Sustainability is at top of mind for some homebuyers today. As more and more states, local governments, and consumers ponder the use and benefits of solar energy, new questions are arising - including questions about what title actions need to be taken with regard to solar projects. First, let’s look at the difference between solar easements and solar leases.

Solar easements, like all property rights granted by the homeowner to a third party, allow a third party to construct solar panels on a landowner’s property for their access and/or use and bar the landowner from blocking their access to direct sunlight. Some states have legally permitted the creation of solar easements. In such cases, title insurance becomes a critical tool for establishing and enforcing them.

Solar leases, on the other hand, present different complications with regard to title insurance. In December 2022, the California Public Utilities Commission (CPUC) passed NEM 3.0, a solar billing plan that will ultimately reduce the monthly energy bill savings for new solar owners, and it will take effect later this month. All new residential systems purchased after April 13, 2023 will fall under NEM 3.0. Since the property owner leases solar equipment from a business and attaches it to the property, when the owner wishes to sell or refinance the property, one of two issues may arise:

• The first surrounds the leasing contract, which often states that property transfers are contingent on the buyer being eligible to continue with the leased equipment. If the buyer is not approved, the owner must buy the panels from the leasing company.

• The second arises around financing - in particular, Uniform Commercial Code (UCC) financing statements, which solar companies attach to properties under solar leases. When an owner attempts to sell or refinance, the lender discovers the UCC financing statement during the title search. Sometimes, the lender may see the UCC financing as having a superior lien to mortgage and deny the financing. A few solutions, however, can help property owners combat the challenge:

- First, the owner must inform the solar company of their intention to sell or refinance. The solar company can then subordinate the UCC filing to the mortgage - or terminate the filing and reinstate it after the new mortgage has been recorded.

- If the solar panels are considered personal property, they bring no added value to the property itself. But if they are considered a fixture, they may affect the property value. This decision may best be determined by an agreement between the homeowner and the solar leasing company. 

Source: What is NEM 3.0 and How Will it Impact California Solar Owners? | Solar.com

This material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. This material is not intended to be construed as legal, tax or investment advice.  You are encouraged to consult your legal, tax or investment professional for specific advice.

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About Bobbi Pronin: 
Bobbi Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade.

Bobbi is not an employee of Anywhere Integrated Services or affiliated with its title companies.