Free PV Panels May Cause Mortgage Problems

May 1, 2012

Homebuyers are being refused mortgages due to ‘free’ solar panels (but  this does not apply if PV installation has been paid for by owner)

Published 23 April 2012
RICS is urging caution to potential buyers looking at properties with ‘free’ PV panels, as it may lead to their mortgage application being declined.
At a time when many prospective buyers are struggling to secure the necessary finance to purchase a new home, they are hitting further difficulties with banks and building societies refusing to lend on properties with roofs leased for the use of ‘free’ PV panels.
These panels are installed by solar companies for free who then sell any extra energy generated back to the grid under the Government’s Feed-in Tariff (TIF) subsidy. These schemes are usually based on leases of 25-years for use of the roof space, which requires the prior approval of the mortgage lender, which many lenders are refusing to give.
David Dalby, Director of Residential at RICS said:
“We fully support the use and production of sustainable energy; however, at a time when prospective buyers are finding it tough to secure mortgages ‘free’ solar panels can cause a further barrier to homeownership. An inflexible PV panel lease, without a buy-out clause, could result in a failed transaction.
“We are advising our members to inform homebuyers of these issues and strongly urge anyone looking to make an offer on a property with ‘free’ PV panels to seek legal advice and consult their mortgage lender beforehand.”
Buyers are more likely to be granted a mortgage on schemes complying with the Council of Mortgage Lenders guidance, where necessary consents have been achieved and the PV panels installed to an accredited standard and maintained.
However, even compliant schemes may reach difficulties as most mortgage lenders have their own specific requirements due to the lack of regulation and standardisation in roof lease contracts, with most lenders assessing on a case by case basis.
Where a mortgage lender does refuse the mortgage on the basis of the roof-lease, the best case scenario is for the solar company to offer a ‘buy-out’ option to the prospective buyer who can purchase the installation at the price stated in the original lease agreement, less depreciation.
However, this can be very costly for the new owner who may already be pushing their finances to the limit with the property purchase.
In the worst case scenario, the installation company could refuse to sell the installation to the new homeowner and seek to charge them for removing the panels and the loss of income from the feed-in tariff, effectively prohibiting the sale of the property.
For more information:
Nathanael Moyers
RICS Senior Press Officer