Can I Sell my House, if I have a Solar Lease?

Of course! But here comes some of the small print that can make the savings of a solar lease not worth the hassle, once it comes time to sell.

The tone of this website, up to this point, has been protecting the homeowner from unsavory solar lease companies. Now let’s look at a home sale from the lease company’s standpoint. Ten years ago, they carefully checked you out; making sure your credit history was such that they knew you would always make the payments you agreed to. Now you’re selling your house to someone who quite possibly doesn’t have as good a credit history. The lease company needs to protect themselves, it's only fair.

They typically offer a few ways of protecting their investment on your roof.

The first is that they can require the person taking over your solar lease to meet their (high) credit standards. This is bad for you as a home-seller, as there are many homebuyers who do not have 700 FICOs. The good news is that almost all contracts have small print that allows you to pay-off the lease early, should you want to.

This is small-print that’s important. When shoppers are comparing homes to buy, being forced to pass a separate credit check because of an existing solar panel system is not attractive. A natural part of preparing this house for sale would be to pay-off the rest of the lease, and present free electricity as one more reason to buy your home.

This action works, as long as there’s no prepayment penalty. Payments that would have been due ten years from now need to be discounted accordingly.

I think that this is the trickiest part of a solar lease – the area most likely to have gotcha text that can hurt.

Here’s an example of prepayment text:

At any time you may prepay all your remaining lease payments by paying us an amount equal to the remaining lease payments due, discounted by the lesser of 4.4% or the prime rate published by the Wall Street Journal, plus 1.9% per annum.

What the heck does that mean?

The good news: it says that you can prepay at any time.

Now the person about to commit to this lease has to figure out what this sentence means and if it is fair.

In the sentence above, I have a real concern. Let's look again at a portion of that text: At any time you may prepay all your remaining lease payments by paying us an amount equal to the remaining lease payments due, discounted by the lesser of 4.4% or the prime rate published by the Wall Street Journal, plus 1.9% per annum.

Using the 5% column in the example on the prior page, the sum of the payments for the final ten years is $44,254 – since each those monthly payments is made twelve times in a year. Discounting that amount by 4.4% still leaves $42,307. That is insane, for a solar installation that might have been worth half of that when new!

Is this gotcha text? I actually don’t think it's meant to be – since no one’s going to pay that amount to escape the lease. When selling their house, they’ll wait another month or two, and find someone willing – and with a high-enough FICO – to take over the lease.

I think, in the example above, the text is meant to be read as: At any time you may prepay all your remaining lease payments by paying us an amount equal to the remaining lease payments due, discounted by the lesser of 4.4% PER ANNUM or the prime rate published by the Wall Street Journal, plus 1.9% per annum.

Is the change I've made above necessary? I'm not sure it is. But perhaps the leasing companies should fire their lawyers, and get regular people to write the contracts.

Let me summarize:

1. If your solar escalator is high, even a high-FICO shopper will not want your lease. And most prospects are too lazy to calculate an appropriate discount for your home. They’ll just continue looking.

2. You’ve just seen the potential riskd of text buried in a lease. In cases like the example above, you might not be able to affordably pay-off your lease, should you want to. Even if the original leasing company did not intend for the example above to be a trap, if another company took them over, who knows how they would interpret this sentence...

next page: So... Should I Get Solar, Using a Lease?

Should I Lease a Solar Panel System?
 
Who Should I Lease From?
 
Are Some Leasing Companies Better than Others?
 
Leasing versus Buying
 
How Much Can I Save if I Lease Solar?
 
Explain the Different Variables in a Lease
 
The Escalator Trap
 
Can I Sell my House, if I have a Solar Lease?
 
So... Should I Get Solar, Using a Lease?
 
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Quiz: Can you explain this solar lease promotion?
 
Understanding a Solar Proposal
 
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Assorted Lease Companies' Web Pages:
 
- BrightGrid
 
- Solar City
 
- Solar Universe
 
- SunCap Financial
 
- Sungevity
 
- SunPower
 
- SunRun
 
- Vivint Solar
 
 

©2014 by Bill Fridl. All rights reserved.
Links to this site are welcome. Copying content from this site without written permission is illegal. Share your thoughts. Email me at billfridl@gmail.com