Everything You Need to Know About Conveyancing and Solar Panels

There are over 1.3 million solar panel installations in the UK. Though they can be a great way of making more eco-friendly energy and saving money on bills in the process, they’re not without their controversies. Though there are certainly people who think they’re nothing but an eyesore, personally we’re more concerned with the added complications they can bring to conveyancing transactions.

If you’re buying or selling a freehold property with solar panels on the roof, there are a few things you’ll need to be prepared for.

(A sidenote: if you’re buying a leasehold property, then the building’s freeholder will retain ownership of the roof. This means that whatever may or may not be installed there has – in the politest possible way – very little to do with you).

How does the ownership of solar panels work?

Just in case you were worried about this post being too straightforward, let us sprinkle in a little complication. Namely, that there are two different ways that solar panels on residential buildings can be owned.

The first type is where solar panels have been bought outright by the homeowner. In cases such as these, the ownership of those panels is blissfully simple and will be transferred to the buyer at completion along with the rest of the property.

However, things aren’t always this clear cut. Sometimes the solar panels on residential buildings are actually owned by an entirely separate third party. We told you this could get complicated!

Ten or fifteen years ago, the cost of installing solar panels on a building was sky high. (Pun very much intended). Because of this, many homeowners took advantage of so-called rent-a-roof schemes, where they agreed to lease their roof space to solar panel companies. Doing this typically allowed the homeowners to benefit from discounted energy bills, while the companies pocketed the income generated from the solar panels via the government’s feed-in-tariff (FIT) scheme.

Though rent-a-roof schemes have become significantly less popular due to the cost of solar panel installation going down and the FIT scheme being discontinued, many older installations are still in place. In these situations, the question of ownership is clearly more complex. The lease will either need to be bought out, or the buyer will need to take ownership of the lease agreement on completion.

Complications of rent-a-roof schemes

The leases for rent-a-roof schemes vary, but usually they run for a period of 25–30 years. Any conveyancing transactions that take place during this period will need to take the lease into account.

Some leases contain clauses that might make buyers and conveyancers squirm, such as:

• The leaseholder having to give consent for the property to be sold.
• The homeowner having to ask permission to extend the property or even to carry out maintenance work on the roof.
• The homeowner having to pay compensation to the leaseholder for any loss of earnings if, for example, solar panels have to be temporarily covered due to scaffolding.
• The leaseholder having the power to sell on the lease to any company of their choosing. This can make it difficult to track down who actually owns it.

If you’re buying a property with a rent-a-roof scheme in place, you will need to disclose this to your mortgage company who – let’s be honest – are unlikely to be thrilled about it. In addition to this, if it turns out that the seller didn’t seek consent from their own mortgage company when they originally entered the rent-a-roof scheme, this could result in something of a conveyancing kafuffle.

Speaking of conveyancing kafuffles, untangling and administrating this sort of thing can result in a lot more work for your conveyancer. If this is the case, you’ll need to budget for additional conveyancing costs.

With all this in mind, either the seller or the buyer might decide it would be more straightforward all round just to buy the lease company out. However, though there usually are early payment clauses built in to rent-a-roof leases, they typically come with heavy financial penalties. The cost of this can end up being significantly more than the solar panels are now worth, which means it’s not always a realistic option.

What to expect from the conveyancing process

If you’re selling or buying a property with solar panels installed, you’ll need to be prepared for the conveyancers involved to engage in a whole lot of back and forth. Please don’t blame your conveyancing professionals here: they’ll just want to ensure everything has been properly accounted for!

Once the basics of who actually owns the solar panels have been covered, there will be a whole lot more answers and associated documentation required.

This is likely to include:

• The MCS installation certificate (if the solar panels were bought outright. This will show whether the solar panels meet the recommended installation standards).
• The lease contract and any related documents, including landlord and tenant notices (if the panels were installed as part of a rent-a-roof scheme).
• Any relevant documents relating to planning consent, building regulation approval or covenant consent (In most cases these won’t have been necessary, but they might in some cases, such as if the property is in a conservation area or if the panels have been installed on a flat roof).?
• Any service or maintenance documents or contracts.
• Any roof survey that was carried out prior to installation.
• The warranty and guarantee documents. (Along with the question of whether the solar panels are still in warranty, what the warranty covers and whether it can be transferred to the new owners).
• FIT documents (if your solar panels are signed up to the feed in tariff scheme. This should include the form to transfer the ownership of the FIT payments to the new owner. Your conveyancers will also need to agree on any further steps to be taken to transfer the ownership of the FIT account to the new owner. This may include completing forms and/or writing to the energy company that administrates the FIT payment about the change in ownership).
• SEG documents (if your solar panels are signed up to the smart export guarantee scheme).
• Any documentation relating to any loans taken out to install the solar panel system, along with proof of this being settled (either prior to or on completion).
• Information about the type of solar panel system that’s in place and how it works. (Not all systems will allow you to use the energy you generate in your own home. Some systems are set up simply to sell all energy generated straight back to the grid.)

Getting an income from solar panels

We know it doesn’t always feel like it, but at some point you will actually reach the other side of the conveyancing process. When this happens, you might be able to expect to receive a small income from your solar panels. (Assuming, of course, that they are owned outright).

In that case, you will need to know the difference between the two schemes: FIT and SEG.

The feed in tariff (FIT) scheme was the original, government-led solar panel scheme. Solar panel installations that are signed up to this scheme will receive a fixed payment from the government for the electricity they export to the National Grid. This is tax free and paid quarterly. The scheme closed to new installations on 1st April 2019, but you can still receive payments if you signed up prior to this date (or if you’re taking over ownership from someone who did).?

The smart export guarantee (SEG) scheme started on 1st January 2020. This scheme reimburses solar panel owners for any excess renewable energy they export back to the grid. This is paid by energy suppliers rather than the government. There are no fixed rates.

Before you get too excited about your new passive income, we’ll just mention here that between FIT/SEG payments and any money you might cut from your energy bills, you’re likely to be looking at around ￡500 per year.

If you have any more questions about conveyancing and solar panels, or, indeed, if you want to tell us we’re FIT, please do give us a shout.