If the property your client is interested in has a leased solar energy system, it means that the current homeowner sends a monthly payment to a financing company that owns the system on the home’s rooftop. Before you advise your client to proceed with the home purchase, you’ll want to do some additional due diligence and gather some more information about the solar lease terms so that you can provide knowledgeable advise and show an understanding of the deal.
Some general questions to have answered by the lease contract and current homeowner:
Is there a purchase or ‘pay off the remainder’ option?
Some solar lease agreements will allow the current homeowner to purchase the system for a fixed dollar amount as specified per the terms of the contract. Depending on the age and condition of the system, this may be a desirable option if your client does not want to assume the monthly lease payments. The terms and conditions for this option can vary depending on the lease provider, contact your Sunspear Energy Consultant for assistance with understanding the fine print of the lease contract. Purchasing the system or ‘paying off the remainder of the lease’ could be baked into the home sale transaction.
What are the monthly fees?
Most lease and PPA’s have a monthly payment, and if you take over the lease from the current homeowner those payment responsibilities will be assigned to you. You want your client to understand what those payments amount to and what percentage of savings they provide relative to purchasing power from HECO (the utility).
Are the lease payments escalating?
Most solar leases have an escalator where the monthly payments increase by 1-3% year-over-year. There are cases in Hawaii where solar leases were sold 6-10 years ago with a higher escalator and solar prices and regular electricity prices were much higher than they are now. It is important for your client to know how the payments they are taking on will change over time so that they can forecast their cost of home ownership.
What is the term of the lease?
Solar leases are typically 20-25 years in length; depending on how far into the lease term the existing system is, your client can forecast the timeline left on their payment responsibility.
Final Considerations for Leased Systems:
Before your client assumes the responsibility of a solar lease make sure they understand their own financial situation. Lease providers will typically require that the new home buyer meets their credit requirements before approving assignment of the lease. It’s also important to be aware that leases can raise your debt-to-income ratio, which could affect a new home buyer’s ability to qualify for a mortgage and other potential long-term financing needs in the future.