Solar Panels in Commercial Buildings

[George Webb]

Are solar panels on a commercial building considered real property or personal property? If they are real property, how would an appraiser account for this "amenity" in their appraisal?

 

[Mile High Trout]

Permanent fixation creates a real property setting for various attached items.

Solar has a value in use, a value in material, and a detracting value of upkeep over the term of the value in use.

It also probably has a relatively clearly defined expected age life and cost to maintain scale over the term which creates the scaling value in use.

You know solar took a long time to come to market, because they had like hundreds of different solar panels up in the wind and rain and sun and snow for at least a decade to learn about durability issues. This is one convenient but complex consideration for solar. The choice of solar material is supposed to have a clearly defined operational age life with effectivity.

 

[PL1957]

IMO, value for "green" features comes from two sources - increased operating efficiency (lower utility costs, etc.) or increased attractiveness to an investor (willing to pay a premium). Unless you can demonstrate one of the above, there ain't much value difference.

 

[rbrienza]

George,
It depends, on a lot of things? Are they owned by the building? are they leased? is the lease assumable? If they are owned they may be, but they might be viewed as a "trade fixture". If they are leased then they may be personal property.

How much power does it produce to the over all structure? it just to one tenant for that tenants benefit?



And Mile High... Solar panels because they are attached does not make them real property... there are a lot of factors.

 

[Michael S]

I recently appraised a large shooping center and there was some solar panels on one small section of the roof. The property was distressed and nobody could answer who owned the solar panels, who had them installed, if they were only for the benefit of the one tenant, etc. According to the property manager the property received a monthly rebate on that electrical meter as it was offsetting whatever electricity was consumed. Effectively this resulted in a slightly lower utility bill for the whole property compared to if they hadn't been there. Frankly it got lost in the noise given how small it was in comparison to the whole property.

My colleague recently appraised a larger single-tenant retail building that had the whole roof covered in solar panels. As I recall the tenant had them installed and they were considered personal property. The tenant was planning to purchase the building and since they already owned them it didn't really enter into the purchase.

 

[Mile High Trout]

The new catch is that these items if leased or even owned with a service contract commitment, always transfer with sale.

But that's the new hook, because it became well known that they often did not transfer with sale, and that was a hold up.

Check the branding on the panels. Some of them sticker up each big panel, or put some kind of identifying marker on there or on the bottom side. Get into the service box, and check for service sticker or something like that. Should have gone through the permit process with the city?

 

[George Webb]

Thank you all for your help and input. I found this link that provides some insight into appraising solar systems. It is a bit confusing, but rather helpful to some degree.

http://www.institutebe.com/Institut...g Clean Energy/Solar-PV-Appraisal-Methods.pdf