Fact 29. Solar Panels when buying or selling a property

Solar panels require careful document checks, ownership clarity, and possible planning permissions to ensure a smooth property sale or purchase.

Solar panels have become increasingly common on residential properties across the UK, offering homeowners the opportunity to reduce energy bills and carbon footprints. However, when it comes to buying or selling a property with solar panels, there are several important legal and practical considerations that both buyers and sellers need to understand. The conveyancing process for properties with solar panels can be more complex than standard transactions, and being well-informed can help avoid delays and potential complications.

Understanding Solar Panel Ownership Models

One of the first and most crucial aspects to establish is how the solar panels were acquired and who actually owns them. There are several different ownership models, and each has distinct implications for the conveyancing process.

Outright ownership means the property owner purchased the panels directly, either through savings or a personal loan. This is the most straightforward scenario for conveyancing purposes, as the panels are simply part of the property and will transfer to the new owner along with the house itself. The buyer will inherit all the benefits of the system, including any Feed-in Tariff payments or Smart Export Guarantee payments that may be registered. Owners of solar panels benefit from free electricity generated from the panels, and any surplus electricity can be sold back to the electricity grid.

Leased panels present a more complicated situation. Under this arrangement, a solar panel company owns the panels and leases the roof space from the homeowner, typically under a long-term agreement that can span 20 to 25 years. The homeowner receives free or discounted electricity, but the solar company retains ownership of the panels and receives the Feed-in Tariff payments. When selling a property with leased panels, the lease agreement must be transferred to the new owner, who must agree to take on the terms and obligations of the lease.

Hire purchase or finance agreements represent another category where the panels may be owned by a finance company until final payment is made. If the finance agreement is still active at the time of sale, the seller typically needs to settle any outstanding balance before completion, or arrange for the buyer to take over the agreement if the finance company permits this.

Legal Considerations and Documentation

The conveyancer will need to review several important documents relating to the solar panels. Sellers should gather all relevant documentation before marketing the property to prevent delays later in the transaction.

Documents required for all solar panel installations, whether owned or leased, include:

A roof survey is usually prepared prior to the solar panels being installed, confirming that the roof had adequate support for the system. This provides evidence that the structural integrity of the roof was assessed before installation.

Planning permission documentation should be provided if it was required. Most systems where solar panels have not been erected above the ridgeline are permitted development and do not require planning permission. However, if the property is in a conservation area, is a listed building, or permitted development does not apply to the property or area, planning permission may have been required.

Building Regulation approval is often not required for the installation of solar panels themselves, but a building regulation certificate for the electrical works would be required. Electrical certification is usually self-certified under one of the competent person schemes such as NAPIT or NICEIC. The certification typically comprises two documents: a Domestic Electrical Installation Certificate or Electrical Installation Modification Certificate, usually provided by the installer to the homeowner at the time of installation, and the Building Regulation Compliance Certificate, usually sent to the homeowner by the scheme provider.

An MCS certificate provides proof that the installation has been designed, installed and commissioned to the highest standard using only MCS certified products by an MCS certified installer. This is usually provided to the homeowner within ten days after installation. The Microgeneration Certification Scheme certification is essential, as many mortgage lenders will not proceed unless solar panels are fitted under the MCS.

Covenant consent documentation may be required if the property deeds require consent to any external alterations. Many installers do not deal with this and leave it to the homeowner, so this is often overlooked. If consent was required but not obtained, an indemnity policy may be able to be arranged at a small cost.

Additional Documentation for Owned Solar Panels

When solar panels are owned outright by the seller, additional documentation is required:

Warranties and guarantees for most panels, inverters and batteries carry long guarantees ranging from 10 to 25 years. Sellers may not be issued with separate guarantees, so will need to locate a copy of the site survey, quotation and invoice giving details of the products used and guarantees available. Buyers should confirm whether these warranties are transferable to new owners and obtain the necessary documentation and contact details for making warranty claims if needed.

Feed-in Tariff documentation is essential if the system benefits from this scheme. The seller will need to obtain the necessary form to transfer the benefit to the new buyer and provide details on how to obtain the FIT payments and any meter readings for the benefit of the buyer. The owner of the property will be registered as the FIT generator with the electricity supplier, and this will need changing on completion of the sale.

