Buying a house with "rent-a-roof" Freetricity panels

FOARP

Hi,

We are first-time-buyers and recently got our offer accepted on a house after a very long house-hunt. The price is OK, at least for this crazy market, but our solicitors have just turned up the fact that the present owners of the house signed a 25 year lease on the roof to Freetricity back in 2012. We were not told this by the seller or their estate agents and it seems pretty important. We are still waiting to hear back from our mortgage lenders (apparently everything is taking a long time at the moment) but from other threads on here I can see that this kind of "rent-a-roof" arrangement often results in the mortgage lenders refusing to lend, particularly with the kind of contractual agreements that the solar panel companies were asking for back in 2012. We also don't yet have the details of the seller's contract with the mortgage company though our solicitors are asking for it.

Obviously the solution if the mortgage company refuses to lend is to got to the sellers and ask them to fix it, either by buying out the solar panel company's lease or finding a way to put their contract into a form acceptable to the mortgage company. Certainly we are not going to pay to fix this. My question is what to do if the mortgage company comes back saying they're OK to lend? Can I assume that they know about the "rent-a-roof" arrangement (e.g., from the valuer's report) and are OK with it? Is there anything more I should ask the sellers to do?

I'm worried we're going to get stuck with a bunch of obligations to the solar panel company, won't be able to modify the roof (e.g., put north-facing dormers in when we convert the loft) and have problems when we sell the property as we are not likely to be there 16 years. Like I said the price is OK considering the crazy market we're in, though quite a bit over what we would have paid even last year. I've thought about asking them to drop the price in view of this but I'm afraid we'd lose the sale, and after the immense stress of the past year really don't want to go back to house hunting.

FOARP

"seller's contract with the mortgage company"

Ugh, that should be  "seller's contract with the solar panel company"

AdrianC

FOARP said:

We are first-time-buyers and recently got our offer accepted on a house after a very long house-hunt. The price is OK, at least for this crazy market, but our solicitors have just turned up the fact that the present owners of the house signed a 25 year lease on the roof to Freetricity back in 2012. We were not told this by the seller or their estate agents and it seems pretty important.

I presume you noticed the panels on viewing...?

Did you ask about their status?
Did you pay the couple of quid to download the title from Land Registry before offering?

Either way, give your solicitor a biscuit for doing exactly what you pay them for.

We are still waiting to hear back from our mortgage lenders (apparently everything is taking a long time at the moment) but from other threads on here I can see that this kind of "rent-a-roof" arrangement often results in the mortgage lenders refusing to lend, particularly with the kind of contractual agreements that the solar panel companies were asking for back in 2012. We also don't yet have the details of the seller's contract with the mortgage company though our solicitors are asking for it.

There are indeed lender-compliant leases around... and non-compliant ones.

Obviously the solution if the mortgage company refuses to lend is to got to the sellers and ask them to fix it, either by buying out the solar panel company's lease or finding a way to put their contract into a form acceptable to the mortgage company. Certainly we are not going to pay to fix this.

Freetricity are still extant, so converting a non-compliant lease to a compliant one should be straightforward.
http://www.freetricity.net/

My question is what to do if the mortgage company comes back saying they're OK to lend?

Then there's no issue.

Can I assume that they know about the "rent-a-roof" arrangement (e.g., from the valuer's report) and are OK with it?

Yes.

Remember, your solicitor also acts for your lender, and is obliged to tell them anything relevant, too. You will not get your full mortgage offer unless and until they are happy that the house meets their requirements.

Is there anything more I should ask the sellers to do?

Like...?

I'm worried we're going to get stuck with a bunch of obligations to the solar panel company, won't be able to modify the roof (e.g., put north-facing dormers in when we convert the loft)

As I said at the top, I presume you saw the panels when you viewed...?

At the absolute worst, you buy out the lease.
Yes, you can ask the vendor to do that... but if the lease is complaint, or can easily be made compliant, that's very unlikely to be agreeable to them.

and have problems when we sell the property as we are not likely to be there 16 years.

But if the lease is currently compliant...

Yes, compliance requirements may change... and lessees will have to change their leases or face a barrage of very unhappy customers.

Like I said the price is OK considering the crazy market we're in, though quite a bit over what we would have paid even last year. I've thought about asking them to drop the price in view of this but I'm afraid we'd lose the sale, and after the immense stress of the past year really don't want to go back to house hunting.

Them's your choices... Agree everything with the vendor (and negotiation is two-way), or walk if you can't.

FOARP

AdrianC said:

I presume you noticed the panels on viewing...?

As FTBs we're pretty clueless about this and didn't even think to ask. It didn't occur to me that there was anything to ask about the panels, and the Estate Agent kept telling us he didn't know anything about the property anyway. Lesson learned I guess?

AdrianC said:

At the absolute worst, you buy out the lease.
Yes, you can ask the vendor to do that... but if the lease is complaint, or can easily be made compliant, that's very unlikely to be agreeable to them.

