Renting Out Your Solar Home in Phoenix?

There may come a time in your life when you decide that it is time to move from your solar powered home but you may not want to sell it.  Having a renter in your home to pay down your mortgage, care for the property, and allow for more property appreciation may be an option to consider if you need to move and you can financially do it.  However if you have solar power on the home, there are several questions you and your property manager (if you hire one) need to work out before renting out the home.

The discussion of leasing your solar powered home falls into two categories (much like solar home sales do) – 1) homes with solar that is owned and 2) homes with a solar lease.

Owned Solar on the Home

When you are leasing out a home with solar as a fixture, i.e. you own the system outright, questions of liability, maintenance, and cost stand out in the forefront.

In terms of liability, is there any additional liability that you, the landlord, assume because of the solar system?  Are you guaranteeing performance of the solar system through your advertising by showcasing the cost savings of electricity?  What happens if the solar system does not perform as you had described to the tenant?  If the system fails, are you responsible for the higher utility bills until the system is fixed?  Who is responsible for fixing the system?  If damages occur as a result of the system, do you have additional insurance and contract clauses in the lease agreement to protect you?  As the landlord, do you have additional insurance to cover the cost of replacement of the system if the house is damaged?

In terms of maintenance on a home that you plan on renting out with a solar system, who is responsible for maintaining the system? Is the tenant allowed to make alterations to the home that could affect the solar system?  Does the tenant have the obligation to maintain the vegetation to avoid excessive shading of the solar system?

In terms of cost, will you pass the full savings off of the tenants utility bill to the tenant or will you charge the tenant a surcharge for use of the solar system? I ask this question because over time, there will be maintenance and component costs that you will incur.  If, for example, the inverter fails and you must replace it, do you have a reserve fund established because of a solar surcharge you tacked onto the rent?  Will you use the solar as an incentive to distinguish yourself from your competition and not charge a solar surcharge?  Can you ask for more in rent instead?

Solar Leases and Rentals

For homes that have a solar lease, the previous three categories of liability, maintenance, and cost apply but because you do not own the system and it is leased by a third party that the tenant does not have a contractual obligation to, you need to address your obligations to the solar leasing company in your lease agreement to your tenant.

In most solar leases, there are provisions that address the limited liability obligations of the solar company but do those protections pass to your tenant as well–the lease is only between you and the solar company and the tenant is not a party to the solar lease.  Do you need additional insurance coverage to protect your tenant?  Does the solar leasing company need to be notified?  Are there any provisions in your solar lease that would void any of the liability protections if you did rent out the home?

In terms of maintenance, most solar leases have clauses that require the home owner to ensure that the panels are cleaned and free from shading.  Do you have clauses in your lease addressing your obligations for maintenance and panel cleaning?  What about access to the solar system on the home?  Do you have clauses that allow for the solar leasing company to gain access to the home to check the system if it is not operating properly and will you have to be there as well?

Most solar leases, unless it is a prepaid solar lease, have a monthly fee that the home owner must pay for the duration of the lease.  Are you or the tenant responsible for paying that fee?  If the tenant is responsible, do you have contingency plans and contract clauses that address non-payment of the solar lease?  If the tenant fails to pay the solar lease on time, will that affect your credit report?  Furthermore, some solar leasing companies require the home owner to have an internet connection so that they can monitor the energy production of the solar system.  Are you or the tenant responsible for maintain an internet connection for the solar system?

Conclusion

Overall solar can be a very attractive feature for a rental home in the Phoenix area.  It affords a tenant to be eco-conscious while saving on their utility bills.  The idea of being able to save hundreds a year off of their utility bill is as attractive to tenants as it is home owners.

Be careful before renting out your house though.  You have certain obligations, especially under a solar lease, that you must fulfill and the standard real estate lease agreement fails miserably to address anything about solar in the leases.  Read through your lease and talk with your leasing company.  Make sure that your lease addresses any potential liability or obligations that you must fulfill, whether you do it or your tenant does it.

Questions, please feel free to give Rob Madden, the Solar Home Broker, a call at 480-888-1234.