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REVISED SOLAR ADDENDUM

On February 1, 2022, the Arizona REALTORS® will release a revised Solar Addendum for use by all members. While the October 2017 version of the form was titled Solar Lease / Solar Loan Assumption Addendum, the revised form is titled Solar Addendum to reflect the fact that the Addendum now also applies to those transactions in which the Solar System installed on the Premises is owned outright by the Seller or owned by a utility company. Ancillary forms that reference the prior title will be changed to reflect the Addendum’s new name.

To better understand the revised Addendum and the changes that have been made effective February 1st, below is a list of Frequently Asked Questions with corresponding answers. A Contract Conversations video on the revised Addendum will be forthcoming and published in a future edition of The Voice. Finally, the Arizona REALTORS® thanks Workgroup Chair Jon Kichen and all the members of the Workgroup for their time and dedication.1

FREQUENTLY ASKED QUESTIONS

Q1. Why was the name of the form changed from Solar Lease / Solar Loan Assumption Addendum to Solar Addendum?

A1. The October 2017 version of the form exclusively applied to those transactions in which the Solar System installed on the Premises is subject to a lease or unpaid loan. The February 2022 version of the form now additionally applies to those transactions in which the Solar System installed on the Premises is owned outright by the Seller or owned by a utility company, meaning the Solar System is not subject to a lease or unpaid loan. The name of the form was revised to reflect this change.

Q2. If a box on line 14 of the Solar Addendum is marked, do lines 24-59 of the Addendum apply?

A2. No. If a box on line 14 of the Solar Addendum is marked, indicating that the Solar System is owned by the Seller or a utility, lines 15-22 apply, not lines 24-59. Similarly, if the box on line 23 is marked, lines 24-59 apply, not lines 15-22. Finally, lines 60 and beyond apply regardless of which box referenced above is marked.

Q3. What is a Utility Owned Solar System as that term is used on line 14 of the Addendum?

A3. A Utility Owned Solar System is one in which the Solar System installed on the homeowner’s roof produces power for use by the utility company and the power constitutes the personal property of the utility company. Under this arrangement, the homeowner purchases all their power from the utility company at full retail price and, in exchange, the utility company provides the homeowner with a monthly credit on their bill. Some utilities, such as APS, refer to programs of this nature as a Solar Partner Program.

Q4. A scenario arises in which the Seller provides to the Buyer all the required information identified on lines 26-30. After reviewing the information, the Buyer has no objections and desires to continue with the transaction. How should the Buyer proceed?

A4. In this scenario, if the Buyer elects to continue with the transaction and not deliver a signed notice of cancellation, the Buyer shall “immediately” apply for lease/loan Assumption Approval in the manner required by Lessor. See lines 37-39. The term “immediately” means as soon as practical and should the Buyer delay, the Seller can deliver a notice to the Buyer specifying the non-compliance as set forth in Section 7a of the Contract.

Q5. Pursuant to lines 40-42, the Buyer’s obligation to complete the sale is contingent upon the Buyer receiving Assumption Approval “no later than three (3) days prior to the COE date.” Why did the workgroup decide to keep the current three day timeline? 

A5. Unfortunately, in many instances it takes the Lessor a lengthy period of time to issue Assumption Approval. The workgroup therefore wanted to provide enough time for the Buyer to complete the Assumption Approval process. If a shorter timeframe were implemented, the Buyer may choose to cancel upon expiration of that shorter timeframe in the event that Assumption Approval has not yet been obtained. Additionally, the workgroup deemed it beneficial to have the Assumption Approval timeline mirror the loan approval timeline set forth in the Contract. 

Q6. How should the Buyer proceed if they believe that Assumption Approval is forthcoming, but will not be issued until after the deadline set forth on line 42, which is three days prior to COE?

A6. The Buyer should seek to execute an addendum with the Seller to extend the deadline by which Assumption Approval must be obtained. If the Seller declines to do so, the Buyer has the right to deliver to the Seller a signed notice of inability to obtain assumption approval, provided that the Buyer does so no later than three days prior to COE.

Q7. Why is there now a section in the Addendum addressing Transfer Fees?

