Mortgage Problems for Home Owners with Solar Panels.

by Mark Johnston

Mortgage problems for home owners with solar panels.

In today’s climate everyone is well aware of the environmental benefits of renewable energy, in particular solar panels.

Under the government solar panel ‘feed in’ tariff scheme, households can generate electricity from solar panels and get paid for any energy they produce.

According to Energy Saving Trust figures, a typical return of £1,190 a year can be expected from the installation of solar panels.

Some home owners have chosen to buy solar panels outright, but others who did not want to incur the upfront costs of installations opted for installations which rely on a lease of the roof space for solar panels.

Most ‘rent-a-roof’ companies keep ownership of the panels and tie householders in to 25 year contracts.

Recent news has shown that some properties were solar panels have been installed are proving to be unmortgageable and unsaleable. Therefore fears that “free solar panels” looked too good to be true has now been fuelled by claims that lenders are refusing mortgage applications.

The Royal Institution of Chartered Surveyors (RICS) has advised its surveyors to warn all house hunters to take special legal advice on properties fitted with free solar panels before committing to buy.

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 further barriers to home ownership”.

Problems can arise if the solar power company is not accredited by the Microgeneration Certification Scheme (MCS) but even those provided by members of the scheme can run in to difficulty as most mortgage lenders have their own specific requirements due to the lack of regulation and standardisation in roof lease contracts.

Paul Broadhead, of the Building Societies Association (BSA), said “leasing roof space to a third party is still a pretty new phenomenon and ought to be treated with caution by home buyers and lenders alike until the industry is better regulated”.

Many lenders are concerned that the solar panels may devalue a property and poor maintenance is also a major concern. Each lender has their own rules on lending on these types of properties. For example, theHalifaxwill only lend if a property owner had the solar panels installed from one of seventy five approved firms. TheYorkshirebuilding society requires evidence that the roof was checked by a structural engineer prior to installation.

While lenders support the principle of green energy initiatives, they also want to ensure that solar panel leasing agreements do not adversely affect the value or marketability of the property.

The Council of Mortgage Lenders (CML) has set out minimum requirements in order to provide protection for lenders and borrowers and these cover matters like ensuring that:

–         installers obtain all necessary consents

–         installation is carried out to an accredited standard

–         panels are properly maintained and that fees for repairs or maintenance are no more than £60 a year

–         the lender can have the panels removed without charge if the property is taken into possession 

Where a lender does refuse a mortgage on the basis of the roof lease, the solar company may offer a ‘buy out’ option, but this typically costs between £10,000 and £12,500.

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