Phoenix solar disclosure requirements – contracts and forms

Update October 2017:  Recently the Arizona Association of Realtors has released a Solar Lease Assumption Addendum that addresses some of the concerns that I had regarding solar lease transfers by creating an assumption contingency and establishing timelines to disclose the solar lease and lease transfer.  It still does not do a lot for solar owned systems, production, cost savings, benefits, condition, etc. 

Arizona law requires the seller to disclose material (important) facts about the property, even if they are not asked by the buyer or the buyer’s real estate agent. Furthermore, sellers have an obligation to disclose information even they do not feel that it is material to the transaction, especially if a buyer asks about something. Failure to disclose material facts about the sale of a home can result in the loss of a buyer or worse, a lawsuit by the buyer.

For most home sellers in Arizona, their real estate agent provides them a copy of the Residential Seller’s Property Disclosure Statement (SPDS) to assist in properly disclosing material facts to their home buyer. Line 181 of the June 2014 edition of the SPDS asks if there are any alternative power systems serving the property and provides a little check box for solar, wind, generator or other. That’s it…nothing about whether it is a solar lease, prepaid lease, or an owned solar system…nothing about the type of panels, size of the solar system, age of the inverter, or even what the monthly lease payment is. I am surprised there has not been a lawsuit yet!

Even the standard residential purchase contract makes little mention of solar other than stating that all existing fixtures, including solar, shall remain with the property. Assuming that there is a lease, the purchase contract makes little mention about having the buyer qualify for the lease transfer, allowing the buyer to cancel the contract if they do not qualify for the lease contract, or even allowing the buyer to view the lease documentation during the inspection period. I have seen agents write more details about the 80 inch flat screen TV mounted to the wall of the master bedroom than I have seen with solar systems and any associated lease transfers.

Now I am not saying that solar is bad but the Arizona residential real estate contract does not protect the buyer, the seller, or the associated real estate brokers in any way if there is a solar system or a solar lease transfer.

Personally I have taken the initiative to try and protect my clients from these hazards through contract and disclosure addenda that I make part of the overall paperwork in a transaction.

My disclosure addendum details the type, make, and output of the solar system. It states when it was installed, includes any supporting documentation (i.e. sales brochures about panels, inverters, etc), and provides the buyer with the detailed information that they should have before committing themselves to a property.

My real estate contract addendum also allows the buyer time to review the lease documentation, states that the buyer has 5 days to initiate the lease transfer process (the same time frame allowed for a buyer to initiate a mortgage application), and discloses important solar and lease information upfront.

Real estate agents in the Phoenix area are out there winging it, primarily because no one has been sued yet. All it takes is for one person to have his or her lunch handed to them before the rest of the “professionals” get on the band wagon. As a seller, protect yourself and make sure that you are properly disclosing your solar information upfront. As a buyer, know what you are getting into before closing. Far too many people out there have been a week or two from closing only to find out that they have to assume a solar lease payment. Solar is a great deal in most cases but know what you are getting into before you do it.