The case of General Motors UK Ltd v The Manchester Ship Canal Company Ltd concerned a licence agreement which allowed General Motors to discharge surface water into the canal for a modest annual fee of £50.
What can go wrong with solar panels?
Jane Witek, Head of Residential Property at Hughes Paddison, considers some implications of the recent rush to install solar panels on the roofs of the nation’s houses.
No-one can have failed to notice the number of solar panels that have spread across the nation’s roof slopes over the last couple of years. Home-owners have been embarking on subsidised solar energy panels, tempted by the promise of long-term free electricity and, in some cases, by an income from selling surplus electricity to the nation’s power companies. So, what can go wrong?
Some home-owners have paid outright for the solar panels and their installation. They benefit from the free electricity generated and additionally sell the surplus to the national electricity suppliers under a system of Feed in Tariffs (FITs). This might save £500.00 annually on the home-owners domestic energy bill and possibly produce an income of perhaps £1,000.00 per year. However a large number of home-owners have opted for a cheaper method of installing solar panels, which could potentially create more problems in the longer term. Here the solar panel providers retain ownership of the panels and take a lease, usually for 25 years, on the roof and airspace above. The providers install the panels for free and provide free electricity for the home-owner, but they retain the income from the FITs payment. The attraction for the home-owner is free electricity and at no costs. The 25 year lease of the roof may create implications for maintenance of both the solar panels and the roof covering itself. It is not unusual for the roof of an older property to require periodic maintenance during the 25 year lease term, and even complete recovering could be necessary in some cases. The lease must therefore clearly set out responsibilities for removal of the solar panels whilst the roof repair work is carried out. Maintenance issues are more straightforward if the solar panels are owned outright. However, this still doesn’t avoid the problems which may arise on resale if the potential buyer doesn’t want to take over the solar panels and the lease arrangement, if the panels are not owned outright. There will no doubt be costs associated with terminating the lease and this is assuming the solar panel provider is willing to end the lease.
Research late last year showed that nearly half of all lenders expect solar panels to affect the marketability of a property, not least due to their negative impact on “kerb appeal”. These reservations are shared by many valuers who are waiting for the housing market to demonstrate through transactions whether buyers will pay more for a house with solar panels, due to energy savings, or less due to the visual and legal drawbacks.
The Microgeneration Certification Scheme (MCS) has become the installation standard and installations outside the MCS are unacceptable to most lenders. During October 2011 the Council of Mortgage Lenders (CML) published a template letter outlining the main points which should be addressed before installation of solar panels. This ensures that responsibilities for obtaining necessary consents and permissions, and for dealing with insurance and maintenance, are clearly set out. A copy of this template letter is available on the ML website: www.cml.org.uk
However, even when the legal aspects of the arrangements have been properly dealt with there are still the practical implications of having the solar panels installed on the roof and remaining there for the 25 year lease term. Individual panels are not that heavy, but the total additional loading may be significant. Building regulation consent is required if the panels will add more than a third to the weight of the existing roof covering so a thorough initial assessment is critical.
Solar panels are a proven and reliable technology and time will tell whether they will eventually be regarded as a desirable asset adding value to a property. However, legal advisors, mortgage valuers and surveyors will understandably be cautious in their appraisal of solar panel installations and their priority will be to ensure that their Clients do not become entangled in any arrangement which is likely to have a long term adverse impact on their home.
If you are thinking of buying or selling a property with solar panels then please contact Jane Witek or Tania Hall for further information.