Property Solicitor, John Pearn examines the legal issues of entering into a solar panel lease
It’s increasingly common for homeowners to lease part of their roof to an energy company who installs solar panels. However, there are a few legal points that a prudent homeowner should consider before going ahead.
Owners often overlook the fact that they need the consent of their lender if they are to enter into such a solar power lease. Before consent is granted lenders will need to be satisfied on a number of issues.
Owners should ensure that no panels will be installed until a proper inspection has been carried out to confirm that the panels can be installed without damage to the property. They need to be satisfied that the solar panel installer will repair any damage caused to the property during installation, or in maintaining or removing the solar panels. The agreement with the solar panel supplier should also ensure that they can be removed to allow the home owner to carry out his own property repairs or improvements.
The legal agreement with the solar panel company should provide for the lender to have the right to break the Lease if they take possession of the property as this is likely to be a condition of the lender consenting to the agreement.
The home insurers should be notified about the existence of the solar panels on the roof but owners should also insist that the equipment itself is insured by the firm installing it. People also need to ensure that the company installing the solar panels will maintain it.
It would be best to check that the firm installing the panels is accredited to the Microgeneration Certification Scheme which ensures that equipment is properly installed. The house owner should make sure he has full contact details for the solar panel firm. The Council of Mortgage Lenders, to which most banks and building societies belong, has drafted a template letter which they request installers provide them with confirming that the agreement with the home owner meets the minimum Council of Mortgage Lender requirements. It basically confirms the terms that are set out above but also requires that any maintenance fee is charged to the house owner.
The Lease of the roof space to an energy company, is classified as a business Lease. Therefore unless the Lease is specifically excluded by agreement prior to the parties entering into it, it falls within the ambit of the Landlord and Tenant Act 1954. This Act gives business tenants the right to apply to the Court for the grant of a new Lease when their existing Lease finishes. These applications are usually successful. It is important therefore that the Lease is excluded from the Landlord and Tenant Act at the outset, particularly as the Lease will bind purchasers of the house in the future and it could devalue the property. Of course, any purchaser would have the benefit of the rent or possibly the assignment of the tariff agreement.
Planning permission is not usually required for the installation of solar panels provided they are not installed above the ridge line of the roof and are themselves no more than 200mm off the roof. Such development is normally permitted development under planning law, but planning permission would be required in a conservation area or if it is a listed building.
Building Regulations do however apply to the installation of solar panels, both in connection with the electrical work and in connection with the ability of the roof to carry the weight of the solar panels.