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Shining a light on Solar Panels
As I travel across Leicestershire, I see far more roof tops with solar panels fixed on them and whilst I appreciate homeowners motive to install them in order to receive free electricity under the Feed in Tarriff (FIT), I always wonder, if they fully understand the legal implications and whether they have obtained their mortgage lender’s consent.
It is estimated that it costs in the region of £10-£12,000.00 to install photovoltaic (solar) panels and although there is a small percentage of the population that can afford to pay for the panels outright, the vast majority of homeowners will opt to enter into a lease arrangement with solar panel providers. In this arrangement, the providers receive a FIT payment calculated on the pence per kilowatt hour and homeowners receive free electricity generated by the panels. It sounds easy enough and who in their right mind would not install solar panels, if providers are offering you free electricity! Surely it is a win win situation.
Point noted, but unless you can afford to pay for the panels outright, you are entering into a lease arrangement with the solar panel provider, usually for a 25 year term and therefore they become the legal owner of the roof space and the air above, whilst retaining ownership of the panels, as well. So what’s the big deal with this? Unless you are fortunate enough to be mortgage free, you will have to obtain the consent of your mortgage provider to make sure that they are happy with you entering into a lease arrangement with the solar panel company. This leads to the question, how does it affect your mortgage company if you install solar panels when you own the house?
Lenders are sceptical about homeowners installing solar panels for several reasons including them potentially devaluing the property, question marks over who is responsible for maintaining and repairing the panels. Another key reason is it is far more difficult for mortgage lenders to dispose of the house in repossession cases, as providers will only remove the panels, if the mortgage company can show they have tried to sell the house, but have failed to do so.
Initially solar panels were a grey area for lenders, but now clearer guidelines can be found on the Council of Mortgage Lenders (CML) website about the minimum requirements that will need to be met before mortgage lenders will provide their consent, including a template letter, which provider’s could use to confirm the installation meets the lender’s minimum requirements. Some of the other things that lenders are looking for in addition to the things contained within the CML template letter are:
- Evidence of accreditation for example the provider producing a Microgeneration Certification Scheme (MSC) certificate for post 2009 installations.
- Evidence that both the provider and installer are members of the REAL Assurance Scheme.
- Contact details for the installer/supplier.
- Copy of the lease or where the same can be found.
This list is by no means exhaustive and each individual lender may have their own set of criteria and therefore it is best for the provider to check with the homeowner’s lender when they contact them for the initial consent before installing the panels.
It is also important for a homeowner to consider the impact of installing solar panels on any future resale, as their purchaser’s lender may well have their own individual criteria, which extends beyond the minimum requirements set out above and they may well not consent to the panels, which gives rise to entire other considerations.
Therefore it seems logical from my perspective for all homeowners wishing to install solar panels to ensure the provider has followed the correct procedure for obtaining consent from the homeowner’s lender, to minimise delays during the conveyancing transaction before proceeding to installing the panels.
Don’t forget it is also a part of your mortgage condition to obtain your lender’s consent before installing solar panels and your provider is under an obligation to inform your lender, if there are any material changes to the lease. So to sum up installing solar panels involves far more than free panels and electricity, and you can read about other factors you need to consider when installing panels in my next blog.