Solar panels on a property will give rise to legal implications for home owners, councils, lenders and insurers.
Installation of solar panels on a property will require careful consideration of financing arrangements, the lease of roof space (if any), a lender’s requirements (if property is mortgaged), title, planning and building regulations.
Feed-in tariffs – What are they?
In April 2010 under the Energy Act 2008, the Government introduced a scheme of fee-in tariffs (FITs) where it makes payments to consumers for electricity generated by accredited installations using certain renewable and low-carbon technologies, including solar panels. For solar power, these payments are guaranteed for 25 years and are intended to help overcome the cost of installing and operating renewal energy technology.
How to pay for Solar Panels
The easiest option is to pay outright for the installation of solar panels. However, the incentives for home owners in generating solar, coupled with the cost of installation, led to a number of solar panel providers entering the market. These providers offered free installation and maintenance of solar panels in exchange for a 20 to 25 year lease of the roof and air space above it; usually taking a rent of all the money that would have been earned by the home owner under the FIT scheme or the free electricity.
The Government also introduced the Green Deal in January 2013 a scheme providing an initial loan to cover the installation of green technologies, including solar panels with an arrangement for repayment through utility bills
Solar Panels and Planning Permission
Solar panels which are affixed to a house or building with the grounds of most residential property is likely to fall within the definition of ‘permitted development’ within the Town and Country Planning (General Permitted Development) Order 1995 and, as such, will not need planning permission.
The conditions of permitted development require that the panels are positioned to minimise the effect on the external appearance of the building and the amenity of the area, including restrictions as to height and projects for the roof slope or wall surface. Further restrictions apply where the property is a listed building, on a site designated as a scheduled monument or where the property is in a conversation area or a World Heritage Site.
Where there is any doubt, the matter should be raised with the local planning authority and their confirmation obtained before proceeding.
Solar Panels and Building Regulations Consent
When installing solar panels to the roof of a building Building Regulations will generally apply. Solar panels can significantly increase the weight of a roof and over a 25 year lease period and beyond, structural issues can occur. It is essential that appropriate expert advice is obtained with regard to the existing roof’s ability to bear the weight of the panels. Building regulations will also apply to other aspects of the work, such as electrical installation.
A homeowner should obtain a certificate of completion and retain this with other documentation relating to the property in case the property is sold in the future.
Solar Panels – Ownership and Maintenance
It is important to be clear about ownership and maintenance of the panels and the roof on which these panels are installed and to ensure that this is documented appropriately. The solar panels should be clearly defined as forming part of (or being expressly excluded from) the property itself or the fixtures and fittings.
Where solar panels have been installed by a solar panel provider, the provider will usually own and maintain them under the roof top lease. The lease should set out clearly the responsibilities for maintenance and removal of the panels where works are required to the roof. The lease also should make clear what happens with the panels at the end of the Lease.
Purchasing a Property with Solar Panels
When purchasing a property some of the questions a conveyancer need to ask are:
Have solar panels been installed?
(a) In what year were the solar panels installed?
(b) Are the solar panels owned outright?
(c) Has a long lease of the roof/air space been granted to a solar panel provider? If yes, please supply copies of the relevant documents.
It is highly likely that a lease of the roof space to a solar panel provider will create a protected business tenancy under the Landlord and Tenant Act 1954. The homeowner, i.e. the landlord will need to ensure they contract out of the 1954 Act so that they can regain possession of the roof space at the end of the term of the lease.
Solar panels and the Mortgage Lender
The lender’s mortgage conditions will generally require the lender’s consent to be obtained to the grant of a lease to a solar panel provider. In addition, many lenders enter a restriction on the homeowner’s title to the property at H.M. Land Registry, preventing the registration of a lease without their written consent. A failure to liaise with a lender before granting a lease can give rise to serious complications for a homeowner with both the lender and the solar panel provider. Proceeding without a lender’s consent may be a breach of the mortgage terms and conditions, and could potentially trigger the lender’s right to require repayment of the mortgage loan. Where a lease has been granted without consent, even if it can be registered, the lender may not be bound by its terms.
The Council of Mortgage Lenders has issued guidance (last updated March 2013) on minimum lender’s requirements in relation to giving consent to a lease of roof space.
The guidance goes into considerable details as to the process of getting the lender’s consent.
Where a borrower is seeking to re-mortgage or purchase a property with an existing solar panel lease the lender is likely to review the lease with reference to the minimum requirements set out in the guidance as well as their own specific requirements.
Impact on Saleability
Research showed that lenders and valuers expect solar panels to effect the saleability of a property. Some solar panels are more intrusive than others and could deter potential buyers.
Then there are the maintenance issues which are more straightforward if the solar panels are owned outright because all of the responsibility falls on the homeowners. However, if the solar panels were installed with a lease arrangement then potential problems may arise on resale if the potential purchaser does not want to take over the solar panels and lease arrangements. Inevitably there will be costs associated with prematurely terminating a lease or with the transfer of the lease. The question then is who will bear these costs the seller or purchaser? Also will the panel provider who holds the Lease be willing to end a lease if a purchaser does not want to take over the Lease.
This article is provided for the purpose of general information only and is not exhaustive. You should not solely rely on information and advice contained herein. Please consult your lawyer regarding any specific enquiry regarding this area of law.