UCC-1 Solar Filing and Selling Your Solar Home
Decreasing costs and various ways to acquire solar secured by a UCC-1 Filing make solar energy more affordable every year. As a homeowner with a solar home, be proud that you are using renewable energy while saving money on home energy costs.
UCC-1 Filing is Public
If you purchased a home with a leased or Power Purchase Agreement (PPA) or subsequently got a loan to add PV panels and equipment to your current home, you signed a Universal Commercial Code-1 (UCC-1) form for solar. This is the same form you signed when you purchased a vehicle.
The UCC-1 form places what is essentially a lien against your leased or financed solar-power assets – PV panels, electrical wiring, inverter/batteries and any other related equipment – used as collateral by the entity financing your solar system. As noted by Travis Lowder on the U.S. Department of Energy National Renewable Energy Laboratory website, “Because all states have adopted the [UCC] code, it serves as the overarching legal framework for commercial/financial transactions in the United States.
The signed UCC-1 form is filed with the Secretary of State (SOS) where the solar home is located to validate the agreement. The filing also lets any other creditors know of the solar provider’s legal rights to your solar assets should your payments lapse into default. In case of default, the UCC-1 Filing acknowledges the financier’s place in line to collect on the debt. Filings are public and are easily viewed online at your SOS’s website.
Home Loan Lenders and the UCC-1 Lien
UCC-1 Filings can be problematic when selling your home. Lenders who do not understand solar loans often believe any UCC-1 Filing lien is on the entire home, but it’s only on the PV panels and equipment and not the home itself. Most lenders are unaware of this distinction. A standard lien search will list the solar UCC-1 Filing with all other liens, effectively putting a stop to the buyer’s home loan. If researched further, the lender will see that the loan lien holder takes no position on the home at all.
However, solar systems under lease or a PPA often do come with a lien on the home when a municipality considers rooftop solar installs a home fixture that stay with the property. Some solar providers removed the UCC-1 Filing and refile under the buyer’s name in advance of closing. Additional fees may apply to refile.
Other localities classify leased or PPA rooftop solar as personal property that potentially can be removed from the home, so the UCC-1 filing in these areas only pertains to the solar system, similar to a UCC-1 Filing for a solar loan.
Lease Matters in Home Sales
Of course, the type of lease or financing you have for your solar-power system also determines what a homeowner needs to consider in the sale, as follows:
Loan – You must pay the loan off prior to selling if the solar loan is secured by the home or for an unsecured loan, you can pay it off with home sale revenue at closing. Communicate with the lender as soon as you know you will sell your home for final payoff amount. Loan payoff may increase the appraisal value, although other factors are considered in valuation. If loan payoff is not an option, discuss possible loan transfer with the financier before listing.
Lease and PPA – Whether you pay to “rent” the solar-power system as in a lease or pay for the power generated by the solar system as in a PPA, the homeowner does not have ownership of the system. Instead, the panels and equipment are owned by the solar-system provider from whom written consent must be obtained to transfer or move the system. As a homeowner, you should study the solar lease agreement prior to listing the home for stipulations around selling. Before placing on the market, look for details on:
- Buying out your lease or purchasing the system.
- Timeframe to alert solar provider of solar equipment transfer to new homeowner.
- Lease transfer requirements for new homeowner such as minimum FICO score and transfer fees, along with years remaining on lease.
- Continuation of lease with removal of panels and equipment to new location and cost, especially if the solar lease transfer terms are not agreeable to buyer.
Keep in mind that appraisers will not place a higher value on a solar home with a lease or PPA agreement.
Extra Steps Ensure A Smoother Sale
Selling your solar-powered home with unowned equipment may take a few extra steps, but it’s necessary to ensure the sale goes smoothly for all parties. A real estate agent with experience in solar homes can help educate the buyer’s lender about solar liens and other uniquely solar-home issues to keep any sale in play.