Finance settlement information must be provided if the seller took out any finance on the system and any remains outstanding. This will have to be discharged on completion, so the seller should obtain a settlement figure and provide details to their conveyancer for payment. Failure to disclose existing finance agreements can lead to serious legal complications and potentially derail the sale.

Maintenance contracts should be provided if there is a service or maintenance contract. The seller should obtain a copy and find out whether it can be assigned to the new buyer, along with any maintenance records.

Additional Documentation for Leased Solar Panels

When solar panels are leased, specific documentation relating to the lease arrangement is required.

The lease agreement itself is critical. If the seller does not have the original lease, their conveyancer can usually obtain this from the Land Registry for a small fee. It is strongly recommended that sellers instruct their conveyancer at the point of marketing and ask them to check that the lease is UK Finance compliant. There are many early leases which are not compliant, and a deed of variation will be required. This can take considerable time, so it is best to start the process early if variation is required.

Landlord and Tenant notices, known as LTBT1 and LTBT2 notices, exclude sections 24 to 28 of the Landlord and Tenant Act 1954 from the lease, removing the requirement for a new lease at the end of the term of the original lease. These should be provided to the buyer's conveyancer.

The Mortgage Lender's Perspective

Mortgage lenders have varying policies regarding properties with solar panels, and this can significantly impact the transaction. Most mainstream lenders accept properties with owned solar panels without issue, viewing them as an improvement to the property. However, leased panels can raise concerns.

Many lenders are cautious about properties with leased solar panels because the lease creates a charge against the property that ranks alongside or potentially ahead of the mortgage. If the homeowner defaults on obligations under the solar lease, the solar company could potentially take action that affects the lender's security. Some lenders refuse to lend on properties with leased solar panels altogether, while others will lend but require specific terms in the lease agreement.

The lease agreement typically needs to meet certain criteria for lenders to approve the mortgage. These often include:

- Provisions allowing the lease to be terminated if the property is repossessed

- Confirmation that the solar company will not place any charges on the property without the lender's consent

- Arrangements for removing the panels if necessary

Many older lease agreements do not contain these lender-friendly terms, which can cause significant problems.

Buyers should discuss the presence of solar panels with their mortgage broker or lender early in the process. If the lender will not approve a mortgage on the property due to leased panels, the buyer may need to negotiate with the seller to have the panels removed or the lease terminated before proceeding.

When purchasing a property with leased solar panels, buyers and their conveyancers need to consider:

- Whether the solar panels and lease are acceptable to the mortgage lender

- What the maintenance provisions are in the lease

- What provisions exist for removal of the solar panels and at whose cost

- What works are required to the roof of the property

Practical Concerns for Buyers

Beyond the legal and financial aspects, buyers should consider several practical matters when purchasing a property with solar panels.

The age and condition of the solar panel system matter because solar panels typically have a lifespan of 25 to 30 years, though their efficiency gradually decreases over time. Inverters, which convert the DC electricity generated by panels into usable AC electricity, often need replacement after 10 to 15 years, which can be a significant expense.

Buyers should ask for evidence of the system's performance, including:

- Recent electricity generation figures

- Maintenance records

- Any documentation showing the system's output over time

A system that is underperforming may indicate problems that could require costly repairs. Professional surveys specifically for solar panel systems are available and can provide peace of mind about the condition and expected performance of the installation.

The structural integrity of the roof is another important consideration. Solar panels themselves can last decades, but they are mounted on a roof that may have a shorter remaining lifespan. The weight of the roof can be increased by the solar panel equipment, so it is always recommended that a survey to check the roof is sound is carried out. If roof repairs or replacement become necessary, the panels will need to be temporarily removed and reinstalled, adding considerably to the cost of the roofing work. Buyers should ensure the roof structure and covering are in good condition and factor in the potential costs of future roof work. Older roofs, especially those originally designed to hold quarry slate, may have significantly reduced weight-bearing capacities.

Buildings insurance is an essential consideration. Buyers should:

- Ensure their insurance company is aware of the solar panels

- Check that their insurance is not affected by the panels

- Verify if the insurance covers damage to the solar panels themselves

The seller should demonstrate that the solar panels have been included in their home insurance policy and that there have been no claims related to the panels.

Compliance with industry standards should be verified. Buyers should check that the provider and installer of the solar panels is a member of the Renewable Energy Consumer Code. This provides consumer protection and can be checked online through the RECC website.

Planning Permission and Building Regulations

Understanding whether planning permission was required for the installation is important for both buyers and sellers.

