Judy Jones listed a property with solar panels in Kennadale for a seller who had to move out of state due to a catastrophic accident. The broker-associate from Southlake was trying to put together all the necessary information on behalf of her client and was having trouble getting a response from the solar panel company.
“I lost the first buyer because the solar company didn’t respond to my requests for three weeks,” she says. “Another contract came in on the property. The title company contacted the solar panel company several times to get the paperwork for closing. It took two weeks to get a response, and the solar company said that the buyer would need to assume the lease on the panels—there were 16 years remaining on the original 20-year lease—and they wanted me to sell the lease to the buyer!”
The second buyer wasn’t able to qualify for a mortgage loan once the lender factored in the 16-year lease as a lien on the property.
Jones’s experience isn’t unique. Most owners don’t know or don’t remember what is in the paperwork they signed with the solar panel company.
How the Texas Real Estate Commission contract forms handle the sale of a property with solar panels depends on whether the panels are paid off, financed, or leased.
Paid Off Panels
If the solar panels are fully paid off, they are treated the same as any other fixture in Paragraph 2 of the TREC contracts.
If the panels were financed, the solar panel company has likely placed a lien on the property. Paragraph 9B(4) of the TREC contracts make it clear that all existing liens must either be satisfied by the seller at closing or assumed by the buyer. The solar panel company might also have its own requirements that must be satisfied if the home and panels are sold.
Encourage your sellers early in the process to review the contract they signed and contact the solar panel company—preferably before the property is listed. Sellers and listing agents would need to calculate the cost of satisfying the solar panel lien in their estimate of proceeds. If the lien is going to be assumed by the buyers, the parties need to seek help from a private attorney. The buyers should also speak with their lender, since assuming the lien could cause issues with obtaining third-party financing.
If the panels are leased, the Addendum Regarding Fixture Leases (TXR 1954, TREC 52-0) must be used. This form allows the buyers and sellers to negotiate whether the lease will be assumed and whether the panels will remain on the property. Additionally, the form requires sellers to deliver copies of the solar lease to the buyers, allows the buyers to terminate the contract if the sellers fail to timely deliver copies of the lease, and reiterates that all liens must be satisfied at closing or assumed by the buyers.
Again, the solar company may have additional requirements that the buyers must satisfy before the lease can be assumed, and the assumption of the lease could cause issues with the buyers obtaining third-party financing. The buyers would need to consult with a private attorney and their lender to address any issues that arise relating to the solar lease.