A few years ago, the UK government started a scheme intended to promote green energy whilst also cutting homeowners’ energy bills.
The scheme was called Feed In Tariffs (FITs) and the idea was fairly simple. Generate your own electricity at home (e.g. through a wind turbine or solar panel) and you could claim payments from your energy supplier.
Many people were attracted to the idea of reducing their carbon footprint whilst also lowering their monthly energy outgoings. The business world also took notice, and a stream of startups emerged with an alluring proposition to homeowners which went something like this:
“Lease your roof to us for the next 25 years and we will install solar panels on your roof for free.”
Since solar panels could cost £12,000 or more to install many people were drawn to this offer. It seemed sensible. Agree to the lease and you would essentially receive “free” solar panels, lower your electricity bills each month whilst also reducing your emissions.
Unfortunately, whilst some homeowners have gone on to benefit from installing solar panels, some people have found themselves “trapped” by unscrupulous leasing companies.
Let’s look at the situation a bit more closely...
Solar Panels & Selling
Currently, there are about one million homes with solar panels installed. A large number of them are fully owned by the property owner. However, many solar panels are there as a result of lease arrangements with the companies described above.
Unfortunately, many homeowners with these kinds of lease agreements have found themselves unable to sell their home due to the conditions in their contracts.
One homeowner, for instance, describes how they were unable to sell their home to a buyer because their lender refused to deal with properties including leased panels.
Sometimes homeowners have tried to work around this problem by attempting to buy the solar panels from the leasing company. However, a number of obstacles often get in the way:
Some lease agreements do not provide an “exit clause”, leaving homeowners effectively trapped and unable to sell their home until it expires (e.g. after twenty five years).
Other lease agreements allow homeowners to buy the solar panels, although at a high price. Some companies quoted over £20,000 for solar panels which originally would have cost a fraction of the price had homeowners installed the panels themselves.
Many of the original leasing companies have now been liquidated due to the UK government’s decision to reduce the FIT subsidies. As a result, many of the lease agreements were sold on. Quite often, the new lease owners are difficult to track down and even once identified by homeowner, many are uncooperative.
This difficult state of affairs has left many homeowners in a seemingly impossible situation. A 25-year solar panel lease will apply to a property regardless of ownership. Consequently, if the homeowner wishes to sell after ten years then they will need to find a buyer who is happy to take on the remaining fifteen years.
Even then, banks are often unhappy to proceed with a deal involving a lease, because it is seen as higher risk. Sometimes they will offer a mortgage if the contract for the solar panel lease meets a strict set of requirements. For instance:
The company which installed the solar panels must have accreditation.
The solar panel installation must be insured and have approval.
It must be possible for the panels to be removed without incurring extra costs (due to FIT payments being missed).
Unfortunately, a large number of the leasing companies (which are now in liquidation) did not meet these requirements when they installed the panels and signed the leasing contract.
A new trap to watch out for
If you find yourself in this unfortunate situation, then you have a few options. First you should try every avenue to determine who owns your solar panels. This might take time and could be a difficult process, but it is a crucial first step.
From there, you’ll need to discuss the terms of the lease with the owner if you wish to buy the panels outright. You might need to seek legal advice, especially if you are looking to end the contract prematurely. It might be possible to do so if you can prove that the company did not meet the terms it originally agreed to (e.g. they did not maintain the panels properly).
With FITs set to cease from March 2019, however, homeowners should be aware of a new profiteering tactic by unscrupulous companies.
Some new businesses have emerged to target people who fully bought their solar panels between 2010 and 2015. These people will still receive the original subsidies from the government under the FIT scheme. Be careful, as these companies are offering an attractive-looking lump sum in exchange for the homeowner’s remaining FIT payments. This lump sum is likely to be far lower than the total of the remaining FIT payments.
Buying Solar Panels: Some Quick Tips
The aim of this article isn’t to put you off buying solar panels (although we understand if you now feel that way!). Rather, it’s to make you aware of some of the dangers involved in this industry, and to give you pause when presented with an offer that seems “too good to be true”.
If you’re looking to install solar panels on your home, then this can be a great option. Not only does it lower your carbon footprint and energy bills, but in many cases it can also increase the value of your property when you eventually look to sell.
If you’re thinking about renewable energy for your property:
Punter Southall Focus is an experienced financial planning business based in Oxford. We help private clients grow and protect their family wealth through retirement planning, life assurance, mortgage advice and wealth management. Get in touch today to book a free, no-commitment financial consultation with one of our team in Oxford.