Ask Your Underwriter

Solar Panels and Title Insurance

Presented by Kay M. Creasman, VP & Virginia State Counsel

Question: An owner has solar panels installed on the roof to help conserve energy and reduce electric bills. Rather than pay for it all at once, the owner has a payment schedule and is paying the costs over time. The solar provider files a UCC statement at the SCC and in the local land records. Before the debt is paid in full, the owner sells the property. What does the title agent do with this situation?

Answer: The title agent has two choices: (1) Require the debt be paid in full and the UCC financing statement terminated; or (2) Require the debt be subordinated to any new first and/or second deeds of trust that might be recorded as part of the purchase. A title/settlement agent determines which requirement makes more sense based on the terms of the contract. 

If the contract is silent as to the solar panels, the purchaser can require they either be removed (which may not be possible without damaging the integrity of the roof) or that the debt be paid and released of record.

If the seller remembered to address the solar panels in the contract the parties will have agreed for the purchaser to assume the debt and continue making the payments. This alternative causes problems from a title insurance perspective. The UCC statement must be either terminated or subordinated. As a title insurer subordination makes the most sense. However, we’ve rarely, if ever, seen a solar panel company agree to that alternative. The lien needs to be released at the SCC and in the land records, then filed again with a new file number after settlement with the new owner. We have seen solar companies release the lien then reinstate the exact same lien prior to the new deed and deed of trust being recorded. That’s a mess. It has to be released AGAIN and the new lien cannot be recorded until AFTER the deed and deed(s) of trust have been recorded. The new forms should be in the name of the new owner, not the former owner. It cannot be a continuation of the old lien which would have priority over the new deed of trust.

In some cases, the matter is not addressed in the contract and the parties reach an agreement outside of closing, which may involve leaving some personal property in the house in lieu of paying off the debt. Regardless, the solar company lien must be released of record and not have a new lien with a new file number recorded until after the deed and deed of trust being insured are recorded.

Contact VAUnderwriting@OldRepublicTitle.com with any questions.