Solar Energy creates unique challenges and potential agent liability issues.

In June 2019 Governor Steve Sisolak signed a solar access bill that directs NV Energy to develop between three and 10 solar access programs for low-income customers, residential customers who can’t install rooftop solar and disadvantaged businesses and nonprofit organizations. Due to the fact that Nevada has almost 300 sunny days a year, it’s no surprise that solar energy is booming.

Impact upon the price of a home.

The installation of a solar system has often been touted as increasing the sales price of a home. In 2015, Berkeley National Laboratory released the results of a study that compared homes in six states to determine if solar systems affected home prices. They found that home values increase 0.92% for each kW of solar power installed on a home when compared with the prices of similar homes without solar power. As a result, appraisers have had to take steps to address green technologies to account for their impact on prices. In 2018 the Appraisal Institute released the Residential Green and Energy Efficient Addendum that appraisers can attach to a standard appraisal. This addendum gives appraisers additional space to account for an increasing number of green technologies and advancements in the home, from water conservation to Energy Star appliances, and ,of course, solar panels.

Methods of acquiring solar energy.

A solar energy system is generally purchased for cash, obtained with credit or leased. A cash purchase always delivers the most immediate, largest savings. With no loan payments, the homeowner realizes 100% of the energy savings immediately, along with the Federal tax credit. For those who cannot afford an outright purchase, a home equity loan can be used to purchase the system. Alternatively, many solar installation companies offer financing programs. For those who don’t have the resources for an outright purchase or the ability to obtain a loan, leasing is a viable option.

Seller’s Real Property Disclosure Form.

NRS 113.100 requires a seller to provide a Seller’s Real Property Disclosure form at least 10 days before residential property is conveyed. Question 15 of the form requires the Seller to disclose the existence of solar panels and whether they are owned, lease or financed. However, there currently is no Solar Energy Addendum. As a result, licensees should be aware of the potential issues affecting the parties relating to a solar system. Sellers who purchase the solar system outright have the option of removing the system and reinstalling it at a new home since they own the equipment. Accordingly, buyers shouldn’t assume that solar panels are going to remain with the home. But if they were financed or leased, someone has to take over the payments and commitment. That means your buyer has to qualify and their lender should be notified. In addition, to the extent the system has been financed, there will generally be additional liens recorded against the property that will need to be addressed. Sellers should make sure that they obtain a Release from the solar company to ensure that they are no longer obligated for the lease.

Concerns for buyers.

While the goal of “going green” is a great one, for buyers it could be a financial nightmare. Buyers should consider when the system was installed and what the useful life of the panels are. Who and how is the system maintained? What happens if a panel goes bad or the system in any way fails? Is the company that installed the unit still in existence and what type of warranty, if any, will cover these issues? If the system is leased, are there any transfer fees and who is responsible for them? Does the lease contain an escalation clause? What, if anything, do they need to do to transfer a warranty? This is by no means an exhaustive list of the issues that buyers should consider.

Education is the key.

Buyers should thoroughly educate themselves with regards to the benefits and potential problems of a home with a solar energy system. The Solar Energies Industries Association website is a great place to start. Whether the system has been purchased or leased, buyers should request all information that the seller has about the system, including, but not limited to relevant contracts, sales brochures, a copy of the lease, and warranties. Don’t be afraid to ask for copies of electric bills and inquire as to what, if any, repairs have been made to the system since its installation.

Considerations for sellers and their agents.

A solar system may be a deterrent to prospective buyers, and the seller may want to consider buying out the lease. However, some companies may charge significant fees to prematurely terminate the lease. In order to avoid the hassles that may be associated with the transfer of panel leases or a buyout, agents should discuss these issues with sellers immediately after execution of the Listing Agreement. In addition, agents should discuss with the seller the importance of accurate and thorough disclosures regarding the system in the Seller’s Real Property Disclosure form. The monthly cost of the system as well as a significant lease terms may be a material fact affecting the desirability and price paid for a home and the failure to disclose could lead to a cancellation or other consequences. Moreover, they should consider how to address the system in the MLS.

For more than 30 years, Attorney Lee A. Drizin has practiced in the areas of estate planning, probate, trusts, guardianship and real estate matters representing clients throughout the state of Nevada.

Drizin Law is providing this information for educational purposes only. It should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. This information is based on general principles of Nevada law at the time it was created and you should be aware laws frequently change. Moreover, the laws affecting you may differ depending on the circumstances. You should consult with a qualified attorney in your own state or jurisdiction concerning your particular situation. Review of this information does not create an attorney-client relationship.