Selling a House With Solar Panels in Colorado: Owned, Leased, or PPA — and What Title Needs

Solar panels rarely kill a deal. What causes trouble is finding out three days before closing that the panels aren't owned by the seller, the solar company needs to approve the buyer, and there's a filing in the county records nobody looked at.

Almost all of it is avoidable if you ask one question at listing: who owns the panels? Here's how each answer plays out on a Colorado closing, and what the title company is going to need.

Step one: figure out which kind of solar it is

Sellers often don't know. "We have solar" can mean four very different things. Ask for the original agreement, or have the seller call the solar company and ask.

The first two are the seller's property. The last two belong to someone else, and that changes the contract, the appraisal, and the buyer's loan.

What shows up on the title commitment

Solar loans, leases, and PPAs are usually backed by a UCC fixture filing. It's a public notice, recorded in the county's real property records (here, the El Paso County Clerk and Recorder), that a company claims an interest in equipment attached to the house.

When title searches the property, that filing shows up. It'll be listed on the commitment either as something that has to be resolved before closing or as an exception the policy won't cover. If you've never read a commitment's Schedule B, this is the kind of item that lives there.

How it gets handled depends on the setup:

• Owned outright, but an old filing is still recorded. This is common. The loan got paid off years ago and nobody filed the release. The seller needs the solar lender to record a termination. It's usually simple, but it isn't instant, so don't wait until the week of closing.
• Solar loan being paid off. Title orders a payoff from the solar lender, pays it at closing like a mortgage, and gets the filing terminated.
• Lease or PPA staying in place. The filing usually stays too. Whether that's acceptable comes down to the buyer's lender and its requirements for title exceptions. Some solar companies will modify or temporarily terminate the filing to satisfy a buyer's lender. Others won't. Find out early.

What the Colorado contract says

The Colorado Real Estate Commission contract has specific places for solar, and checking the wrong box causes real problems:

• Inclusions. There's a "Solar Panels" checkbox for panels the seller owns. Leased panels don't go here.
• Encumbered Inclusions. For owned panels that still have a loan on them. Owned inclusions convey free and clear unless the buyer agrees to assume the debt, which needs the lender's written approval.
• Leased Items. For leased equipment the buyer will or won't assume.
• Solar Power Plan. For a PPA or similar agreement, whatever the solar company calls it. The buyer marks whether they will or won't assume it, subject to their review of the agreement and written approval from the solar company before closing. If that approval doesn't come, the contract terminates.

The seller also owes the buyer a copy of the solar agreement as part of the due diligence documents. Get it into the buyer's hands, and the buyer's lender's hands, as early as possible.

What the buyer's lender will care about

Underwriting is where most solar delays happen. Fannie Mae and Freddie Mac have specific rules, and FHA and VA have their own. A few that come up most:

• Leased and PPA panels add no appraised value. The appraiser can't count equipment the seller doesn't own. Price the house accordingly, especially if the seller paid a lot for the system.
• A lease payment usually counts as debt. It can affect the buyer's debt-to-income ratio. PPA payments that are based only on power produced may be treated differently. The lender needs the actual agreement to decide.
• Insurance terms matter. Under Fannie Mae's rules, the solar company generally can't be named as a loss payee on the homeowner's insurance policy.
• The house needs grid power. Major loan programs require another source of electricity besides the panels.

Older solar agreements don't always meet current lender requirements. Sometimes the solar company will amend them. That takes time, which is the whole point of asking early.

Transfer or buyout?

Transferring the lease or PPA

The seller starts this with the solar company, not the buyer. The buyer typically applies, the solar company may check the buyer's credit, and everyone signs a transfer agreement. Timelines vary by company and can run several weeks. Start the call when the listing goes live, not when you get an offer.

Buying it out

If the buyer doesn't want the agreement, or can't qualify with it, the seller can usually buy it out. Get a written buyout quote from the solar company and treat it like any other payoff: it's paid through closing out of the seller's proceeds, and the filing gets released afterward.

Run it through the net sheet before you list. A hypothetical example:

These numbers are made up to show the structure. The buyout number has to come from the solar company in writing. The seller doesn't get to estimate it, and neither do we.

Sometimes a transfer is cheaper for the seller. Sometimes a buyout is what keeps the deal together because the buyer's lender won't approve the lease. Knowing both numbers before the first offer gives the seller real options.

Listing agent checklist

• Ask the seller: owned, financed, leased, or PPA?
• Get a copy of the full solar agreement and the solar company's contact information
• Ask the solar company for its transfer requirements and a written buyout quote
• Have title check the county records for any UCC fixture filing, including old ones that should've been released
• Check the correct contract section: Inclusions, Encumbered Inclusions, Leased Items, or Solar Power Plan
• Disclose the arrangement in the MLS so buyers and their lenders aren't surprised
• Put any buyout on the seller's net sheet before you set the price

Buyer's agent checklist

• Ask for the solar agreement as soon as you're under contract, and send it straight to the lender
• Confirm the monthly payment, escalator (if any), years remaining, and what happens at the end of the term
• Ask the lender whether the agreement meets its program's requirements
• Make sure the solar company's approval is moving well before closing

Quick answers

Do solar panels transfer with the house in Colorado?

Owned panels transfer with the house like any other fixture. Leased panels and PPA systems belong to the solar company, so the buyer has to take over the agreement with the solar company's approval, or the seller has to buy it out.

What is a UCC fixture filing on solar panels?

It's a public notice recorded in the county real property records showing that a solar lender or solar company has an interest in equipment attached to the home. It shows up on the title commitment and has to be released, paid off, or accepted by the buyer's lender before closing.

Do leased solar panels add value to a home appraisal?

Generally no. Under Fannie Mae and Freddie Mac guidelines, leased panels and PPA systems can't be included in the appraised value because the homeowner doesn't own them.

Does a solar lease payment affect a buyer's mortgage approval?

It can. A lease payment is usually counted in the buyer's debt-to-income ratio. PPA payments based only on power produced may be treated differently. The buyer's lender decides after reviewing the agreement.

How long does a solar lease transfer take?

It depends on the solar company. It can take several weeks between the application, the buyer's credit review, and signing the transfer agreement. Contact the solar company when the house is listed.

Can the seller pay off the solar lease at closing?

Usually, yes. The seller gets a written buyout quote from the solar company, and the title company pays it from the seller's proceeds at closing like any other payoff. The filing is released afterward.

This article is general educational information about how solar arrangements are commonly handled on Colorado closings. It isn't legal, tax, or lending advice. Contract forms, lender guidelines, and solar company requirements change and vary by transaction, so confirm the details on your file with your broker, lender, and closer.