A7. Since 2017 when the Solar Lease / Solar Loan Assumption Addendum was first drafted, it has become increasingly common for Lessors to charge a Transfer Fee in conjunction with the Buyer’s assumption of the Solar System lease/loan. The workgroup therefore wanted to provide the parties with the opportunity to negotiate and document who will pay any such Transfer Fee.

Q8. What is a Credit Score Fee as that term is used on line 50?

A8. Many Lessors require the Buyer to have a minimum credit score to obtain assumption approval. For those buyers who do not meet the required credit score, some Lessors will issue assumption approval if the Buyer agrees to pay an additional fee referred to as a Credit Score Fee. The Buyer is not obligated to pay this fee and may instead elect to cancel the Purchase Contract provided the Buyer does so within the Inspection Period or five (5) days after receipt of notice from Lessor of the Credit Score Fee, whichever is later. If the Buyer elects to proceed, the Buyer will be responsible for paying this fee.

Q9. Why is it important for the Seller to keep the electric utilities on through Close of Escrow as contemplated in lines 62-71?

A9. If the Seller turns off the electric utilities or changes the rate plan between the date of Contract Acceptance and Close of Escrow, the Buyer may be unable to remain on the same rate plan previously utilized by the Seller. This change may result in increased rates and the loss of net metering billing status.

Q10. What are the Buyer’s rights should the Seller turn off the electric utilities or change the rate plan between the date of Contract Acceptance and Close of Escrow?

A10. If this change results in increased rates or a billing plan that is less favorable than the rate plan previously utilized by the Seller, it shall be deemed a change in the Premises under Section 4f of the Contract. Under Section 4f, this change in the condition of the Premises may entitle the Buyer to provide notice of disapproval to the Seller and cancel the Contract.

Q11. What steps should the Buyer take to protect their interests in the event the electric utilities are not on at the time of Contract Acceptance or anytime thereafter?

A11. If the utilities are not on at the time of Contract Acceptance or anytime thereafter, the Buyer may be unable to remain on the same rate plan previously utilized by the Seller. In this event, the Buyer should investigate whether the Solar System rate plan will change as a result of the utilities being turned off.

Q12. The Buyer has very little knowledge of solar systems, solar leases, or solar power in general. However, I as the Buyer’s agent am very familiar with these subjects. Is it appropriate for me to conduct the due diligence identified on lines 73-80?

A12. No. Due diligence should be performed by the Buyer, not their agent, although the agent can direct the Buyer to resources through which the Buyer can obtain information and answers to their questions.

Q13. I requested that the new Solar Addendum act as a disclosure in which the Seller provides very specific information to the Buyer about the Solar System. Why did the workgroup decline this request?

A13. Several members asked that the new Solar Addendum disclose to the Buyer specific information about the Solar System such as the System size in watts, the angle of orientation of the solar panels, the material from which the solar panels are constructed (i.e. – monocrystalline, polycrystalline, or thin film amorphous silicon), the type of inverter installed, the maximum allowable dead and live load ratings of the roof, etc. However, both the workgroup and the Risk Management Committee are opposed to asking questions for which the average Seller does not know the answer. In such instances, the Seller may guess and provide incorrect or incomplete information resulting in increased potential liability. Rather than ask such questions, the more prudent course of action is to have the Seller convey to the Buyer all documents in the Seller’s possession pertaining to the Solar System. The Buyer can then review these materials or contact the solar company and/or Lessor to obtain answers to any questions they may have about the Solar System and/or terms of the lease/loan. 

Q14. In my transaction, the Seller has agreed to pay off the Solar Lease/Loan in full prior to Close of Escrow. Should that be documented on the Solar Addendum?

A14. Any such agreement can be identified in detail in Section 8a of the Contract, but agents should discuss with their broker how best to document this term.


[1] In addition to Chair Jon Kichen, the Workgroup was comprised of the following individuals: Ali Al-Asady, Paul Bruce, Melisa Camp, Bobbie Cooper, Sharon Ellsworth, Wednesday Enriquez, Holly Eslinger, Danielle Foley, Tara Rutkowsji, Rob Madden, Jacki Tait, and Arizona REALTORS® staff members Jamilla Brandt, Scott Drucker, Nikki Salgat, and Jan Steward.