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Consent of a Lender for Solar PV Rent a Roof Schemes

Since the introduction of the feed in tariff scheme in April 2010 a number of installers have begun to offer free solar panels to home owners who cannot afford, or do not wish to pay for, solar panels. The companies install the panels in exchange for the home owner entering into a lease of the airspace immediately above their roof which allows the installer to claim the feed in tariff payments for the term of the lease (which will usually be for the term of the tariff payments, i.e. 25 years.

As the scheme involves granting a legal interest (the solar panel lease) in your property to the installer, if you have a mortgage then your lender will need to give its consent. There are two reasons for this, firstly it is a breach of the conditions of most mortgages to grant a lease of all or part of your property without the lender’s consent and secondly the lease will not be binding on the lender and can be terminated by the lender. In order to make the process of obtaining consent more simple the Council of Mortgage Lenders (CML) has issued guidance to installers and home owners.

Entering into the Lease with Solar PV

The first stage is to enter into a lease. The installer should draft the lease (since he will usually have a specimen). It will then need to be approved by the home owner who ought to seek legal advice before entering into it. The lease will need to meet certain minimum requirements to ensure that it will be acceptable the lender.

Some solar panel leases require the home owner to pay an annual maintenance charge. The Council of Mortgage Lenders requires that the maximum charge is £60 per annum. The installer must be responsible for insuring the panels and the equipment, for repairing the equipment and the lease must allow for the lender, in the event that it has to repossess and the presence of the panels is affecting its ability to sell, to remove the panels and terminate the lease without penalty.

Once the lease is entered into it must, as all leases of 7 or years or more must, be registered at Land Registry and for this the lender’s consent is required

Process of Applying for Consent for Solar PV

Once the lease is entered into the installer makes an application, on behalf of the borrower, to the lender. The installer must provide evidence of its accreditation with MCS, signed authorisation from the home owner for the lender to communicate directly with the installer, a copy of the lease and the contact details of the installer.

The lender will then make a decision on a case by case basis and will communicate the decision to the provider and/or the lender. If any changes are made to the lease in future the lender should be notified in order to assess whether it is able to continue to give consent.

Template Letter to Lender regarding Solar PV

To assist installers, the Council of Mortgage Lenders has drafted a template letter which installers can provide to lenders and which confirms to the lender that the agreement with the home owner meets the minimum CML requirements. A draft of the template letter is attached.

To (insert name of lender):

Your borrower (insert name) has applied to us to install photovoltaic panels (‘the panels’) and enter into an year lease in respect to the air space above the roof.

We can confirm this application relates to photovoltaic panels fitted to the roof of the property and associated equipment to be installed in the property.

(borrower name) has been informed that the lease they are entering into is a long-term legally binding agreement. They have been recommended to seek professional advice from a suitably qualified conveyancer relating to the terms of the lease and the possible impact on the value of their property.

We attach a copy of the lease [only include if lease to be sent]. We will advise you of any intended changes to the lease agreement, where that change may impact on your minimum requirements, so that you can review your position on whether you can give consent to the lease.

We can confirm the following:

1) We will not install the panels unless we have undertaken an appropriate physical inspection of the property to ensure it is suitable for all the equipment to be installed, without detrimental impact.
2) We will be responsible for insuring all the installed equipment. Such insurance is to be in place for the full term of the lease and to include any damage caused to the property or injury to any person.
3) We will ensure that the borrower is advised that they must inform their buildings insurance company of the installation of the equipment, and that we are responsible for insuring the panels themselves, and any ancillary equipment.
4) The system is to be maintained by us and:
(A) the maximum maintenance fee payable by (borrower name) is £60 or less per annum at the start of the lease. The fee may be increased annually by no more than the Retail Price Index; OR
(B) we will not charge a maintenance fee.
5) We or (borrower name) under the terms of our lease will be obliged to obtain all relevant legal consents (e.g. planning permission, buildings consent, listed buildings consent, restrictive covenant permission and any title permissions). Any documents obtained by us will be forwarded to the applicant who will be advised to keep copies of any consent obtained, no matter who obtained the consent.
6) Where the property is leasehold we will obtain (or request the borrower to obtain) the relevant consents from the landlord/block manager/residential committee where appropriate. We will forward details to (name of borrower) and request that they retain the documents.
7) Where the lender’s consent is obtained to register the lease, we will retain a copy of this consent.
8 ) If the lease requires (the borrower) to maintain vegetation/trees (for example by pruning) to ensure the panels’ efficiency, it will exclude the necessity to undertake work to vegetation/trees protected by law (e.g. tree preservation orders, where the property is in a conservation area).
9) We confirm we are liable to repair, at our expense, any damage to the property caused by us (or our contractors) when installing, re-installing, maintaining or removing the panels and associated equipment.
10) The lease agreement does not exceed 30 years.
11) The lease agreement allows for the necessary removal and re-instatement of the equipment for essential roof repairs and improvements, providing a reasonable grace period for continuous removal, and a reasonable total grace period over 12 months, during which we will not seek to recover from the homeowner any losses in renewable benefits such as Feed-in-Tariff payments, where we remove and reinstate the panels within those grace periods.
12) Where we remove and re-instate the panels within those grace periods we:
(A) will only charge the homeowner/occupier for reasonable costs incurred in respect of such removal and subsequent reinstatement of the equipment; OR
(B) will not charge for costs associated with the removal and subsequent reinstatement of the panels.
13) In the case of repossession, (lender name) or any subsequent lender:
(A) will have the right to break the lease if, having used reasonable endeavours to sell the property, is reasonably advised that the presence of the panels is adversely affecting demand;
(B) not be liable for any costs of removal; repair to the roof as part of the removal; or penalty costs of any description, including
– where damage has been caused by the borrower/occupier;
– where damage or loss of income is caused as a result of disconnected electricity supply;
– for any breach of landlord covenants during the repossession period.
14) Within the lease, the definition of ‘successors in title’ includes a ‘mortgagee in possession’.
15) The lease agreement validly excludes security of tenure under the Landlord and Tenant Act 1954, where the lease applies to a property in England and Wales.

Please note all reference to equipment above includes the panels and all ancillary equipment (including wires) installed by or on behalf of us.

We take responsibility for full compliance with the obligations contained in this letter. We will be legally liable to you for non-compliance.

(name of Provider)

1 Comment to Consent of a Lender for Solar PV Rent a Roof Schemes

  1. September 26, 2011 at 11:50 am | Permalink

    This is a really interesting piece. The letter should be really handy as looking at it, it appears to have any possible errors or problems that councils or mortgage providers may have with Solar Panels already fitted to a property.

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