Prepaid Solar Lease

[erockinaz]

Just curious, what is the difference in cost between a purchased system and a 20-year prepaid lease?

Also wondering this. Depends on what the prepaid lease discount is, but unfortunately, I don't have that info. Without a lease discount, I'm sure it would have been cheaper to buy, especially with the fed tax incentives available at the time.

 

[Vermonter]

Also wondering this. Depends on what the prepaid lease discount is, but unfortunately, I don't have that info. Without a lease discount, I'm sure it would have been cheaper to buy, especially with the fed tax incentives available at the time.

Solar company benefits from the tax incentive on leased panels.

Also have to wonder if this would complicate the sale of the property? Lease can be transferred, but it probably wouldn't be easy. Like assuming someones leased vehicle. There would be additional hoops for the buyer to jump thru.

Maybe that's why these people are paying the lease up front?

 

[Randolph Kinney]

Thanks, that supports my initial thought.



Good to know, I hadn't thought of that



I agree, since they started the lease in 2012, they would have had some tax benefits to buying the system outright. According to the agent, they were not sure if they should buy or lease, decided to lease, and then had the opportunity to prepay at a savings and took it. The lease is transferable for the next twenty years, so the current buyers can sell with the prepaid lease intact.

Thanks for the input, first time seeing a prepaid lease on solar.

Fannie Mae requires any solar lease to be modified.



NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Property Owners and Solar Energy Company agree as follows:

1. Damage to Residence and Real Property. Solar Energy Company represents and agrees that any damage that occurs as a result of installation, malfunction, manufacturing defect, or removal of the Solar System is the responsibility of Solar Energy Company and Solar Energy Company shall repair any such damage and return the improvements to the Residence and Real Property to their original or prior condition (for example, sound and watertight conditions that are architecturally consistent with the rest of the Residence).



2. Property Owners’ Property Insurance. Solar Energy Company agrees not to be named loss payee (or named insured) on the Property Owners’ property insurance policy covering the Residence that the Solar System is attached to.



3. Transfer after Foreclosure. If the interest of Property Owners in the Real Property shall be transferred to another person or entity by reason of foreclosure, trustee's sale, deed in lieu of foreclosure or other proceeding for the enforcement of a security instrument on the Residence (such transferee, its successors and assigns, including, but not limited to, a lender, shall be referred to herein as "Purchaser"), Purchaser shall have the following options:

A. Terminate the Lease and require the Solar Energy Company to remove the Solar System;

B. Become the beneficiary of the Lease with the Solar Energy Company without payment of any transfer charge or similar fee; or



C. Enter into a new lease or other agreement with the Solar Energy Company, under terms no less favorable than the Property Owners.



4. Successors and Assigns. This Amendment shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, and assigns.



5. Governing Law. This Amendment shall be governed by and construed under the laws of the State in which the Real Property is located.



6. Counterparts. This Amendment may be executed in counterparts, and all counterparts together shall be construed as one document.

 

[CindyR]

And it will probably be the last and only time you ever encounter a prepaid leased system : ) LOL

Actually these are pretty common in AZ - we have discussed them before.

http://appraisersforum.com/forums/threads/solar-panels-a-new-twist.200723/

And as for the question about the difference between the prepaid lease and the outright purchase is that if they are leased they are not owned. Unless it some kind of lease-purchase agreement then the panels will theoretically be removed at the end of the lease. And the company will likely then try to interest you in leasing some new and better panels.

We also have an interesting new twist here in AZ where the power company wants to rent your rooftop. They will put a solar system on your house and simply return the power to the grid. You get $30 per month off your electric bill for 20 years. Have not seen a sale transaction with this scenario yet but lots of folks have signed up so we will see how that goes. And we will also be interested in seeing how the agents describe this in MLS. You can tell them now because they have a sign in the front yard that says "I am an APS Solar Partner".

 

[Randolph Kinney]

We also have an interesting new twist here in AZ where the power company wants to rent your rooftop. They will put a solar system on your house and simply return the power to the grid. You get $30 per month off your electric bill for 20 years. Have not seen a sale transaction with this scenario yet but lots of folks have signed up so we will see how that goes. And we will also be interested in seeing how the agents describe this in MLS. You can tell them now because they have a sign in the front yard that says "I am an APS Solar Partner".

I would think a buyer of a home that has solar panels on it might want them removed, if they are not owned. If the power company won't agree, that will impact the value.

 

[DriveByBBQ]

Just curious, what is the difference in cost between a purchased system and a 20-year prepaid lease?

The upfront cost of equipment. When I got out of the business 3 years ago the average roof top system cost 15 - 25 K and it's been perpetually falling since. There was a boom in third party solar providers in states with proper incentives and tax breaks. (i.e. Louisiana) a few years ago. I'm not terribly familiar with long term prepaid leases but my inclination is some portion of the consideration paid by the lessee is tied to energy prices and some sort of elaborate reimbursement by the lessor. A lot of these solar companies are trying to get the jobs in before Obama is gone and the federal tax rebates potentially leave with him.

 

[DriveByBBQ]

I would think a buyer of a home that has solar panels on it might want them removed, if they are not owned. If the power company won't agree, that will impact the value.

I expect "solar gardens" which are communal, ground mounted, arrays built out of site to become more popular in new neighborhood developments. Roof top systems are vastly more expensive to install and maintain. Build a big one on the ground and the whole neighborhood gets a break on their bill (and probably a bump in their HOA dues)

 

[Randolph Kinney]

That sounds reasonable. However, the utility company is in the business to make a profit so as more of its revenue is siphoned away by solar panels not under its direct control, they lose money.

 

[erockinaz]

I expect "solar gardens" which are communal, ground mounted, arrays built out of site to become more popular in new neighborhood developments. Roof top systems are vastly more expensive to install and maintain. Build a big one on the ground and the whole neighborhood gets a break on their bill (and probably a bump in their HOA dues)

there is a community in west Phoenix built by John F Long called Solar One that was built on this same concept. When it was built in the late 1980s, it was among the first of its kind. However, the solar tech sucked in the 1980s and within a decade, the solar panels had stopped functioning and they ended up removing most of the panels. The cost to maintain quickly outstripped the benefit. The neighborhood was a nightmare to appraise in the 90s, it typically sold for less because of the abandoned solar area with graffiti and broken beer bottles all over. The tech is better, and I can definitely see communities with solar gardens being a thing of the future.

 

[DriveByBBQ]

That sounds reasonable. However, the utility company is in the business to make a profit so as more of its revenue is siphoned away by solar panels not under its direct control, they lose money.

Hence their move to utility scale solar farms, so they can control the supply. Southern Company and the Public Service Commission perpetually fleece our citizens. They are so intertwined it's obscene not to mention illegal (I believe they actually share an office floor). Incredibly corrupt. Southern Company has a monopoly and never takes a loss, they just pass the cost onto the consumer.