The Hidden Sunburn: How Leased Solar Panels Can Complicate Real Estate Transactions

By Sun National Title Company

How Leased Solar May Impact Your Real Estate Transaction

As renewable energy continues to grow in popularity, more homeowners are turning to solar power to reduce their utility bills and carbon footprint. However, when it comes to buying or selling a home with leased solar panels, things can get unexpectedly complicated—especially during the real estate transaction process. At Sun National Title Company, we believe in empowering our clients and partners with the knowledge they need to navigate these challenges smoothly.

The Rise of Solar Leasing

Leasing solar panels offers homeowners a lower upfront cost compared to purchasing a system outright. In many cases, a third-party solar company installs and maintains the equipment, and the homeowner pays a fixed monthly fee for the electricity generated. While financially attractive at first, these agreements create long-term obligations that can cause friction when it’s time to sell the home.

Key Issues in Real Estate Transactions

1. Transfer of Lease Agreements One of the most common issues is the need to transfer the lease to the new homeowner. This is not always seamless. The buyer must qualify with the solar company, and approval can be subject to a credit check and other financial requirements. If the buyer doesn’t qualify or is unwilling to assume the lease, the seller may be forced to buy out the contract—a cost that can reach into the tens of thousands.

2. Title and Lien Complications Leased solar panels often involve a UCC-1 financing statement, which acts as a lien on the property. This filing gives the solar company an interest in the panels—and sometimes in the home itself. These liens must be identified and addressed before closing. At Sun National Title, we ensure that these filings are discovered early in the title search process, avoiding last-minute surprises.

3. Appraisal and Value Confusion Appraisers may struggle to determine how leased solar panels impact a home's value. While they may lower utility costs, the lease liability can offset those savings. Buyers are sometimes hesitant to inherit a lease, especially if it offers little financial benefit compared to newer systems.

4. Disclosure Requirements Sellers are legally obligated to disclose the existence and terms of a solar lease. Failure to do so can result in delays, contract cancellations, or even post-sale disputes. A full copy of the solar agreement should be shared early in the transaction process.

5. Mortgage Issues Some lenders, especially those who offer government-backed loans like FHA and VA loans might not approve a mortgage with leased solar panels. This is particularly true if the lease terms are vague or can’t be transferred. 

Tips for Buyers, Sellers, and Agents

• Sellers: Know your lease terms. Have documentation ready, and talk to your title and escrow professionals about any liens or UCC filings.

• Buyers: Ask about the lease terms, monthly payments, and system performance. Will you save money compared to your current utility bills?

• Agents: Set expectations early. Help your clients understand that a leased solar system is more than just a feature—it’s a financial obligation.

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How Sun National Title Can Help

Navigating solar panel leases during a real estate transaction requires diligence and experience. At Sun National Title Company, our team ensures that all encumbrances are properly identified and resolved. We work with buyers, sellers, agents, and lenders to coordinate clear communication and smooth closings.

Don’t let a solar lease dim your deal. Contact Sun National Title Company today to learn how we can help guide your next transaction—rain or shine. Call us today. 239-334-3321