With the rise in commercial property and home owners leasing solar panels, people need to be aware of their obligations under the solar panel lease when selling their properties.
Property owners must ensure any leased fixtures, such as solar panels, are appropriately addressed before entering into an agreement for sale and purchase.
The first step a seller should take is to contact their solar panel provider. The provider can advise what options are available to them when selling their property and what costs may be associated with each option. An awareness of these costs may assist the seller in deciding which option they would like to take in regard to their leased solar panels.
Depending on the solar panel provider and what is accommodated for in the lease, there are a few options available to sellers.
Transferring the lease to the new owner
The most common option is to assign the lease to the new owner. The sale and purchase agreement for the property should be conditional on the assignment of lease. This will be important if the seller cannot, for any reason, transfer or terminate the lease (options discussed below) as the seller will still be liable under the lease and will need to pay any exiting and removal fee if the lease cannot be assigned to the purchaser.
When assigning the lease, the seller will be required to enter into what some providers may call a “transfer agreement”. However, the assignment will be subject to any conditions required by the provider, such as credit checks of the purchaser and any outstanding payments to be paid before settlement.
Some providers may supply example clauses that could be used in the agreement for sale and purchase. Amongst other matters, the clause within the agreement for sale and purchase should cover the following points:
1. Solar panel and hardware relating to it that is not owned by the seller and cannot pass to the purchaser on settlement;
2. Purchaser accepts assignment of the lease (subject to any of the provider’s conditions);
3. Timeframe for the transfer agreement to be executed and deliver to the provider;
4. Whether the sale and purchase agreement is conditional on the assignment (what occurs in that instance).
Putting the solar panels on another building
If the seller holds another property, they may wish to transfer the solar panels to that property. If the seller chooses this option, they will need to ensure the panels are removed and transferred before or on settlement.
This transfer will usually come with a cost. However, some solar panel providers may consent to the transfer free of cost, dependent on how long the seller has been with the provider.
Removing the solar panels before sale of the property
Alternatively, the seller may wish to terminate the lease and have the panels removed from the property. If the seller chooses this option, the seller will need to ensure the panels are removed before or on settlement.
If the panels cannot be removed in that timeframe, it’s beneficial to have a clause inserted into the sale and purchase agreement that provides the solar panel provider access to the property after settlement in order to complete the removal.
Some top tips to protect yourself:
- Ensure any leased fixtures are not recorded as chattels in the sale and purchase agreement. Make sure this is disclosed and acknowledged by the purchaser
- Ensure a clause is inserted regarding what option the seller is taking (e.g. assignment of solar panel lease clause). Note whether this clause is a condition under the sale and purchase agreement (e.g. if the solar panel provider does not agree to the assignment, the sale does not proceed). This clause needs to be consistent with what the lease provides
- If the seller is assigning the lease, ensure there are no outstanding payments owed to the solar panel provider and that the ‘transfer agreement’ is executed before settlement
- If the seller is transferring the lease, ensure this occurs on settlement
- If the seller is terminating their lease, ensure removal has occurred before or on settlement.
Special thanks to Solicitor Katrina McDonald for preparing this article. For further information, please contact a member of the Property team.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.