This month we are refreshing our knowledge of both land law and conveyancing procedure when considering the impact of solar panels being installed on a property when it is sold. In many parts of the country you cannot have failed to notice the thousands of properties that now have solar panels on their roofs. Much of this work has been done over the past couple of years, so it is still early on to fully assess the impact on the conveyancing process, but in this article we will highlight a few of the potential issues.
At this point the writer has to declare an interest as someone who installed solar panels on his own property. When I had my panels installed, I had no reservation about the reliability and effectiveness of the technology, and so far everything is working fine. What I did worry about before I had the system put on the roof was the potential for legal problems to crop up many years later when I sell the house. I opted to purchase my solar panels and believe that this decision will help me avoid potential legal problems further down the line. The focus of this article is on the thousands of people who, rather than pay for their solar up front, chose to have “free” solar installed. Depending on what arrangement was made with the company that installed the free solar, there will be some unfortunate owners who find themselves struggling when they want to sell. In the worst case, they may own a property that is virtually unmortgageable, making it much less attractive to buyers generally.
Owned or Leased?
As already mentioned, most solar electricity systems sold over the past few years were either paid for outright or installed for free but with conditions about the electricity generated. In both cases the home owner benefits from the free electricity generated. But only those who own their system gain the additional benefit of selling any surplus of electricity to the national electricity suppliers under a system of Feed-In Tariffs (FITs).
The majority of owners opt for the free panels, which means that the panel providers retain ownership of the panels and take a lease, usually for 25 years, on the roof and airspace above. These providers also retain the income from the FITs payment for themselves. What this creates is a potential land law issue. Those of you who have studied on the Diploma course will be aware of what a lease is and know that it can create long-term obligations that affect a property. A 25-year lease of a roof is technically no different from leasing part of the garden or even part of the house. However, this kind of leasing arrangement raises some serious questions, including those about who is responsible for the maintenance of the panels or, for that matter, the maintenance of the roof itself. So, for example, what happens if the lease agreement does not clearly set out who is responsible for removing the solar panels while works are carried out? Can home owners remove the panels themselves, or do they have to get the permission of the company that still owns them?
Even if a buyer was not overly concerned with the potential pitfalls of a roof lease, the existence of such an arrangement would have to be disclosed to any lender, and lenders most definitely will have questions to ask. Fortunately, fairly early on in the solar panel boom some measures were put in place to help ensure some minimum standards for the work done installing panels. The Microgeneration Certification Scheme (MCS) is the installation standard, and only MCS installations are eligible for FITs payments. Any solar panels without this certification would be very unlikely to meet most lenders’ minimum requirements.
For a conveyancer, details about a property are usually collected using the Law Society Property Information Form (TA6). This is updated regularly, and the current form includes several questions about the addition of solar panels to a property, which a seller should provide information about. Key issues which a buyer will flag about solar panels include whether they have been installed properly, whether they are owned or leased, whether a lease of the airspace above has been granted, and any other impact that a seller might be aware of, such as the willingness of a lender to lend money. This final point has been considered by the Council of Mortgage Lenders, which has issued a policy statement that includes guidance on the minimum standards of what a roof lease should contain.
As we said at the beginning of this article, it is still early to assess how many properties may be affected by inadequate roof leases or by solar panels that have not been installed to the minimum standard. What is clear is that these are issues that any competent conveyancer will raise with his or her client. Legal advisors will no doubt be cautious in their advice to clients when trying to ensure that there is no lease or other arrangement which is likely to have a long-term adverse impact on a property.