So you're interested in switching to solar energy, but you aren't sure whether you should own or lease a solar energy system and whether it will place a lien on your home. In this blog, we'll look at the differences between owning and leasing your solar panels, and which options could result in a lien.
Solar Financing and UCC-1
When financing a solar energy system for your home, some lenders require a Uniform Commercial Code financing statement (UCC-1) to be filed also. It is important to note that not all lenders or banks will file a UCC-1. For example, at Positive Energy Solar our solar lender is Nusenda Credit Union. Nusenda does not file a UCC-1 when providing solar loans to customers.
A UCC-1 statement is a legal notice that some creditors file to publicly declare their right to seize assets from anyone who defaults on a lease granted to them for their solar project. In other words, it allows the lender the right to repossess the solar panels in case of a default. This is not a lien on your home. A buyers’ mortgage lender who is unfamiliar with solar financing may mistake a UCC-1 filing to be a lien on your home when performing a title search - but it isn’t. Mortgage lenders place liens on houses, auto lenders place liens on vehicles, solar lenders and banks that file UCC-1 statements on solar projects do not place liens on anything but the solar panels.
A UCC-1 is a filing by the solar lender or bank that indicates their legal right to repossess all solar equipment in the event that you fail to keep up with your payments on the solar lease and in some cases solar loans. This ensures that the asset of the lender, your solar panels at the time, remains protected until paid for in full. They do not legally claim or hold any ownership over any other part of your home. The UCC-1 filing appears on your property title to give notice to anyone running a title search that the solar panels are on your property.
If you decide to purchase your solar panels outright, you do not need to concern yourself with the UCC-1 statement. This is because you own the system. UCC-1 statements are filed only when you lease or take out a loan on your solar system with certain banks.
Solar leases and PPAs
When signing a solar lease or PPA (Power Purchase Agreement), you are basically renting the solar panel system. With a lease or PPA, a UCC-1 financing statement will be filed with the agreement and a lien will be placed against the panels. At Positive Energy Solar, we do not offer leasing or PPA options. Solar leases or PPAs do not allow you the tax credits and financial incentives that come with owning a solar system. The solar lender is entitled to all of the tax breaks and financial incentives available to one who owns solar panels.
With a lease, you pay a fixed monthly “rent” in return for use of the system. With a PPA, you pay a fixed price per KWh for power generated, hence the name power purchase agreement. Unlike solar leases, the monthly amount you pay is not fixed, as the production of your solar panel system changes from month to month and by season.
Your property value does not increase under a solar lease or PPA because you do not own the solar. Under a PPA or lease agreement, it can be difficult to sell your home because the new owners must agree to take over the contract and qualify for the lease. The alternative of paying out the remainder of the lease or agreement and having the solar system taken off of your roof can be quite costly.
Solar loans are a great way to invest in solar and reap the benefits of solar tax credits and financial incentives as you work toward owning the system. With a solar loan, a UCC-1 statement may or may not be filed depending on the financing institution your loan is through. Typically, there will not be a lien placed on the system with a loan. There is value in making this type of investment as you work toward becoming a solar owner. $0 down options are often available, you get to pay a fixed rate that never changes unlike your utility bill or a PPA, and you can pay off your loan at any point in time.
Plus, once the panels are paid off, you can see an increase in your home value. A home with owned solar panels on average is worth 4.1% more than homes without this clean energy system. This additional money made from selling your eco-friendly home can be used to pay off the panels.
At Positive Energy Solar, we value transparency and make switching to solar easy and hassle-free. To learn more about financing or purchasing solar for your home, contact us for a free consultation or give us a call at (505) 344-0071!