As solar energy becomes more common, real estate professionals are increasingly encountering homes with solar panel systems. Without a clear understanding of how these systems are owned, financed and transferred, the parties – and the REALTORS® involved – may face legal, financial and ethical issues.

Residential solar systems are typically owned, leased or subject to a Power Purchase Agreement (PPA). Each arrangement carries different financial and legal obligations that may continue after closing. In many cases, the solar company may also file a UCC financing statement to protect its interest in the equipment. Before signing a listing agreement, sellers should contact the solar company to confirm transfer procedures, payoff or prepayment amounts and any other requirements.

Before listing or purchasing a property with solar panels, it is important to determine the type of agreement in place, whether the buyer is willing and able to assume the seller’s obligations, and whether financing, lease payments, warranties or service agreements will transfer with the property.

Real estate licensees should encourage full disclosure regarding the solar system and any related services. Sellers should disclose the existence of the system and any known concerns, including poor performance, roof leaks, installation defects, warranty issues or customer service problems. Buyers should receive copies of all agreements with the solar company as early as possible so they can understand their rights and responsibilities before closing.

Because solar agreements can significantly affect financing, settlement and future ownership obligations, REALTORS® should recommend that the documents be reviewed by a knowledgeable attorney, ask the title company to conduct a UCC search and confirm whether the buyer is willing and able to assume the agreement.

Taking these steps can help prevent costly surprises and protect both consumers and real estate professionals.