With energy prices at an all-time high and UK households looking to save money to keep their outgoing costs down, buying a property with solar panels may seem more appealing than ever before.
There are many benefits to buying a home with solar panels yet, it is not always complication free. Therefore, it is important to understand the ins and outs before making an offer.
Take a look at our guide to find out what you need to know before buying a property with solar panels.
What are the benefits of owning a property with solar panels?
Before we get into the nitty gritty it is worth considering what the pros and cons are when it comes to buying a property with solar panels installed.
Solar electricity is a low carbon, renewable energy – and according to the Energy Saving Trust a typical home solar PV system could save around one tonne of carbon per year, depending on where you live in the UK.
Having solar panels already installed on a property means you can save thousands of pounds on the installation fee. You will gain access to either free or cheaper energy and you can potentially earn money back from them via a UK government scheme.
They usually come with a warranty of around 25-30 years, and they are relatively easy to maintain.
What are the disadvantages of owning a property with solar panels?
Getting a mortgage on a property with leased solar panels can sometimes be problematic. The issue is that a large proportion of the roof is leased to a solar power company.
However, with more homeowners investing in solar panels on their properties mortgage lenders are more likely than they were to lend against a property with them – as long as they meet their minimum requirements.
While solar panels are relatively low maintenance it is important to stay on top of them to ensure they are working effectively.
Finally, although you may not have been put off buying a property with solar panels other buyers may in the future. Opinion on their appearance is very much subjective and this could impact you when looking to sell the property.
Who owns the solar panels?
One of the first questions you will want to find out when looking to buy a property with solar panels is who owns them. If the vendor owns them outright, then it is unlikely you’ll run into any complications.
Yet, as part of the government Feed-in-Tariff (FIT) initiative, set out in 2010, a lot of properties that have had solar panels installed lease them.
The initial rate offered by the FIT scheme meant it could be quite profitable to earn money back from having solar panels installed. The biggest drawback being the cost to have them installed back in 2010 would have been around £15,000.
Under the ‘Rent a Roof scheme’ homeowners grant a third-party or company access to their roof under a lease agreement for between 25-30 years. While the solar company benefitted from the government’s Feed-in-Tariff (FIT), the homeowner would get free installation and cheaper energy. After the lease agreement ended, the homeowner would then benefit from the FIT payments.
Over time the cost to install solar panels has reduced by over half. This, together with the end of the Feed-in-Tariff in 2019 means there has been a significant decline in popularity of the Rent-a-Roof scheme. While the scheme does still exist, there are fewer companies in the mix.
Feed-in-tariff and Smart Export Guarantee explained
In a nutshell – the government’s feed-in tariff (FIT) scheme offered cash payments to households that produced their electricity using renewable technologies, such as solar PV panels or wind turbines.
FIT payments are made up of two elements:
- Generation tariff – this is a payment for the total amount of electricity generated, calculated per unit.
- Export tariff – this is a payment for the units of electricity exported to the National Grid, assumed to be 50% of the amount you generate.
The above are payable for up to 20 years (25 years if you signed up before August 2012) and are usually paid each quarter. The other bonus is that they’re tax-free.
The scheme, however, closed to new applicants in March 2019 although those already on it are not affected and it is transferable to a new homeowner if they buy a property with solar panels.
In replacement for the FIT scheme – the Smart Export Guarantee (SEG) was launched in January 2020.
SEG will pay homes for the excess renewable electricity they generate from solar panels and put it back into the National Grid.
One of the main differentials of the SEG scheme compared to FIT is to receive payments you must apply directly to an energy supplier. There’s no fixed rate which you will be paid, instead, it is set by the energy supplier, whereas FIT rates were set by the government.
Furthermore, to get an SEG tariff the government states: “You must have a meter capable of providing half-hourly export readings. This would typically be a smart meter. Speak to your energy supplier about getting a smart meter installed if you do not already have one.
You need to show that your installation and installer are certified through the microgeneration certification scheme (MCS) or equivalent.”
Getting a mortgage for a property with leased solar panels
As we’ve mentioned, it can be a little more complicated buying a property with solar panels that are leased – not to mention when you are looking to get a mortgage.
There are several things the mortgage lender will want to know when you are looking to borrow against a property with solar panels. At a minimum, you should find out from the seller if:
- The installation company that installed the solar panels is accredited by the Microgeneration Certification Scheme (MCS)
- The installation itself was approved and is insured
- You can remove the panels without incurring penalties for missed Feed-in Tariff payments
To be eligible for FIT payments the seller will have had to have chosen an MCS-approved installer however if they bought the solar panels outright there was no obligation to do the same.
Although it wasn’t mandatory to use an MSC-accredited installer, having this certification gives lenders the confidence that the installation and products used were to a certain standard. Without it, it could reduce the number of lenders willing to offer a mortgage to you.
If you’ve not already done so getting the advice of a mortgage broker could help save you a lot of time and potential money in the long run.
They can access your needs and circumstances and advise on all the necessary paperwork required – not just the solar panel paperwork – to help identify the best mortgage that suits you.
Is it worth buying out of a solar panel lease early?
If, after speaking to your conveyancer and mortgage broker, you find out that it is going to be difficult to get a mortgage you could investigate if the solar panel lease includes a ‘buy-out’ clause.
If the lease does include a ‘buy-out’ clause you could ask your vendor to complete it before the property transaction is completed.
It’s worth knowing that there could be a costly premium to buying out of a solar panel lease and the seller may not have the funds readily available, although it may be that the sola panel lease could be bought out using your purchase money on completion, but the mechanics of this would need to be agreed through the conveyancers.
How does buying a property with solar panels affect the conveyancing process?
As with any property transaction, there is always the risk of unforeseen circumstances that could delay a property purchase from taking the standard 16-18 weeks from offer acceptance to exchange.
Buying a property with solar panels doesn’t necessarily mean there will be delays however it does add an extra layer of complexity.
Finding out as much information before you make an offer on a property can also help avoid any significant delays.
If you’re looking to move home and you are looking for a professional licensed conveyancer to manage your property move – get a free instant conveyancing quote from Enact conveyancing today.
