Solar Panel Liens: What Real Estate Investors Need to Know

Solar panels can boost a home’s energy efficiency and value, but for real estate investors, they can also create some serious hurdles when it comes to acquisitions, flips, rentals, and even wholesale deals. If you’re an investor working in Texas or other high-solar-adoption markets, you’ve likely run into properties with solar panel liens or loans. Handling these right can mean the difference between a deal that cash flows and a deal that falls apart.

Let’s break down what you need to know, and how our team helps investors turn potential solar headaches into opportunities.

Why Do Solar Panel Liens Matter to Investors?

• Title Complications:
  Most solar panel loans are secured with a UCC-1 lien—this is not the same as a mortgage, but it does attach to the property and must be cleared before you can get clean title or new financing.

• Disrupts Standard Closings:
  Many traditional lenders won’t fund a purchase or refi until all liens—including UCC filings—are cleared.

• Reduces Buyer Pool on Dispo:
  When you go to sell or refinance, many end buyers (and their lenders) get spooked by solar loans, limiting your exit options or driving down price.

Types of Solar Panel Encumbrances Investors Encounter

1. UCC-1 Filings (Loan/Lien):
   The most common instrument, used to secure a solar loan with the panel equipment as collateral—but tied to the property address.

2. Solar Leases/Power Purchase Agreements (PPA):
   These are contracts to “rent” the panels or buy the power, often with long terms (15-25 years), and require transfer/assignment on sale.

3. Outright Ownership:
   Panels are paid off, and there’s no lien, but you’ll still want proof of clear title to the equipment.

Due Diligence: What Investors Should Check Before the Offer

• Ask the Seller Directly:
  “Are the solar panels owned, leased, or financed?” Get supporting documents: loan statements, lease contracts, payoff quotes.

• Order a Title Search and UCC Search:
  Many title companies in Texas miss UCC filings. Ask for a separate UCC search to catch liens attached to the property.

• Calculate the Payoff:
  Find out the exact payoff to clear the lien or buy out the lease. This is critical for your deal math.

Acquisition Strategies: How to Structure the Deal

1. Negotiate Payoff at Closing

Build the solar loan payoff into your purchase negotiations—either the seller pays it off, or you factor it into your offer. If buying as a flip, clearing the lien upfront makes resale and financing easier.

2. Assume/Transfer the Loan

Some solar loans can be assumed by the next owner—but make sure you (or your end buyer) qualify and are comfortable with the terms. For rentals, this can sometimes make sense if the cash flow works with the payment.

3. Wholesale or Assign With Full Disclosure

If wholesaling, disclose all solar encumbrances to your buyers, and present the deal as-is. Factor the lien or lease buyout into your assignment fee.

4. Creative Financing (Subject-To/Wraps)

If you’re acquiring a property “subject-to” the existing mortgage (sub-to), a wraparound, or with seller financing, it’s important to understand how solar panel loans or liens affect your transaction. The solar panel lender’s lien (often a UCC-1) will remain in place unless specifically paid off at closing, and their payment is typically separate from the mortgage.

Important Legal Note:
Never state to the seller, lender, or any party that you will “take over” the solar loan or “assume” the obligation—unless there is a formal, written assumption agreement with the solar lender. Instead, clarify that as the new property owner, you will continue making payments on the solar panel loan as part of the property’s total monthly expenses, but that the loan remains in the seller’s name and on their credit until paid off.

This distinction is crucial for legal compliance and to avoid misrepresentation. The correct approach is to structure your subject-to or wrap so that the solar payment is included in your deal math and ongoing payments, while all parties acknowledge that the solar loan stays in the original borrower’s name unless formally assumed.

5. Investor Partnerships or Bridge Loans

If the deal is strong but the lien complicates short-term financing, consider bringing in a partner or using a bridge loan to clear the solar lien, then refi into permanent debt post-renovation.

Disposition: Selling a House With a Solar Panel Lien

• Disclose Early and Often:
  List the solar status in your MLS and marketing. Provide payoff or transfer instructions to your buyer and their lender.

• Be Prepared for Pushback:
  Buyers (and their agents) may be unfamiliar or wary. Educate them, and be ready to negotiate—sometimes offering to pay off the solar lien as part of the deal.

• Work With a Title Company Experienced With Solar:
  Not all title companies handle these well. We have established relationships with teams who can coordinate UCC payoffs and ensure a clean closing.

How The McDonald Team Helps Investors Navigate Solar Panel Issues

Deal Analysis:
We review your contracts, title, and payoff statements, and advise you on how the solar lien impacts ARV, net proceeds, and exit options.

Negotiation & Transaction Coordination:
We negotiate with sellers, buyers, and solar lenders to get accurate payoffs and facilitate clean closings, whether you’re buying or selling.

Creative Structuring:
We help craft subject-to, wrap, or partnership structures that make sense for your investment goals, even when a solar lien is involved.

Access to Our Buyer and Lender Network:
If you need a buyer or lender familiar with solar panel deals, we have a vetted network ready to move.

The Wrap-Up

Solar panel liens don’t have to kill your deal—if you know how to navigate them. Whether you’re flipping, holding, wholesaling, or getting creative, The McDonald Team provides the due diligence, negotiation, and structuring expertise to help you maximize your investment returns.

Contact Cody McDonald today for a consultation on your next deal, and let us help you turn a potential solar panel headache into a win.