Solar panels – could they stop you selling or mortgaging your house?

We are all aware of the environmental benefits of renewable energy and in particular solar panels. In recent years, solar panels have become a popular choice with home owners wanting to make their home “greener” and also save themselves some money – a priority in these financially difficult times. However, recent legislation has reduced the feed-in tariff to home owners so the financial benefit has reduced and this is in addition to the legal issues surrounding solar panels which can cause all sorts of problems to home owners.

On 23 March 2012, the government lost its appeal in the Supreme Court, in its attempts to cut solar panel incentives. This is good news for all home owners who installed their solar panels before 3 March, as they will receive the full feed-in tariff of 43.3p per kilowatt hour of energy generated. If you installed your panels after this date then you will receive just 21p per kW hour.

In practical terms, if you have a 2.9kW system installed then the earnings and savings have been slashed from £1,190 a year to just £640.00.

In addition to this, the feed-in tariff is set to fall again in July and again in October. If you do want to install Solar Panels then you should consider your home’s energy efficiency (an Energy Performance Certificate will tell you this).

If your home’s energy efficiency is under a “D” rating, then your feed-in tariff will be cut from 21p to just 9p which is nearly half the amount that your electricity company will charge you directly.

In addition to the above, having solar panels installed can affect your ability to mortgage your house.

Some mortgage companies are refusing to lend to homeowners who have solar panels on their roof which are leased to the utility company together with the roof space for a term of 25 years.

If you paid for your panels to be installed then this is not an issue. However, for those who have leased their roof space, the road ahead for mortgages may prove troublesome.

The reason the mortgage companies have given for not lending to these properties is that the lease runs for 25 years and so will be passed to a buyer. More important, from the lender’s perspective, is that the solar panels might restrict a mortgage company should it repossess a property. The mortgage company must show that is has tried and failed to sell the property before the lease company will remove the panels. Lenders are also concerned that the solar panels may devalue a property and poor maintenance is also a concern.

The Council of Mortgage Lenders has produced a guide to help panel providers and mortgage companies standardise the process. The installers must get consent from all relevant parties including the lender and the installation must be carried out to an accredited standard. Under the lease, the utility company must be committed to maintenance which must be of a high standard preventing the home owner from being financially liable. Finally, the lease must give the lender the right to cancel the arrangement if they repossess the property.

In addition to these guidelines, many lenders have their own rules for lending on these properties. For example, the Halifax will only lend if a property owner had the solar panels installed from one of seventy five approved firms.

Yorkshire Building Society requires evidence that the roof was checked by a structural engineer before the installation and that the installer is registered with the Microgeneration Certification Scheme.

However, despite these guidelines, many mortgage companies are still turning down applications. Therefore, it is very important that home owners are aware of the possible consequences if they are considering installing solar panels under a leasing arrangement. Buyers also need to consider the risks of purchasing a property with this arrangement in place. If you do still want to proceed then it is really important that you take legal advice and instruct solicitors to review the lease to ensure that it complies with the guidelines.

Here at Brachers, we would be happy to advise you on the lease for the solar panels and ensure that you are fully aware of the legal, financial and practical implications before proceeding.

This content is correct at time of publication