In our recent podcast episode, we talked about Solar Panels and how they may affect an Equity Release application. We cover different ways that solar panels can be owned and the subsequent implications this can have on Equity Release.
What are the Different Ways Solar Panels can be Owned?
There are three ways that solar panels can be owned. They can be owned outright, on a hire purchase agreement, or leased. Depending on how they’re owned will depend on the different lender’s requirements. Where a client has solar panels, it’s helpful to ask at the outset how they’re owned, so they can be properly advised on what the lender may require.
It is certainly important that advisors find out early on whether a client owns solar panels. It helps us a great deal if we know this early on. We can then start asking questions and gathering the documents that we need straight away.
Leased Solar Panels
Where the client has granted a lease to a solar panel provider to install the panels in return for cheaper energy, they the property of the solar panel provider. The installation is a lease of the air space above the roof, which is granted by the owner of the property to the solar panel provider. In that scenario, the terms of the lease will affect any new lender who subsequently grants a mortgage over the property. Solar panels that are leased can often cause the most problems as the lease must be council of mortgage lenders compliant. If the lease is not CML compliant, a deed of variation will need to be entered into between the client and the solar panel company which can cause delays for the Equity Release.
Can Equilaw Help With a Deed of Variation?
Yes, that is something we can do. We are able to liaise between the solar panel company and the Equity Release lender in order to get the deed of variation sorted. The client will have to sign the deed and then it will need to be registered with the land registry prior to completion of the Equity Release. This can sometimes cause delays. Some solar panel companies have standard deeds of variation which they won’t be willing to amend to satisfy an Equity Release lender. If that’s the case, then a new lender will need to be obtained for the client in order for them to be able to proceed.
Our additional works fee for a deed of variation is currently £500+VAT. Some of the solar panel companies will also have their own charges to write up the deed of variation. A Shade Greener is currently charging £216, so we would need to obtain that money from the client upfront in order to proceed. Different solar panel companies will have different fees.
If the Existing Lease is Compliant, Will There be Any Other Requirements?
Providing that a lease is compliant, getting an Equity Release mortgage on a property with leased solar panels shouldn’t present any problems. It is worth noting that different lenders may still have slightly different requirements for what we need to provide to them. For the lenders that use Eversheds, we’ll send an additional requirements form when we receive the offer. We also have to obtain documents such as the MCS certificate and confirmation that the provider and installer are members of a code of practice for the renewable energy sector, approved by the charted trading standards institute.
Some of the information can be obtained online, but it is helpful if the client can provide as many documents as possible regarding the solar panels at the beginning of the process. Even if the lease doesn’t need any work doing to it, and the lenders are generally happy with it, we might still need some other documentation and proof before we can go to completion.
Client Owned Solar Panels
When the solar panels are owned outright, the lender may still have requirements in terms of needing the MCS certificate. They may also require proof of purchase. This can cause problems where the solar panels were paid off a long time ago and the client no longer has a receipt, or the solar panel company has gone into liquidation. If the solar panel company has gone into liquidation, we can obtain evidence of this from companies house and that is usually enough to satisfy the lender, but they may still require a receipt as evidence that there is no money owing.
What Happens if the Client Doesn’t Have a Lease?
Where a client has not got a lease (and they should have), or if they’ve lost the lease and it was never registered against their deeds, the lender won’t proceed until the lease has been registered. This registration can be done for them alongside the Equity Release. If they don’t have a formal lease, and they cannot find their lease, then they will need a new one. For this, specialist advice will need to be obtained as it is classed as a commercial lease. If this is the case, we would have to send that work out to a different firm.
Higher Purchase Agreement Solar Panels
Where the solar panels are being paid for on a higher purchase agreement, the lender may require this to be paid off in full as part of the Equity Release. This is likely to be the case, even if there’s no charge in relation to them on the property title. If they’re not registered they may still need to be repaid. This can cause a lot of problems where the client hasn’t factored this into their calculations, or they aren’t releasing enough to pay them off.
We’re able to contact the funder to obtain a settlement figure and pay this off on completion of the Equity Release where necessary. The same also applies for solar panels that the client has obtained under a green deal scheme as the lender may require that the green deal is paid off. As with all the types of solar panel ownership, the lenders have different requirements. Until we receive a copy of the offer, we don’t necessarily know what they are going to ask us for. Ultimately, it is worth bearing in mind that there may be additional requirements, even if the client owns the solar panels under a higher purchase agreement.
