There’s no doubt that the popularity of solar panel installations on British roofs can be seen in just about every street – but should you be careful when buying a house with solar panels?
Having a solar panel installation on your home will provide a sustainable source of energy and see lower energy costs, though not every home hunter will want them – and there are legal implications when buying homes with a solar array.
These solar panels are usually fixed on a pitched roof that is facing south.
However, because the panels are fixed to the roof does not mean necessarily that the panels belong to the property owner.
Also, having solar panels will have an impact on your conveyancing process and there are some important issues that you need to consider when buying a house with solar panels.
Is the property leasehold or freehold?
The first question to ask is whether the property with solar panels is leasehold or freehold.
There is a big difference to understand because the owner of a leasehold property will not have the authority for solar panels to be installed without gaining the freeholder’s permission.
So, if you are thinking of buying a leasehold property that has solar panels installed, you need to contact the freeholder to ensure that the necessary permissions have been given.
Also, the terms of the property’s lease will need to be reviewed carefully to ensure that the installation of solar panels will be permitted.
A conveyancing solicitor will explain what the potential ramifications will be, and you need to understand carefully if the panels have been installed without permission.
If you are thinking of buying a freehold property, then there’s no issue because the homeowner will own the roof and no permission is necessary for them to install a solar array.
Are the solar panels owned outright?
Buying a house with solar panels might have some clouded issues, so you need to ask:
- Does the homeowner own the solar panels?
- Does another company own the solar panels?
For those who have not installed solar panel arrays previously, then you need to understand:
- Solar panels are expensive to install but they make for a sound investment over the years;
- The cost means either the homeowner has paid for them, or a solar panel company has leased their roof.
The reason for this is that the feed-in-tariff (FiT) was introduced in 2010 and delivered a generous fee for installing panels and generating electricity – this was part of boosting the popularity of solar panels as part of an energy efficiency drive. The fee effectively subsidised the installation.
However, companies were created that offered to fit a solar panel installation on the roof for free.
These schemes were known as ‘rent a roof’ so the homeowner would lease their roof to this company, or a third party, and have the panels installed for free.
The initial cost in 2010 for fitting solar panels was £15,000 on average, so lots of homeowners took up the offer of having free energy but signing over the income from the feed-in-tariff.
In recent years, the cost of solar panel installations has fallen dramatically so there are very few companies offering a rent a roof scheme.
If a solar panel company has agreed on a lease, they will have installed solar panels and the panels will remain their property.
There’s a trade-off here because the homeowner will enjoy cheaper electricity when they are at home.
However, the feed-in-tariff paid by the Government will be collected by the solar panel company so you will not be earning money from those solar panels.
Be aware too that the solar panel company’s lease will usually be for 25 years with the homeowner.
You can buy a property with a solar panel leasing agreement in place, but you will need:
- To be vetted by the solar panel company;
- Check whether your mortgage provider will lend against the property without asking for extra information.
Indeed, it is probably worthwhile highlighting with your mortgage provider as soon as possible about the prospect of gaining a mortgage on a property that has solar panels already installed and seek their consent.
The mortgage provider will undoubtedly ask for more information and you need to be clear about exactly what they will want.
Among the issues they will need clarification for, include:
- Who is responsible for the maintenance costs – the company or the new owner?
- Does the rent a roof company have access rights to the property?
- Does the paperwork comply with the Microgeneration Certification Scheme (MCS)?
There’s also an issue with extra conveyancing work required because you will need the leasehold interest to be noted on the title.
This means that the conveyancing process is likely to take longer – and will cost you more as a result.
For those properties that are being sold with the solar panels being owned outright, then the process for buying is straightforward.
In these circumstances, it’s likely that the mortgage application and the house buying process will proceed along similar lines to those homes being sold without solar panels.
Solar panels must meet the recommended standards
One of the issues when buying a house with solar panels installed is that you need to know whether they have met the recommended standards.
There are solar panel guidelines for mortgage providers, installation firms and customers that have been created by the Building Societies’ Association (BSA), and the Council of Mortgage Lenders (CML).
It is these guidelines that lay down the minimum criteria that all solar panel installations must meet – and also the terms that are required under a lease agreement.
Provided that the lease terms and the installation meet these guidelines, you will find that most mortgage lenders will not have issues with lending.
However, should you find that the installation or the terms do not meet the guidelines, then a mortgage lender will probably insist that the lease for the solar panels is ‘varied’.
Again, this will extend the conveyancing process and push up your conveyancing bill.
When buying a property with a solar panel installation you need to understand that the final decision about whether a mortgage will be agreed upon will lie with your mortgage provider.
Having said that, you may find that other mortgage lenders may have different lending policies.
So, you will need to speak with your mortgage provider as soon as possible and understand what their policies are and supply all relevant information when requested.
Do the solar panels have a warranty?
Among the first things you must do when buying a house with solar panels installed, is to establish whether your solar panels have a warranty.
Most solar panel installations will come with a warranty, and you need to confirm that it is still current and, if so, how much of the warranty remains.
You will also need to check:
- What does the warranty cover exactly?
- Will anything need replacing during the solar panels’ lifetime?
The important issues to consider here is that while most solar panels come with a warranty of between 25 and 30 years, you may find yourself paying for repairs if the warranty does not cover a specific issue.
There’s also the potential of the inverter needing to be replaced so that the solar panels work effectively to deliver energy. This work can be expensive to undertake.
Can I get a mortgage on a property with solar panels?
As stated earlier, you’ll need to raise the issue of having solar panels installed on a roof with your conveyancing solicitor.
You will need to get a copy of the original solar panel lease and have the conveyancer look at it.
It’s a good idea to have this done before you make an offer on the property.
By working in this way, you will find out early in the mortgage lending process whether your lender will offer a loan on a property that has a leased solar panel installation.
If the mortgage lender declines a loan, then potential solutions include checking the lease for a buyout clause.
This means that you can pay the company that installed the solar panels an amount of money – which usually covers the installation cost, plus a premium.
If there is no buyout clause, then the issue becomes complicated because the leasing company may demand to be compensated for potential future revenue loss.
Will solar panels generate an income?
While you may have fallen in love with a particular property that has a solar panel installation, you may find that they do not generate a significant sum.
And on top of that, you may be inheriting inconvenience and obligations under the original lease.
There’s also another issue in that the leasing company may no longer exist and that another company has taken over the installation but finding out who that is can be a frustrating process.
However, if the panels are working properly you are boosting your home’s energy efficiency – and this also counts towards its Energy Performance Certificate (EPC) rating.
Is it bad to buy a house with solar panels?
For anyone asking, ‘Is it bad to buy a house with solar panels?’, Then the answer is, ‘It depends’.
As highlighted in this Property Road article, you need to determine:
- Is the property leasehold or freehold?
- Does the homeowner own the panels or are they leased?
- Does the paperwork for the lease exist?
- Are you prepared to pay extra for the conveyancing required?
- Will your mortgage lender agree to a mortgage on a home with solar panels?
- Is the solar panel installation still earning an income – and what is it?
- Will you be facing expensive maintenance or inverter replacement costs?
All of these questions need to be asked and answered before you proceed with buying a house with solar panels to ensure you enjoy your new home.