Solar Panels on Mortgaged Properties?

The “feed in tariff” scheme introduced by the Government, whereby homes are able to have solar panels installed on their roofs to generate electricity for their own use with any surplus going into the National Grid and being paid for that surplus, has proved very popular.

Statistics produced by Energy Saving Trust indicate that as a result of having solar panels installed a return of about £1,190 per annum can typically be achieved.

If the homeowner funds the solar panels/installation costs themselves either from savings or borrowing then they should still obtain the mortgage lender’s permission as the installation may affect the saleability and value of the property. Of course, if the property is not mortgaged, then the above does not apply.

However, if the homeowner prefers not to pay for the solar panels/installation work up front or indeed cannot afford to do so then there is another potential option. This, in effect, amounts to the leasing of their roof where the panels are to be installed with the company supplying and installing the “free” panels but retaining ownership of the solar panels and then tying the homeowner into a contract over 25 years – herein may lie a problem if the property is mortgaged or to be mortgaged.

It has come to light that some mortgage lenders have declined mortgage applications on homes where solar panels have been installed on the above “free” basis.

On the advice of The Royal Institution of Chartered Surveyors (RICS) its surveyor members have been asked to inform house purchasers to obtain special legal advice on a home that they are considering purchasing that has had solar panels installed on the above “free” basis before proceeding with the purchase.

David Dalby of RICS, stated: “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”.

Paul Broadhead who works for the Building Societies Association (BSA), stated: “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”.

A number of mortgage lenders have expressed their unease about poorly maintained solar panels and, also, that they might actually have a negative impact on the value of a property.

Each mortgage lender has different lending criteria for such properties. For instance, the Yorkshire Building Society will ask to see proof that, prior to the solar panels being installed, a structural engineer inspected the roof and the Halifax’s criteria in respect of such properties is that the installation of the solar panels was carried out by one of a panel of 75 firms that have been approved.

Obviously mortgage lenders support environmentally friendly initiatives but they wish to make sure that leasing agreements for solar panelling do not detrimentally affect either the marketability or the value of a home.

To protect both borrowers and mortgage lenders, minimum requirements have been put in place by The Council of Mortgage Lenders (CML) such as: –

  • If a property is repossessed the mortgage lender may have the solar panels taken down without charge
  • Solar panels must be looked after properly the cost of which should not exceed £60 per annum
  • There is an accredited standard of installation of solar panels
  • The required consents are obtained by the installer of the solar panels

All may not be lost if the mortgage lender declined a mortgage application due to their being a 25 year contract in place on the solar panel installation as a solar panel firm could provide a “buy out” option in the contract but this may cost in the region of £10,000 to £12,500.

This article was written by Danielle Biggs. For more information, visit our solar panels website or Danielle’s Google+ page.

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I own and operate a renewable energy information resource website and am passionate about all things which help in our protection of this planet.

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