Lenders remind borrowers of solar panel lease guidance
Published: 28 March 2012 | Author: Bernard Clarke
Lenders are reminding consumers who want to lease their roof space to firms installing solar panels - and solar panel providers offering this service to consumers - to make sure that leases comply with CML guidance.
Some home-owners buy solar panels outright, in which case there is no lease. But others prefer not to incur the upfront costs of installation, and have opted for installations which rely on a lease of the roof space for solar panels. This allows households access to solar energy and can provide them or the installation provider with an income from the "feed-in tariff".
Lenders support the principle of green energy initiatives, but want to ensure that solar panel leasing agreements do not adversely affect the value or marketability of the property. Ensuring compliance with the CML’s minimum requirements should reduce the chance of a borrower encountering problems in trying to sell or remortgage the property, or in carrying out repairs and maintenance.
The minimum standards provide important protection for lenders and borrowers, given that most agreements to lease roof space last for 25 years. Any changes to the borrower’s circumstances over that period, or the need for maintenance or repairs, should not create a financial burden for either the lender or borrower.
The guidance also warns consumers that individual lenders may have their own specific, additional requirements. It advises borrowers to include their lender in the discussions with the panel provider from an early stage. That should enable any security or valuation issues to be addressed before signing a lease agreement.
The guidance is not intended to deter people from installing panels, but seeks to ensure that the lender’s security is not affected by the arrangement. It covers matters like ensuring that:
- installers obtain all necessary consents, including the lender’s consent, before proceeding;
- installation is carried out to an accredited standard;
- panels are properly maintained, and that any fees for repairs or maintenance are no more than £60 per year, with any grace periods required for maintenance adequately protecting the home-owner’s interests;
- the lender can have the panels removed without charge, if the property is taken into possession during the period of the leasehold agreement and the installation of panels is affecting attempts to sell the property, or its re-sale value; and
- there are no other onerous conditions affecting the value, marketability or sale price of the property.
Recent press coverage of individuals encountering problems after agreeing to the installation of panels may have arisen because the lease does not comply with the CML’s standards, or individual lenders’ requirements. It is therefore timely to remind both consumers and solar panel providers about compliance with standards for leases to avoid problems in the future.