In England and Wales, the domestic installation of mounted solar panels is likely to be considered permitted development, meaning there is no need to apply to the council for planning permission. However, some conditions must be met:

- Solar panels must not be installed above the highest part of the roof, excluding the chimney

- Panels should protrude no more than 200mm from the roof or wall surface on pitched roofs, or 600mm on flat roofs

- Panels should be installed to minimise the aesthetic impact on the building's exterior

Important exceptions to permitted development exist:

- The panels cannot be installed on a wall that faces a highway in a conservation area or World Heritage Site

- Panels must not be installed on a property located within the grounds of a listed building

- If the property is a listed building or in a conservation area, planning permission would generally be required

For ground-mounted solar panels, installations are likely to require planning permission unless they meet certain conditions:

- Ground-mounted solar panels must be no bigger than 9 square metres in area

- Maximum horizontal dimension of 3 metres in any one direction

- Must be no higher than 4 metres

- Must be at least 5 metres from the property boundary

- Must not be visible from the road if the property is in a conservation area or world heritage site

- Any additional ground-mounted solar installations beyond the first one will also require planning permission

As of November 2023, the UK government has relaxed the requirements for permitted developments in conservation areas. This change allows homes with flat roofs to no longer require planning permission for solar panels, reducing delays and costs to homeowners. However, buyers and sellers should always check with the local planning authority to confirm the current legislation and whether planning permission was required for a specific installation.

Building Regulations compliance is also essential. The installation of solar panels must comply with standard building regulations of a property, which cover Part A (structure), B (fire) and P (electrical). The roof must be able to support the weight of the solar panels easily. All electrical work related to the solar panel installation must comply with Part P of Building Regulations, which covers new electrical additions to a property and the rewiring of current systems. The wiring must adhere to strict IET Wiring Regulations put in place by BSI (BS 7671), covering the installation of the inverter and wiring, electrical isolation, and earthing.

Distribution Network Operator Notification

When solar panels are installed, the Distribution Network Operator must be notified of the installation. The notification depends on the Declared Net Capacity, which is the estimated output of the installation. If the system size exceeds 3.68kWp per phase, an application to the DNO is usually required if the house has a single-phase supply. This limit is 3.68kWp per phase, so 11kWp on a three-phase supply. Consent to connect to the grid is usually given for systems under 4kWp without issues.

Since most UK homes have single-phase electricity, anything over 3.68kWp will require approval from the DNO beforehand. Solar panel systems under 5kWp are usually approved without any issues. Installations above 5kW typically require additional checks but still almost always receive approval, albeit with a slight delay. There is no legal limit to how many solar panels can be installed in the UK, and there is no maximum amount of solar energy production limit, beyond physical limitations.

Feed-in Tariff and Smart Export Guarantee

Properties with solar panels installed before April 2019 may benefit from the Feed-in Tariff scheme, which closed to new applicants after that date but continues to pay existing recipients for the duration of their agreement. Under this scheme, homeowners receive payments for the electricity they generate, whether they use it themselves or export it to the grid, plus additional payments for electricity actually exported.

Feed-in Tariff agreements can be transferred to new property owners, and the payments continue for the remainder of the original term, which is typically 20 years from installation. The tariff rates are index-linked and increase annually with inflation. For properties with early installations when tariff rates were highest, these payments can be substantial and represent a valuable asset.

The seller's conveyancer should facilitate the transfer of the registration to the buyer's name, which requires notification to the electricity supplier and scheme administrator. Buyers should obtain full details of any Feed-in Tariff registration, including:

- The tariff rate

- The date of registration

- Evidence of registration with the scheme administrator

- Recent payment statements

The buyer's conveyancer will request the electricity supplier's requirements to change their records and any fees involved.

For properties with panels installed after the Feed-in Tariff closed, the Smart Export Guarantee provides payments for electricity exported to the grid. To qualify for the SEG scheme, homeowners must have a smart meter that can provide readings every half-hour, along with an MCS certification confirming they meet solar panel installation regulations. The amount received depends on the energy supplier and typically ranges from 6 to 9 pence per kWh, significantly lower than the initial Feed-in Tariff rates which were over 40 pence per kWh. Income generated under the SEG scheme is tax-free, although the significant reduction in payments compared to the Feed-in Tariff impacts the amount of profit that can be made.

