Residential solar power is increasing in popularity and an attractive option to many homeowners throughout Arizona. While REALTORS® often express concern about potential liability associated with transactions involving leased solar systems, ensuring that a copy of the solar lease is attached to the Residential Seller’s Property Disclosure Statement (SPDS) can decrease the potential liability of all parties involved.

Solar panels may boost a home’s value, but leased solar systems can present challenges when an owner decides to sell their home. Among those challenges is a buyer’s:

  1. willingness to undertake an additional financial obligation;
  2. ability to assume the solar lease, presuming that the lease is even transferable; and
  3. understanding of the terms of the lease

To mitigate potential liability, disclosure and due diligence are needed. In order to satisfy their disclosure obligations, sellers must convey information to buyers regarding the solar system, including whether the system is leased and not owned. Likewise, in order to satisfy their own due diligence obligations, buyers are advised to learn as much information as possible about the solar system, including the terms of the solar lease and how it can be transferred. Unfortunately, in the event that the buyer or seller fails to meet their obligations, disputes often arise.

Lines 181-189 of the SPDS address alternate power systems serving the property, including a leased solar system. Should the seller indicate on the SPDS that the property is served by a leased system of this nature, they are asked to provide the name and phone number of the leasing company, and attach a copy of the lease. By following this directive, everyone in the transaction is better protected.

In the event that the solar lease accompanies the SPDS, it would likely prove difficult for a buyer to successfully assert a non-disclosure claim against the seller or REALTORS® pertaining to this leased alternate power system. Similarly, receiving a copy of the solar lease would largely prohibit a buyer from claiming that information was withheld from them or that they lacked the pertinent facts needed to make an informed decision about purchasing the home and assuming the lease.

While solar leases can present obstacles to a successful closing, attaching the solar lease to the SPDS is a simple solution to reduce liability and it can make all the difference.

This article is of a general nature and reflects only the opinion of the author at the time it was drafted. It is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.

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About the Author

Scott Drucker, Esq.

Scott M. Drucker, Esq., a licensed Arizona attorney, is General Counsel for the Arizona REALTORS® serving as the primary legal advisor to the association. This article is of a general nature and reflects only the opinion of the author at the time it was drafted. It is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.