Leased Renewables

DefinitionA renewable system (i.e., solar or wind) belonging to a third party is installed on a customer’s property at little or no cost to the property owner. The property owner has entered an agreement to pay for the lease of the equipment. Fee model is based on equipment to generate power, not power itself. If requirements are met, it may be possible to transfer lease from home seller to buyer with the approval of the system owner. If being transferred, see Fannie Mae guidelines for more info. Since lease is for equipment, it must be included in the buyer's DTI calculation. If a buyer cannot or will not adopt a lease, then the seller is required to pay the remaining contract amount in full, and the system would be removed. This renewable system is typically considered personal property. All tax credits as well as maintenance responsibilities, etc., belong to the third-party owner. Some leases require the homeowner to pay the personal property tax. The lease should provide items that the homeowner is responsible for paying. In a solar lease model, a customer will sign a contract with an installer/developer and pay for the solar energy equipment over a period of years or decades. Solar leases can be structured so customers pay no up-front costs, some up-front costs (partially prepaid) or fully prepay (the leasing company is then able to depreciate the equipment over time and offers a lower fee for prepaid leases). The homeowner may have the option to purchase the system during or at the end of the lease term (most leases are for 20-year terms) at its fair market value or terms set in the original lease contract.