Addressing Problems and Delays

Despite best intentions, solar panels can cause delays in conveyancing transactions. Common issues include:

- Difficulties obtaining documentation from installation companies that may have ceased trading

- Lenders rejecting mortgage applications due to lease terms

- Disagreements over who should pay for remedial work if surveys reveal problems

When lease agreements contain terms that are unacceptable to buyers' lenders, resolution options include:

- Negotiating lease variations with the solar company, which may involve fees and considerable time

- Paying for early termination of the lease

- Agreeing to a price reduction to compensate for the reduced pool of potential buyers due to mortgage lending restrictions

Buyers and sellers should maintain open communication with their conveyancers and respond promptly to information requests. Early identification of potential issues allows more time to find solutions before exchange of contracts. Conveyancers can advise on the best course of action when complications arise and can liaise with solar panel companies, finance providers, and lenders on behalf of their clients.

Mis-sold Solar Panels

The installation of solar panels has given rise to litigation against the suppliers or installers of the panels in some cases. Most complaints arise when third-party funders provide loans for the purchase and installation of the panels. Claims arise when buyers were not informed that it was a loan, or the loan's terms were misrepresented.

A mis-sale claim also sometimes arises in instances where the installers have provided figures for the energy supplied by the panels based on installation in one of the sunniest parts of the country, when they are actually installed in an area with exceptionally high rainfall, for example.

Other complaints arise in circumstances such as:

- Solar panels not being required

- The roof not being suitable for panels

- The necessity for consent not being brought to the buyer's attention and being ignored

- The electricity meter not being compatible with the solar panel

As well as court proceedings, complaints can be raised with the Energy Ombudsman, and if not satisfied with their response, with the Secretary of State. If the Secretary of State's final notice is not satisfactory, an appeal lies with the First Tier Tribunal.

VAT and Financial Incentives

There is no VAT on domestic solar panels in the UK until at least 2027. The VAT on energy-efficient systems within the home was cut from 5 percent to zero as of April 2022. As part of the UK initiative to tackle the cost of energy crisis and push green energy into private households, the cut in VAT applies to installations of solar panels, electric heat pumps, and insulation, allowing households to save significantly on their energy investments.

Various government incentives are available for installing solar panels:

- Energy Company Obligation enables help with energy-saving improvements for those on certain benefits or living in social housing

- Solar Together is a community buying scheme that enables a reduction in installation costs for an entire group, where homeowners in a particular council apply for solar panels and companies bid to install them

- Home Upgrade Grant Phase 2 provides low-income households in off-grid areas with grants of up to £10,000 for solar panels

Considerations When Removing Solar Panels

If sellers are considering removing their solar panels and taking them to their next property, there are several factors to consider. While this is legally possible, as new properties are also unlikely to require planning permission due to permitted development rights, the process may cause more complications than it is worth.

Solar panels were purchased and installed with the current property in mind, and may therefore not be perfectly suited to the size, shape, and location of a new home. The solar panels may simply not be able to capture the same amount of sun exposure as at the previous home. The process of removing, transporting, and reinstalling the solar panels will be labour-intensive and expensive, and may also void any existing warranty on the panels.

Selling a property with solar panels included is an extremely attractive feature for buyers, as they will benefit from free electricity and profit from additional energy as soon as they take ownership of the home. Selling a property with solar panels might allow sellers to increase the listing price by a greater amount than the initial cost of installing them, while also saving the headaches associated with removing and reinstalling the panels at a new property.

Moving Forward with Confidence

Solar panels need not be a barrier to a successful property transaction, but they do require careful attention during the conveyancing process. Understanding the ownership structure, gathering comprehensive documentation, and addressing lender requirements early can help ensure a smooth transaction. Both buyers and sellers benefit from working with experienced conveyancers who understand the specific challenges that solar panels can present and who can navigate these issues effectively to bring the transaction to a successful conclusion.

To ensure a seamless transaction, it is wise for both sellers and buyers of residential property to address the requirements for solar panels early on. Engaging surveyors for any structural concerns and informing conveyancers about the solar panels as soon as possible can help avoid delays and pave the way for a smooth and successful purchase or sale. Properties with owned panels and active Feed-in Tariff agreements can be attractive selling points, while leased panels may reduce the pool of potential buyers due to mortgage lending restrictions. Transparency about the solar panel arrangement in the property particulars and being prepared to explain the setup to potential buyers helps facilitate a successful transaction.