A CURRENT HOT TOPIC: SOLAR PANELS

Air conditioning on full blast, only being able to walk the dogs at 7:00 am, constantly feeling dehydrated – it is summertime in Florida! Summer in Florida is H O T. It is not surprising that Florida is called the “Sunshine State.” With Florida’s abundance of sunshine, there has been an increase in solar panels installed on properties.

How do solar panels affect your closing?

Consummating a sale on a property with solar panels comes with unique challenges. The first question, which will determine the roadmap of the closing, is whether the solar panel system lease will be assigned (i.e., transferred) to the new buyer at closing or whether the seller will pay the remaining balance in full and a satisfaction will be required at closing.

Buyer has agreed to assume the lease. What needs to occur for a solar panel lease to be transferred at closing?

A solar panel system is typically leased for an average term of 20 years. Similar to a standard lease, the property owner signs a lease agreement that requires the property owner to pay a monthly fee to the solar panel company. Once the solar panels are affixed to the property, the solar panel company will file a Uniform Commercial Code Financing Statement (“UCC 1”), which will often be recorded in the public records and filed with the state. A UCC 1 is used as a mechanism to place a lien on a particular piece of collateral belonging to a person. If the new buyer is assuming the lease, the UCC 1 will need to be terminated at closing and a new UCC 1 will be recorded at closing to reflect the new buyer in the public records. Typically, a Uniform Commercial Code Financing Statement Amendment Form (“UCC 3”) will be recorded as well, depicting that an amendment to the UCC 1 is occurring. Depending on which solar company is handling the transfer, they might require a memorandum of the lease to be terminated and re-recorded. It is important to note that with this option, the seller does not incur additional fees at closing.

Seller has agreed to pay off the remaining balance. So, what needs to occur to satisfy the lien at closing?

When buyer and seller agree that the solar panels will be paid in full at closing, the UCC 1 will still need to be terminated at closing. Furthermore, the seller will be required to pay the remaining balance of the lease in full at closing. The satisfaction amount can vary between $20,000 and $75,000, dependent upon the size of the property and how many solar panels are attached to the property. If the solar panel lease is paid in full and satisfied at closing, the buyer will have no further payment obligation for the solar panels. The closing agent will obtain a payoff and ensure that the full amount is provided to the solar panel company at closing. Then, a satisfaction will be recorded in the public records.

What are some tips real estate agents should follow for a successful closing?

  • When going on a listing appointment, ask the sellers if the solar panels are leased or owned outright.
  • If the solar panels are leased, obtain a copy of the lease and initiate contact with the solar panel company.
  • During contract negotiations, make sure to determine whether the buyer will be assuming the solar panel lease or whether the seller will be paying off the remainder of the lease in full at closing.
  • Always disclose that solar panels are affixed to the property.
  • If parties are agreeable to assigning the lease and the buyer is utilizing a loan, ensure the buyer’s lender is aware and will allow the assignment.
  • Once the property is under contract, let the closing agent know immediately whether the solar panel lease is being assigned or paid in full at closing.

As always, should you have further questions on solar panels and how they interact with real estate closings, we recommend you confer with an experienced local real estate attorney. Stay cool everyone and enjoy the rest of your summer!

Sincerely,
Mallory Bauer, Esq. mbauer@berlinpatten.com

Mallory practices in the areas of residential real property transactions and condominium development work, including but not limited to real estate closings, contract and lease preparation, negotiation, and seller financing.

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