By guest author Andrew Ehrnstein of Solar City
Those considering going solar may wonder, ‘does installing solar on my house create a lien’? The short answer is: almost certainly not. It does depend on the company. However, it would be good to know what a lien is, and how this might or might not come up in a solar installation. Mortgages and contractors can create liens against a house to secure payment for their notes and services. A lien is a right to keep possession of property until the debts owed against that property are paid back. And basic real estate law says that anything attached permanently to a structure is assumed to become part of the property.
If you are paying cash for your solar installation, then the contractor has a lien right under Colorado law from the moment they deliver materials until you’ve paid in full. Most homeowners do not pay in cash for their solar, but that’s how it works in those cases.
When a solar contractor installs a system on your home, the system is more likely to be financed with either a loan or a lease. The major solar companies use non-lien financing, meaning that they secure payment only with the equipment, and not your house. You may want to verify that this is true when interviewing your solar provider before signing their agreement. With non-lien financing there would be no lien against your house. In order to make it clear that the note or lease is NOT secured by your house, they have to record a UCC-1 fixture filing which spells out the fact that this installation is NOT part of your real estate. Once that’s done, the equipment can be used as security without encumbering your house, leaving you free to sell or refinance your house without any issues. It is still important to talk to your solar company before selling or refinancing so that they can help your mortgage or title company with the appropriate documents.
It is common for title companies to pull up the title information on your home, see that something was recorded, and assume that it is a lien. Actually, anyone can record anything at the county if they want to, like a family tree or lyrics to a favorite song. That does not mean it is a lien.
I often get asked if we have put a lien on a property, when the answer is always “No, we have not.” While every company has its own policies, a common way for solar companies to avoid liens is to never record a lien and to remove or subordinate the fixture filing during refinance or sale. In the case of a lease, our company removes it and then re-records after your new loan has been recorded. In the case of a loan, we or our partners will subordinate our fixture filing to any other lien or security to make it plain to even the most persnickety underwriter that we are not encumbering the title of the house.