Right To Buy and Solar Panels (3rd Party Leases) Q&As
In 2011, Colchester Borough Council agreed to install Solar Panels on its Housing Stock. This involved entering into the ‘Rent a Roof Space’ agreement with a third party. The Council was one of the first Council’s in the Country to install solar panels on its housing stock following the outcome of a procurement process.
If you exercise your Right to Buy (RTB) and have Solar Panels (PV or Photovoltaic Panels) on your roof you will need to be aware of the following:
How Does the Solar Panel Scheme work?
Colchester Borough Council run a scheme offering tenants the chance to have solar panels (PV Panels) installed for free and where the tenant will receive free electricity. Colchester Borough Council also benefit from the scheme as the roof space where the solar panels are situated is rented out to the Solar Panel Provider. In return the Solar Panel Provider receives the Feed-in-Tariff payments. This agreement is known as a Roof Lease Agreement and is made between Colchester Borough Council and the Solar Panel Provider.
We have had solar panels installed - does this stop me from exercising the right to buy my home?
Assuming that your house or flat is eligible for the right to buy then installation of the solar panels will not prevent you from exercising the right to buy. However, there are conditions that will have an effect on your RTB as detailed below.
I am buying my house/bungalow (non-flat) - what are my options?
You will have two choices when you come to exercise the right to buy
You can choose to continue leasing the roof space, by transferring the lease into your name. You will then continue to receive the free electricity.
You can buy the solar panels outright from the solar panel provider; they then become your property and your responsibility. You will still receive free electricity and also an income called a Feed in Tariff which would help pay back for your investment.
I am buying my flat - what are my options?
When a tenant buys the lease of their flat the roof still belongs to Colchester Borough Council and the tenant becomes a leaseholder. For this reason you would not be able to buy or lease the panels, and CBC will choose to keep the solar panels in place. If you no longer want to receive the free electricity then speak to your Solicitor who will liaise with CBC Legal Dept.
What happens if I choose to continue leasing the roof after I have bought my house?
We believe that most tenants buying a home from CBC will choose to transfer the roof lease into their name, and continue receiving free electricity. That means that you will have certain obligations to the Solar Panel Provider (and they have certain obligations to you) and your solicitor or conveyancer will explain these to you
However, because you have agreed to lease the roof space on your home to the solar panel provider, there are some additional considerations if you exercise your right to buy. These are explained below.
What do I need to tell my solicitor or conveyancer?
The most important thing is to explain to your solicitor or conveyancer that you have had a solar panel system installed on your home. They will then need to advise you about the implications of the lease which has been entered into with the Solar Panel Provider and they will also need to disclose this to your mortgage Lender
What happens to my free electricity after I've bought my house?
The same arrangements will apply as they do now, so that you will continue to receive any electricity that is generated by the solar panel system free of charge. The solar panel provider will continue to receive the government’s Feed in Tariff as is the case now.
What happens if I do not want to lease my roof and want to own the panels and claim the Feed in Tariff myself?
If you decide to purchase the solar panels (and to claim the Feed in Tariff) when you buy your home from CBC. In those circumstances, you will need to pay the solar panel company a fee. This fee will depend on how long the panels have been in place and how many panels you have. This is a separate transaction to the purchase of your house, and you will need to discuss this directly with the Solar Panel provider.
Will purchasing the panels affect my buildings insurance?
We would advise you to speak to your insurance company on this issue.
Important Information – If you are exercising your Right to Buy
Please read – If you are buying your property with a help of a mortgage and you have Solar Panels on the roof
RTB – Difficulties obtaining a Mortgage where 3rd Party Leases are in place
Some RTB applicants have experienced difficulties with obtaining a mortgage where there is a third party lease in place a prime example being the Solar Panels where the Solar Panel lease does not contain a ‘enforcing mortgage break option’.
An ‘enforcing mortgage break option’ is where a Mortgage Lender could terminate a third party Solar Panel lease if the borrower defaulted on the mortgage and the Mortgage Lender could reasonably (usually 3 months) demonstrate that they were unable to dispose of the property with the 3rd Party Solar Panel Lease in place. They are also concerned that in the event of possession of the property, the solar panel lease might have a negative effect on the value of the property and/or any interested parties might not wish to purchase the freehold interest in the property which is subject to the terms of an existing third party lease.
Colchester Borough Council have three different types of leases for Solar Panels in place. The later Solar Panel Lease has an ‘enforcing mortgage break option’ and so doesn’t cause any major complications. However, the other two companies have declined to add this break clause in their leases.
In these cases if the Mortgage Lender refuses to give you a mortgage due to the enforcing mortgage break option you have two options
To approach other Mortgage Lenders who are willing to lend without the mortgage break option
To buy the solar panels outright from the solar provider; they then become your property and your responsibility. You will still receive free electricity and also an income called a Feed in Tariff