Solar panel installations

IMPORTANT CONSIDERATIONS WHEN GRANTING A LEASE OF A ROOF TOP FOR SOLAR PANELS

You will have seen many advertisements in the press offering free electricity in return for a solar installation on your roof.  Due to the ever increasing costs of energy this sounds a tempting offer but there are important considerations.

First of all if you have the money or can obtain the finance it is preferable that you pay for the installation yourself rather than grant a lease to another Company as you will receive the benefit of the Feed-In-Tariff (FITs).  The FITs provide a minimum payment for all electricity generated.  The tariff is fixed for 25 years and linked to the Retail Price Index so that each year it will increase with inflation.

The cost of installing a system depends on the roof size and the module used but one company has issued guidance that it is between £5,000 and £6,000 per kWp installed.  A typical family uses 4,000 kWh per year and this would require a 4 kWp system. 

By way of example a 2.7kWp system would earn approximately the following:

            £990.00 for the generation tariff

            £40.00 per year for the export tariff

            £140.00 per year reduction in current electricity bills. 

This will give a total of approximately £1,170.00 saving per year but is on the assumption that 50% of the electricity is exported. 

It is important to bear in mind that the FIT are going to be reviewed in April 2012.  A review was carried out in June 2011 which resulted in the FIT for the larger projects being reduced by up to 70% which has resulted in the demise of many proposed solar parks.

The important considerations are as follows:

1.         Feasibility 

How much of the roof will be covered and what will this generate?

What will be the visual impact of the panels?

How high above the roof does the installation need to be? 

Where is the inverter going to be sited within the dwelling?

 2.         Covenants

You need to check whether there are any covenants on the title such as a covenant that the property should not be used for business purposes or that there must not be any alteration to the exterior of the dwelling.  If there are covenants then consideration has to be given as to who has the benefit of the covenants and indeed whether the covenants are enforceable.  If the covenants are enforceable then it should be established whose consent is required before the installation and the grant of the lease.

In addition if there is a mortgage or legal charge on the property then there will be a prohibition on granting leases within the mortgage conditions.  Mortgagees in relation to residential dwellings will be concerned that if they have to exercise the right to repossess the property that they ensure they can obtain vacant possession.  It may well be that the banks who have charges on commercial premises will take a more relaxed view in this regard.

 3.         Micro Generation Certificate

It is important that the installer does have a Micro Generation Certificate.  The Micro Generation Certification Scheme is an internationally recognized qualify assurance scheme.  However you should also check the creditability of the company and preferably speak to other property owners who have had installations fitted and see what other testimonials there are in relation to the works that has been carried out.  As in every trade unfortunately there are some rogue traders. 

4.         Lease

 In the lease the owner of the freehold is known as the landlord and the solar company is the tenant.

 As far as the lease is concerned there are important considerations:

 4.1       Contracting out of the Landlord and Tenant Act 1954.

It is highly likely that a lease of the roof space will create what is known as a protected business tenancy.  Therefore if the owner of the property wants to be sure to gain possession of the roof space at the end of the lease the necessary procedures will have to be followed to ensure that the lease is not protected under the above Act.  Although as far as the telecom industry is concerned there is some statutory security through the Electronics Communications Code, there is nothing that gives the fixed generator long term security of occupation.  It is a relatively easy procedure to follow which involves giving notice prior to the completion of the lease that the lease is excluded from protection and then either the tenant gives a simply declaration or a statutory declaration confirming that they have received the notice and accept the consequences of the same.

 4.2       Length of Term

 The length of the term varies but most appear to be 25 years as this matches the FITs and guaranteed payment.  If there is a right of renewal this should be resisted.  Often there is a right of the tenant to terminate as obviously if there is a change in circumstances resulting in it becoming uneconomic to continue with the scheme then they should have the right to bring it to an end.  The lease should then provide for what would happen to the installation and very often a clause will be included to state that at the option of the company there will be no obligation to remove the panels and it should be made clear that in those circumstances the ownership of the panels will vest in the owner of the property.  There is sometimes a provision for the landlord to be able to terminate the arrangement but this does not result in the installation being removed but instead it will require a large capital sum to be paid in return for the ownership of the installation passing to the landlord.

 4.3       Rent

The rent is usually minimal but the entitlement is for the landlord to use the electricity without payment or at no cost.  There may be a rent linked to the percentage of the payments received or the amount of electricity generated. 

If you have a domestic installation then consideration should be given to maximise the amount of free electricity consumed.  For example you could fit times to the washing machine and dishwasher so that they are operating during daylight hours when the solar panels should, hopefully, be generating electricity.

4.4       Tenant’s obligations

Very often the lease will place obligations on the tenant including the obligation to make good any damage caused, to manage and register the system and keep it in good repair and to comply with all the statutory obligations.  There should also be an obligation for the company to insure the system.

4.5       Owner’s obligations

Likewise there will be obligations placed upon the owner of the building being an obligation not to alter, rebuild or renovate any part of the roof and to maintain the integrity of the roof, not to permit trees or other plants to grow on to the roof which would then shade the panels.  There is also usually be an acknowledgement that the tenant is entitled to the whole of the FITs.

4.6       Easements

 The tenant will normally be granted easements that access the roof and also to the inverter in the property in order to carry out repair works. 

 4.7       Assignment

 The lease will provide that in the event that you sell your property then the obligations will vest in the new owner.  Careful consideration should be given to the ability of the tenant to assign as obviously the landlord will want to know and have some say as to who the new tenant will be. 

5.         Planning

The Town and Country Planning (General Permitted Development) (Amendment)(England) Order 2008 amended the Town and Country Planning (General Permitted Development) Order 1995 which came into force on the 6^th April 2008.  The amended Order contains various classes of permitted development.  Permitted development means works that can be carried out to a property without the need for a formal application for planning permission.

 The following installations are examples of permitted development:

             (i)         installing solar PV equipment that protrudes less than 200 mm from the line of the roof/wall.  There are usually conditions imposed that the installation is sited so as to minimise its effect on the external appearance of the building and provide for its removal when no longer needed.

             (ii)        installing a stand alone solar that is no higher than 4 m above the ground where the solar panels do not exceed 9 square metres.    There are conditions imposed that the installation is so sited so as to minimise the effect on the amenity of the area and it will be removed when no longer needed.

             (iii)       installing solar PV or stand alone solar in a conservation area or World Heritage Site as long as it cannot be seen from a highway.  These are conditions imposed if the installation is sited so as to minimise its effect on the area and once again will have to be removed if no longer required.

Please bear in mind that if you have a listed building then Listed Building Consent will be necessary for the installation.

 6.         Insurance

 You must inform the company that provides your buildings insurance of the grant of the lease.

 7.         Sale of the Property

 Some have questioned whether on a residential dwelling the lease would deter a purchaser.  I refer you to the obligations on the landlord set out above and the fact that easement will be granted to the tenant.  It may well be that some purchasers would not wish to proceed on this basis and it may be another argument to have your own installation.

There is no doubt that there is considerable benefit in having solar panels installed on the roof not only for environmental reasons but also for economic reasons due to the increase in electricity prices.  However, if you are approached by a company who wishes to lease your roof please consider matters carefully, and take appropriate advice.  Do not simply sign on the dotted line.

 

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