Why it Pays to be Wary of Free Solar
If something sounds too good to be true, you can bet your bottom dollar that it usually is. Take free solar schemes for example, and recent new claims that some financial institutions are refusing mortgage applications for properties that have free solar panels.
It seems solar PV systems on properties that have been installed by free solar companies under the rent-a-roof scheme can create something of a barrier when it comes to buying and selling homes. So much so, certain banks and building societies are even refusing to issue mortgages on individually offending homes that have taken part in free solar schemes.
Under the rent-a-roof scheme – which is more commonly referred to as free solar – firms will supply and fit a solar PV system for free, in exchange for renting out the roof space for a whopping 25 years. Whilst homeowners or tenants benefit from free electricity and reduced household energy bills, it’s the firms installing the solar panels which are able to generate an income under the feed-in tariff; a Government scheme which pays people to produce their own renewable electricity. There are both pros and cons of free solar schemes.
According to a recent article in The Telegraph, homeownership in the UK is facing an additional barrier in the form of free solar PV systems, with mortgage providers finding yet more reasons to make buying and selling homes difficult in an already challenging environment.
Commenting on the situation, David Dalby – director of the Royal Institution of Chartered Surveyors – told The Telegraph that although they supported the use of renewable energy technologies, the last thing prospective buyers, who were already finding it hard enough to secure a mortgage, needed was yet more obstructions to buying their own homes.
“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,” he added.
However, all isn’t necessarily lost. If a bank or building society refuses a mortgage due to the 25-year roof lease, the company who fitted the solar system may offer the prospective purchaser the opportunity to buy the installation for the price stated in the lease agreement, less depreciation. However, that’s the good news. Alternatively they could refuse to sell the installation, and even attempt to charge for not only the removal of the panels but also try and claim for loss of income.
“Most building societies will consider lending on properties with solar panels,” said Paul Broadhead, a spokesman for the Building Societies Association.
“One factor that will sway their decision towards a refusal is if they believe that the roof space leasing agreement with the panel provider, makes the property less saleable.”
He added that given that leasing third party roof space is still in its infancy, it needs to be treated with caution, not just by homebuyers but also lenders.