House hunters warned against buying homes with free solar panels fitted

Published 19th Apr 2012

House hunters have been warned by surveyors against making offers to buy properties fitted with free solar panels, over fears their mortgages will be turned down.

Homeowners selling properties which buyers cannot get a mortgage for could end up being forced to pay tens of thousands of pounds to buy themselves out of the solar panels scheme.

The solar panels caution has been issued by the Royal Institution of Chartered Surveyors (RICS), whose members value properties for mortgage lenders and inspect them for home buyers. Many estate agents are also members.

It has been triggered by the mounting problem of mortgage lenders baulking at issuing loans for homes where companies have fitted solar panels for free.

They do so in return for long leases giving them ownership of the roof space above the property for typically 25 years.

So far most problems have emerged in cases where solar panel companies have not done paperwork in line with guidance from the Council of Mortgage Lenders, but RICS has urged caution over any property fitted with free panels.

And it said that ‘even compliant schemes may reach difficulties’ - highlighting lenders’ power turn down any property and mortgage on their own merits.

David Dalby, director of residential at RICS said: ‘We fully support the use and production of sustainable energy; however, at a time when prospective buyers are finding it tough to secure mortgages ‘free’ solar panels can cause a further barrier to homeownership.

'An inflexible PV panel lease, without a buy-out clause, could result in a failed transaction.’

Many free solar panels schemes came with buy-out clauses allowing homeowners to regain ownership of their roof if they paid a set amount, reflecting the typical £12,000 cost of the panels plus an extra premium.

But RICS warned that in the ‘worst case scenario’, a free solar panels installation company with no buy-out guarantee offered could refuse to sell the installation to the new homeowner.

It could then seek to charge them for removing the panels and the potential £27,500 loss of income from the Feed-in Tariff, effectively stopping the sale of the property.

Mr Dalby said: ‘We are advising our members to inform homebuyers of these issues and strongly urge anyone looking to make an offer on a property with ‘free’ PV panels to seek legal advice and consult their mortgage lender beforehand.’


What should house hunters do?

RICS has advised its surveyors to warn house hunters to take special legal advice on any property fitted with free solar panels before committing to buy.

It explains that these panels are installed by solar companies for free who then sell any extra energy generated back to the grid under the Government’s Feed-in Tariff (FiTs) subsidy.

The homeowners involved benefit from the energy savings from solar panels, typically about £90 to £180 per year, while the company takes the revenue generated.

Thanks to generous subsidies for schemes installed before payouts were cut, revenue was forecast to potentially be £27,500 over 25 years by the Energy Saving Trust.

Free solar panel schemes are usually based on leases of 25-years for use of the roof space, requiring the prior approval of the mortgage lender, which house hunters may find their lender refuses to give.

RICS says that buyers are more likely to be granted a mortgage on schemes complying with the Council of Mortgage Lenders guidance, where necessary consents have been achieved and the PV panels installed to an accredited standard and maintained.

Problems can also arise if the solar power company is not accredited by the Microgeneration Certification Scheme.

However, RICS adds that even compliant schemes may reach difficulties as most mortgage lenders have their own specific requirements due to the lack of regulation and standardisation in roof lease contracts, with most lenders assessing on a case by case basis.

Where a mortgage lender does refuse the mortgage on the basis of the roof-lease, the best case scenario is for the solar company to offer a ‘buy-out’ option to the prospective buyer who can purchase the installation at the price stated in the original lease agreement, less depreciation.

It warns that this can be very costly for the new owner who may already be pushing their finances to the limit with the property purchase.

Source: ' ThisIsMoney '

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