Sun's Out: Insuring Title to Property with Solar Panels

By: Martha Prizio, New Hampshire Senior Underwriting Counsel

While there are many benefits to solar panels (reduction in energy bills, repurpose underutilized land, and employ an alternative, renewable and inexhaustible power source), an owner or prospective buyer may not appreciate the impact of solar panel installation on title. Consider the following when insuring title to property with solar panels:

How Will I Know?:

Parties to a transaction may not make you aware that there are solar panels affixed to the property. In addition to direct inquiry and an aerial view search, look for special provisions in the purchase and sale agreement, recorded notices, UCC financing statements and references in property cards/assessment data.

Fixtures vs. Personal Property:

Once installed, solar panels and their related equipment generally become fixtures, and are treated as part of the real estate.

Ownership & Financing:

Whether solar panels are owned or leased is a critical part of determining requirements for insurability. Further, solar panels are an expensive improvement and may be financed. The solar panel company will likely have an established process for addressing payoff, release and/or subordination of equipment-related encumbrances. Regardless of the financing options, a UCC-1 Financing Statement should be recorded at the Registry of Deeds.

Owned by Title Holder:

i. Exhibit A: May include description of panels and equipment in Exhibit A.

ii. Schedule B – I (Exceptions): UCC and terms and conditions of security agreement, related to the UCC, if applicable; may be a loan policy Schedule B – II (Subordinate Matter) if appropriate subordination recorded or UCC is recorded subsequent to insured mortgage.

Owned by Solar Panel Company/Leased by Title Holder:

i. Lease: A copy of the lease should be obtained and reviewed and the parties should provide direction as to whether payoff or proration is contemplated at closing. Depending on the circumstances, an assignment, subordination, termination and/or notice of lease may be required.

ii. Exhibit A: Expressly exclude description of panels and equipment in Exhibit A.

iii. Schedule B – I (Exceptions): UCC and terms and conditions of lease referenced in notice of lease and/or UCC.

Energy Projects:

A transaction involving traditional or alternative (e.g., wind, solar, geothermal, or biomass) energy generation facilities or issuance of “energy” endorsements (e.g., ALTA 36 series or similar) will require State Office approval. Reach out to your local underwriting team for guidance.

State-Specific Considerations:

Not all states treat solar panels and their associated encumbrances in the same manner. Reach out to your local underwriting team with questions or concerns.

The information contained in this document was prepared by First American Title Insurance Company (“FATICO”) for informational purposes only and does not constitute legal advice. FATICO is not a law firm and this information is not intended to be legal advice. Readers should not act upon this without seeking advice from professional advisers.

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