All Forum Posts by: Steven Straughn

Hey @Tris Rollins, my thoughts on your situation are probably scattered through my other posts on this thread, but I'll recap here. I would wait for the solar company to come to you. You have no obligation to do anything proactive. Even though they may have the right to remove the system, they will incur some cost in doing so, and they will then have a used system to try to sell. So they are not in a good position.

Once they contact you with an offer for assuming the lease, ask for the original contract for the system. If it's more than a couple years old, it's likely that they received tax credits that would have to be repaid if the system is not in service for 5 years. I have no idea how that's enforced, but in our case we were told that we couldn't purchase the system outright before the 5th anniversary. A system that was installed recently may have missed out on tax credits, so they may be able to remove it without issue. Also, the age of the system will determine how likely they are to be interested in exercising their right to remove it (should you decline all offers). In our case, the system was 3 years old, and we ended up paying about 20 cents on the dollar to buy out the remainder of the lease. 

Thank you @Nick Foster and @Katie L. for taking the time to offer your insight! I'll take some time to digest what you've said and dive deeper into some of these issues, then perhaps follow-up with some additional information. Good news is we don't need to make any decisions quickly. 

Hi Nicolas. Thanks for taking the time to offer your expertise to the community. I'd love to get your thoughts on the situation I describe in this post: https://www.biggerpockets.com/forums/51/topics/533...

Hi BiggerPockets. I'm looking for some advice regarding the transfer of property from my in-laws to their 3 adult daughters. I will, of course, seek advice from a legal/tax professional, but recall from time that I previously spent on this site that there are a lot of knowledgeable people who are willing to help. 

The background: The house (located in Napa, CA) is owned outright by my wife's parents. They have poor credit, slightly below average income, little savings, and are nearing retirement (1-2 years). My father-in-law will have a decent pension. They will be moving to San Diego after retiring (possibly living with us) and will be renting their house out. Long-term, the plan is to hold onto the house and pass it on to their 3 daughters. They have mentioned setting up a trust to facilitate that, but have also said that they are open to other arrangements that would make better use of the property. 

I wonder if it wouldn't be more beneficial to the family to create a multi-member LLC to hold the property. Rental income would flow through the LLC to my in-laws the same as if they retained personal ownership, but I think an LLC would allow flexibility in how the property is used for tax purposes. It seems to me that the 3 daughters would be able to realize some tax benefits through the LLC, whereas my in-laws would not be able to take full advantage on their own. Also, putting the home in a trust would prevent the daughters from potentially using the equity (not likely, but who knows?).

I'm sure there are many factors of which I am ignorant, and look forward to you setting me straight. Thanks for reading. 

I don't think I have any specialized knowledge with regard to this situation, so my opinion is probably worth what you'repaying for it. I doubt you have a legal argument against the validity of the contract. It seems to me that co-signers are most often not a part-owner of the thing being signed for, just a financial backstop that lessens the risk for the lender. It's entirely possible that your father was taken for a ride by the solar company, but there's probably not anything you can do about it now. 

Looking forward, it seems you probably just need to market the lease to prospective buyers as best you can. That may mean having a separate document that attempts to show how much a buyer might save per month compared to a similar home without solar. While it may be a tougher sell for many buyers, as most people of suspicious/fearful of things they don't understand, you just might find a buyer who views a pre-existing PV system as a positive. 

That buyout figure is ridiculous, but I suppose it wouldn't hurt to negotiate. For $30K, either the system is extremely overpriced, or they offered a system is too big for a 1,200sf home. Our home is 2,300sf, and we could purchase a system that would zero us out for less than that. 

So I'm not sure if any of this is helpful. But I'd rather be Captain Obvious than withhold something that you might find helpful. Hopefully some other members will chime in as well. Best of luck!

While I am certainly not an expert in solar or real estate, my advice would be to present the numbers to the seller as a bargaining chip. If they haven't had many offers, maybe they will be willing to make concessions in order to keep you from walking. 

That's a tough one, but I don't think you have anything to worry about. If the deceased's estate is still on the hook for the lease, it'll take time to sort that out, and you'll likely be reaping the benefits of the panels during that time. It's possible that the estate would have to pay off the balance of the lease, and if that's done after COE, you get free solar. If the lease is nullified, the solar company could come take the panels, but will likely try to negotiate with you, and you're in a strong position. After COE, you hold all the cards. And even before COE, it's unlikely that the family would let the situation with the lease derail the sale. Would like to hear how this one ends... Good luck!

Hi Timothy, 

How long has the lease been in place, and how long of a lease is it? How long are you planning to own the home? Your leverage will come from having a firm grasp of the numbers and presenting the seller with a reasoned argument for why it doesn't make sense for you. You may end up paying more for your power for years until utility rates increase to equal the amount set by the lease, but if you don't stay in the house long enough you may never see the benefit. The counter argument to that is that you'll be able to sell the home and offer the next buyer the much more attractive part of the lease - the last half. I assume that you have a copy of the lease agreement. What does it say about the obligations of the current owner if you decided not to assume the lease? They would likely be on the hook for a large sum of money, so they would either need to cough up the money in accepting your offer, or they would have to wait for a buyer who wants it. Either way, they lose money and/or time.

Resolution: After 7 months of negotiations and free solar power, we reached an agreement with the solar company. They final got serious with their offers, and we opted to prepay the balance of the guaranteed production for $5,000, which comes out to $.06/kWh. They gave us the option to buy the equipment outright for $6,000, but then we would have to deal with inverter replacement (4-6 years down the road), and any other maintenance that may be needed. If we sell, our buyer would have no financial obligation to the company.

Though I wouldn't consider myself an expert, I'll go ahead and chime in, as most of the true experts are probably asleep. If the comps show a range that big, they are not really comps. Maybe that's just a list of everything that has sold in the area. Seems to me that you need to refine the comps to get a much better idea of what the home will be worth after you dump $500K into it. No doubt the bank has a much better idea of the property's worth than you do at this point, which will put you at a disadvantage. So you need to figure out what the place is actually worth. If the bank has it for $1.5 million, I don't see how they could unload it for just $400K, meth lab or not.

Oh, and you should probably get some other opinions on how much it will cost to fix it. You've come to the right place for advice, but without some solid numbers, I'm afraid we can't be of much assistance.