Taking on a leased solar system with house purchase

[Pratish Halady]

Hi Everyone, We are looking to buy a property for rental and it's great except the seller obtained a solar panel from Solar City (SC) through a lease. The seller discounted the price of house a bit but asked us to transfer the lease to us (they wouldn't take it with them). Solar lease was initiated in early 2016. House is in Daly City, CA just south of San Francisco. Has anyone had any experience with taking on such a lease, and any issues it may have created for a rental property? Under the 20-year power purchase agreement we have to pay SC for electricity usage at fixed rate per kWh escalating every year. SC covers maintenance but we have a few obligations too including maintaining Internet connection even if house is vacant, etc. We really like the house and think we are getting a bit of discount for the solar being there, so want to make this work. I'm thinking not to prepay the lease only because it is producing cheaper electricity which can be a benefit to tenants. Would anyone have any advice for this type of setup? Thanks, Pratish

[Shaun Weekes]

@Pratish Halady

The bottom line is solar is saving a lot on electric bills and it makes your investment home much more desirable.

The issue that you haven't come across yet is that SC will have a lien on the home.  It's called a fixture lien and you need to have the seller call the SC and have that temporarily removed for the purchase or refinance if you choose to in the future.  If you don't that 5 - 20K lien will have to be paid and it will be a major headache on title documents.  

Take care of this up front Sir!