Solar PV ‘rent a roof’ schemes lead to mortgage issues
By Jon Ramage
With the business and workload continuing to expand, Cockrams Surveyors have moved to employ another graduate. Jon Ramage will start work in June after completing an RICS accredited BSc degree in Building Surveying and Environment. Prior to studying, Jon came from a construction related background with 8 years site experience, ranging from smaller scale landscape projects through to large multi-storey construction sites. This has provided the appropriate foundation on which to become a Chartered surveyor and take on site supervision roles within the business. Jon is currently completing his dissertation based on the Rent a Roof scheme, therefore he has extensive knowledge surrounding this area and has written the following article.
The UK is committed to targets set by the EU to reduce CO2 emissions by 20% before 2020. One of the measures put in place to tackle this problem was the introduction of the Feed-in-Tariff to provide a financial incentive for investment in renewable energy generation, such as photovoltaic systems, which convert sunlight to electrical energy.
Since the introduction of the Feed-in-Tariff for solar photovoltaic (PV) installations on the 1st of April 2010, a market has emerged whereby solar companies offer home owners free solar power in exchange for a 25 year lease on the airspace above the corresponding roof. The solar companies install free photovoltaic panels on the property and pocket the lucrative Feed-in-Tariff payments for energy generated, which are financed by electricity consumers. This type of arrangement has become known as ‘rent a roof’ schemes. Properties in Cornwall are particularly profitable under the schemes due to being the sunniest county in the UK.
The Feed-in-Tariff scheme has been subject to a great deal of negative press since its launch, mostly due to the fast track reviews and cuts to the payments made by the Department for Energy and Climate Change. The tariff was regarded as over generous which led to the creation of a highly profitable industry. Homeowners with the capital to invest in PV systems have been rewarded with very good returns, an opportunity which continues despite the Feed-in-Tariff payments having been halved. Investors seeking to capitalise on these returns created companies employing hard sales tactics in order to persuade home owners to ‘go green’ and sign up to ‘rent a roof’ leases; unfortunately this did not always involve checking the mortgage lenders terms and conditions.
Whilst there is no problem for homeowners who have financed the PV installation themselves, the 25 year lease for ‘rent a roof’ contracts continues to be an issue for mortgage lenders. The problems arise due to some mortgage providers refusing to offer finance for properties bound under such leases. This issue was identified last year by the Council of Mortgage Lenders (CML), who released guidance notes to lenders in an attempt to standardise the process. Despite this the fact remains that many lenders are still suspicious of properties under ‘rent a roof’ contracts, which leads to complications when trying to sell or re-mortgage the property.
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