That's what I figured. Might even be better for us if the mortgage company did say "no" because of the panels as it might force them to buy them out.

AdrianC said:

Like...?

No idea to be honest, just making sure there's not something obvious I'm over-looking.

AdrianC

FOARP said:

AdrianC said:

I presume you noticed the panels on viewing...?

As FTBs we're pretty clueless about this and didn't even think to ask. It didn't occur to me that there was anything to ask about the panels, and the Estate Agent kept telling us he didn't know anything about the property anyway. Lesson learned I guess?

Well, it is the EA's job to make sure you're buying what you think you're buying...

Even if you did know, he'd still have to do the same DD on behalf of the lender.

AdrianC said:

At the absolute worst, you buy out the lease.
Yes, you can ask the vendor to do that... but if the lease is complaint, or can easily be made compliant, that's very unlikely to be agreeable to them.

That's what I figured. Might even be better for us if the mortgage company did say "no" because of the panels as it might force them to buy them out.

If the lease can easily be reissued in compliant form, you are not going to persuade the vendors to pay for buying the panels/lease out... Effectively, they would be giving you a multi-thousand-pound (perhaps even five digits) discount. For what reason?

Petriix

My suggestion is to offer to meet in the middle: ascertain the lease buyout price and knock half of this off your offer. Then you can either buy out the lease and enjoy a healthy return from the FIT payments over the next few years, or (assuming the lease is acceptable to the lender) just enjoy a discount off the price of the house.

peter8518

Re comment regarding 'a healthy return on FIT payments' (Petriix 12.31pm) may I offer a word (or two) cautionary words:

Assuming that the FIT payments can be transferred at the introductory rate (which actually changed during early 2012), then the return is likely to be 'healthy'. How healthy will depend on the size of system installed (up to a max of 4KW).  However, the purchaser must offset the cost of 'lease buy-out', against any return FIT.

Another (very important) point,  is the condition of the inverter (which quite often fails at around the 10 year mark).  Replacement can be quite expensive.

If the buyer wants to alter the roof to install a 'Dormer' window there will be additonal (solar panel related) costs relating to this work.

There are about 13 years left where FIT will be paid (assuming the inverter is still operational!).  After which (and depending on your local authority) the system will need to be decommissioned.

I'm not sure whether this information is helpful or not, but needs it to be considerered to avoid 'heartache' at a later date.

At least if the lease remains with the current leasee then all the above costs would fall on them (theoretically speaking).

peter8518

Just noticed your concern re 'north facing dormers on conversion'.  This would suggest the panels are located on the north facing roof.  Is this an error on your part?  I would be very surprised to see a north facing system in the uk.  The norm is south facing (with diminishing generation the nearer you get to west or east).

If the system is installed north facing you are unlikely to generate sufficient electricity to make the installation financialy viable and could out to be a bit of a 'white elephant'.

I'm worried we're going to get stuck with a bunch of obligations to the solar panel company, won't be able to modify the roof (e.g., put north-facing dormers in when we convert the loft) and have problems when we sell the property as we are not likely to be there 16 years.

FOARP

peter8518 said:

Just noticed your concern re 'north facing dormers on conversion'.  This would suggest the panels are located on the north facing roof.  Is this an error on your part?  I would be very surprised to see a north facing system in the uk.  The norm is south facing (with diminishing generation the nearer you get to west or east).

If the system is installed north facing you are unlikely to generate sufficient electricity to make the installation financialy viable and could out to be a bit of a 'white elephant'.

I'm worried we're going to get stuck with a bunch of obligations to the solar panel company, won't be able to modify the roof (e.g., put north-facing dormers in when we convert the loft) and have problems when we sell the property as we are not likely to be there 16 years.

The panels are south facing, but my concern is that they are part of the same roof - just the other side of the ridge - and the rental agreement appears to cover the whole roof.

FOARP

As an update on this, if you see the house you're putting an offer on has this kind of encumbrance on them, run a million miles away from putting an offer on that house as the likelihood of getting stuck in conveyancing hell is very, very high.

Took two months for the vendors to find the agreement, another month for our solicitors to come back with feedback that the agreement wasn't acceptable to the lender, and now we've been waiting for another two months for the solar panels company to issue a variation - and are still waiting. Now looking at losing our mortgage and really am sick to the teeth of the whole thing.

[Deleted User]

FOARP said:

As an update on this, if you see the house you're putting an offer on has this kind of encumbrance on them, run a million miles away from putting an offer on that house as the likelihood of getting stuck in conveyancing hell is very, very high.

Took two months for the vendors to find the agreement, another month for our solicitors to come back with feedback that the agreement wasn't acceptable to the lender, and now we've been waiting for another two months for the solar panels company to issue a variation - and are still waiting. Now looking at losing our mortgage and really am sick to the teeth of the whole thing.

Thanks for the update, and that's good advice. Really the vendor should have sorted this out before putting it on the market.