The Real Deal New York

When solar panels become a headache for home buyers, sellers

Disputes arising over modules' leases increasingly interfering with property sales

March 20, 2015 02:05PM
By Kenneth Harney

Elon Musk Tesla

From left: Elon Musk and Lynn Farris

Can going green by leasing solar panels for your roof cost you money — or headaches — when you go to sell the house?

Possibly both. Say you get pitched by one of the growing number of companies offering solar panels at no upfront cost that they claim will save you lots of money on electricity bills. Sounds like a slam dunk. So you sign on. Then a few years later you decide to sell the house. You assume that the presence of solar panels can only be a marketing plus, maybe even get you a higher price. Everybody goes for green, right?

But that’s when it gets weird. Some would-be buyers balk when they learn that they’ll need to qualify on credit to take over your solar lease payments for the next 15 to 17 years. Others say they like the house but won’t sign a contract unless you buy out the remaining lease payment stream — $15,000 or $20,000 or more — because they’re worried that the solar equipment will become obsolete or won’t save as much on electricity bills as advertised.

Issues like these are popping up increasingly in California and other states and are interfering in sales and closings, according to real estate industry experts. Consider what happened to Nora and Andrew Barber when they went to sell their home near Fresno, California. They needed to move because of an employment transfer to Thousand Oaks, near Los Angeles. Their house attracted offers quickly but two successive sets of buyers backed out of contracts because of the leased solar panels on the roof. They either thought the long-term cost of the lease from Clean Power Finance was too high or got cold feet after hearing what credit qualifications they’d need to take over the lease.

Meanwhile, the Barbers were in the middle of negotiations to purchase their new house and making preparations to move. “It was a nightmare,” Nora told me, “we were in a panic”- pressured by the need to close the new purchase yet still dealing with unexpected complications caused by the leased panels. Finally, they paid $22,000 to get out of the lease and sold the house.

Steve Olszewski, senior vice president of operations for Clean Power, said that as a matter of policy, the company does not comment on cases involving its customers. He added that “we have seen very few instances” of home buyers “not wanting solar.” In 95 percent of cases, he said, buyers either take over the solar agreement as-is or the home seller “pre-pays the agreement” or purchases the equipment outright.

Lynn Farris, a realty agent with Windermere Hulsey & Associates in Vacaville, Calif., says disputes arising over solar panel leases are “becoming an increasing problem” for sellers and buyers, and because of the rising popularity of solar, “it’s going to get worse.” She has seen sales fall apart when the parties couldn’t agree on how to handle the substantial payments owed on long-term leases — in one case it was nearly $30,000 — or because buyers thought the leases “were really bad deals.” Out of four leased panel agreements she has analyzed, “only one was any good,” she said.

Nationwide, residential solar installations are booming — up by 50 percent per year since 2012, according to the Solar Energy Industries Association. More than 600,000 homes and businesses now have on-site solar, with the fastest growth rates occurring in Maryland, Massachusetts and New York. The biggest player in the field, SolarCity — backed by deep-pocket venture capital and chaired by Tesla Motors and SpaceX CEO Elon Musk — says it now has 190,000 customers in 16 states. Jonathan Bass, vice president of communications, says working out smooth transfers of leased systems from sellers to buyers — or buyouts of systems — is a priority. SolarCity has a 12-person team that already has arranged “close to 3,000” transfers, Bass said.

Takeaways from all this? Top on the list: Be aware of the potential complexities that can occur when you lease, rather than buy, solar panels. If you opt for a lease, understand your long-term obligations, and talk to your current utility company about the savings claimed. Most important, if you’ve got a leased system and plan to sell, contact the leasing company well in advance to learn about their lease transfer and buyout options. That way you’ll be ready if prospective buyers have problems with your panels.

  • secondsilicon

    Credit score requirement is 650. If someone can afford to buy a home, they typically have this. But hey, let’s let one example push people away from saving tons of money and switching to a better way to power our homes.

    • Bryan

      Solar leases and PPAs are two of the most expensive ways to have solar on your home. Only a fool would lease a system at today’s much lower purchased system pricing.

      • Scott Moser

        Especially in my market where cost per watt over the system life is at or below utility rates

  • mrseanpaul81

    Would have been a good idea to talk about the issues or lack of issues when one is financing solar panels instead of leasing. It seems this article focus on the negative effects of one out of two options and don’t even mention the second option!

  • Is it really a problem or just another aspect of a home sale that requires understanding of the pricing of fair value for a solar system?

  • Bryan

    Here are three things when when shopping for solar for your own home or business:

    1. Pricing for solar has dropped to historically low levels. Today a name brand, average sized 4.75 kW grid tie solar system that will produce up to 600 kWh per month with only 5 hours of peak sunshine per day.can now be purchased for less than $2.20 a watt after applying the tax credit or less than $11,000.

    2. Nearly all of the leased solar systems that have been installed in the U.S. are designed to turn themselves off during a power outage. And even though you have all those solar panels installed on your roof and even though you’re responsible for paying 20 years were of lease payments, during a power failure, even during daylight hours, you won’t even be able to charge your cell phone with that solar leasing company’s solar system.

    3. The Federal governments, NREL (The National Renewable Energy Laboratory) just released a report that says that It’s far cheaper to pay cash for a system or save about 29% by getting a loan instead of an expensive solar lease or PPA. Don’t get blindsided by the solar leasing company’s balloon payment or their 2.9% annual payment increases.

    Solar has truly become affordable today. Just make sure that you compare quotes from at least 6 dealers before you commit to a system. Don’t just shop the big leasing companies or even the small local dealers. Use a search engine such as Yahoo to (enter the name of your state followed by the word solar) and you’ll come of with hundreds of results to compare pricing. Pricing can vary by tens of thousand of dollars for the same system. Be smart, shop before you buy or lease.

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