crucial for both parties to ensure a smooth transaction. Here are key questions to ask :
Are the solar panels leased?
Are the solar panels owned outright by the seller?
Is there a lien on the solar panels?
If there is a lien, will it be assumed by the buyer or paid off by the seller at closing?
The answers to these questions will dictate the steps needed to complete the transaction. Below, we outline the processes for both leased panels and owned panels with a lien.
1. When Solar Panels Are Leased:
If the solar panels are leased, the Texas Real Estate Commission (TREC) provides a promulgated form—TREC NO. 52-1, Addendum Regarding Fixture Leases (see below) —which should be included when submitting a contract. This addendum outlines the terms under which the buyer will assume the lease and specifies the responsibilities of both the buyer and seller regarding the leased fixtures.
Credit Application & Transfer of Ownership Form: The solar company typically requires the buyer to submit a credit application and complete a transfer of ownership form to qualify for assuming the lease. Contact the solar company early to understand their specific requirements, which may include administrative fees or inspections.
Coordination with the Title Company: While the title company does not handle the solar lease transfer directly, they play an important role in ensuring that any UCC-1 filings related to the leased solar equipment are properly addressed, either by transferring the lien or confirming that there are no outstanding issues affecting the property's title.
Involving the Lender: The buyer's lender will need to factor the leased solar panel payment into the buyer’s debt-to-income ratio. It is essential to engage with the lender early to ensure the buyer still qualifies for the mortgage with the added lease payment.
Consultation with Professionals: Consulting with a licensed real estate agent and an attorney is critical to ensure that all documentation is completed accurately and in compliance with Texas real estate laws.
2. When Solar Panels Are Owned with a Lien:
If the solar panels are owned but have an outstanding lien, the process differs from leased panels. In this case, the TREC NO. 52-1 Addendum Regarding Fixture Leases should not be used. Instead, additional language should be added to the Special Provisions section of the contract, stating that the buyer will "assume" the lien for the solar panels.
Assumption of Lien: The contract should clearly state the buyer’s obligation to assume the lien and continue making payments. Both parties should agree on any outstanding balances and ensure these are disclosed before closing. If the buyer does not assume the lien, the seller must pay off the lien from the proceeds of the sale or their own funds at closing.
Coordination with the Title Company: The title company will verify that the lien on the solar panels is properly documented and that it doesn’t interfere with the clear title of the property. They will ensure any UCC-1 filings are updated to reflect the buyer’s assumption of the lien, or confirm the lien has been paid off by the seller.
Involving the Lender: The lender must be informed about the lien, as the payments will affect the buyer’s debt-to-income ratio. The lender will need to requalify the buyer with the additional lien payment factored into their mortgage approval.
Consultation with Professionals: It is advisable to consult with a licensed real estate agent and an attorney to ensure the lien assumption is handled correctly and that all necessary legal steps are taken.
3. Monitoring Deadlines & Closing:
Whether the solar panels are leased or owned with a lien, it's important to track deadlines closely. Ideally, all necessary transfers and assumptions should be completed before closing. If not, ensure that agreements are in place detailing how the process will be finalized post-closing.
Disclosure:
This information is provided for informational purposes only and should not be construed as legal advice. Buyers and sellers are encouraged to consult with licensed real estate professionals and attorneys to ensure all aspects of the solar contract transfer are handled correctly and in accordance with Texas law.
FAQs:
Do I have to assume a solar panel lease when buying a home in Texas?
Not necessarily. If the solar panels are leased, the buyer and seller can negotiate whether the lease will be assumed by the buyer or if the seller will buy out the lease before closing. Ensure this is clearly outlined in the contract using TREC NO. 52-1, Addendum Regarding Fixture Leases.
What happens if there is a lien on the solar panels?
If the solar panels are owned but have an outstanding lien, the buyer can either assume the lien or request the seller to pay it off at closing. This needs to be addressed in the Special Provisions section of the contract. Unlike leased panels, the TREC Addendum Regarding Fixture Leases should not be used.
Will assuming a solar panel contract affect my mortgage approval?
Yes. Whether the panels are leased or there is an outstanding lien, the additional monthly payment will impact your debt-to-income ratio. It’s crucial to consult with your lender early in the process to ensure you still qualify for your mortgage with the added expense.
Do solar panel liens affect the property title?
Yes. A UCC-1 filing may exist for solar panels with liens or leases, and the title company will need to ensure that this is either transferred to the buyer or cleared by the seller before closing to avoid title issues.
What forms do I need to transfer a solar panel lease in Texas?
In Texas, the TREC NO. 52-1, Addendum Regarding Fixture Leases is used to outline the terms for transferring a solar panel lease. For solar panels owned with a lien, custom language in the Special Provisions section is necessary to indicate the buyer's assumption of the lien.
