Buying vs prepaid lease

[earsly]

Hi All,

I bought a brand new condo (upland, ca) that has solar panels (from solar city) on it. Before purchasing, I asked the seller's agent if I could opt out of solar and she said yes. However, we're almost about to close and I find out I can't opt out (per the solar company) since it's already installed. At this point, I rather not go look at other places and the location of this condo is perfect.

Solar system

• 3.120 kW DC producing an estimated 5,372 kWh (first year)

My options are:

1) Leasing solar for $76.11 for 20 years. "If you are not in default under this Lease, you will have an option to purchase the System at the end of the Lease Term for $12,121.20."

2) Prepaid lease $9,360 which covers 20 years with maintenance and warranty, etc...

3) Purchase system outright: $13,447.20 initial - $4,034.16 tax credit = $9,413.04 net. I would need to purchase insurance.

Option 1 sounds terrible. Also, I'm planning to sell my place in 5 years so leasing wouldn't be great since people wouldn't want to be stuck with a contract.

Would anyone here actually consider prepaid lease over purchase? Thanks.

Mike

[J.P.M.]

Get a signed copy of the lease for that equipment and read it. Note that you did not sign that lease. SolarCity and you have no relationship at this time. SolarCity does have a relationship (the lease) with the current condo owner or the HOA (but probably not the HOA).

If that lease is anything like all the other SolarCity leases I've seen, the current leasee is the one responsible for either buying out the lease or getting the new prop. owner to accept the lease (subject to SolarCity approval for credit req., etc). Potential new owners are usually ignorant of all this, and so usually roll over and get screwed.

Tell them to stick their lease where the sun doesn't shine. Play hardball w/the seller and tell them you will not accept the lease.

Again, read the lease - The onus is on the leasee (probably the condo owner) to resolve the lease - not you.

Anyone telling you anything else is B.S.ing you.

Keep in mind that they (SolarCity and/or the sellers) have nothing to gain by removing the system. Since you have no obligations under the lease, you have the whip hand.

As a practical matter, you ought to be able to buy a new system of equal size for about ($3.50/Watt)*(.7) = $2.45/Watt net = $7,644 and own it. Why pay more for used equipment you will never own, particularly if your timeline is 5 years ? I'd offer them (SolarCity) about $4K to 5K max.to buy the existing (used) system. Otherwise, I'd tell them to remove it as I'd not you want anything to do with a lease under any circumstances, or used equipment at that price.

An alternative might be to accept the transfer to a prepaid lease but ask for about $12K-$14K relief (reduction) in the condo selling price. Then negotiate a buyout from SolarCity for used equipment.

BTW, why a 20 year lease on a used system ?

Ahh !! - the joys of leasing.

[cebury]

Exactly what JPM said. If you tell the seller you don't want the system, you may end up getting it for free as they will have to eat the buyout cost of the lease (they must preppay all the remaining payments until lease end). That does seem a bit unfair to the old owners, but that's playing hardball if that's your thing. They signed the contract and took that risk. The sellers agent is the one who told you that you could opt out, she was either ignorant or did it intentionally knowing once you sign closing and the three day rule expires, you would take the ownership of the issue yourself. Even then, unless their was a lien on the house (which would've been discovered in title search and the Solarcity leases Ive seen due not put liens) the lease contract is still between the last owner and solar city, not you. Until the home is sold, SolarCity is within their right to come to the premises and remove the equipment and fix the roof at their expense. You should have your agent, or call the title person yourself, confirm there is no lien on the home from Solarcity.

If you want to play nice, I would offer 3k at most since its used and you probably can't take the 30% income tax credit on this system.

This might extend your closing date to resolve this, because I wouldn't sign until I was satisfied whatever arrangement is finalized.

[earsly]

Hi JPM and Cebury,

I apologize for the delayed response. This condo is brand new and comes with brand new solar panels from solar city.

It is brand new construction so solar city worked with the builder to have solar panels installed on the building. I spoke to the seller's agent today and I have the same scenarios as above.

1) Prepaid lease $9,360 which covers 20 years with maintenance and warranty, etc...

2) Purchase system outright: $13,447.20 / 3,120 watts = $4.31 per watt.

- (Prepaid lease) Is there a prepaid lease price I should aim for?
- (Purchase) It looks like I should aim for $3.5 to $4 system installed before incentives?

The condo is located in southern california (inland empire).

Thanks.

[J.P.M.]

Hi JPM and Cebury,

I apologize for the delayed response. This condo is brand new and comes with brand new solar panels from solar city.

It is brand new construction so solar city worked with the builder to have solar panels installed on the building. I spoke to the seller's agent today and I have the same scenarios as above.

1) Prepaid lease $9,360 which covers 20 years with maintenance and warranty, etc...

2) Purchase system outright: $13,447.20 / 3,120 watts = $4.31 per watt.

- (Prepaid lease) Is there a prepaid lease price I should aim for?
- (Purchase) It looks like I should aim for $3.5 to $4 system installed before incentives?

The condo is located in southern california (inland empire).

Thanks.

The price is way too high, and IMO and to my experience only that solar company is way substandard.

Your money/choice/life.

[cebury]

Hi JPM and Cebury,

I apologize for the delayed response. This condo is brand new and comes with brand new solar panels from solar city.

It is brand new construction so solar city worked with the builder to have solar panels installed on the building. I spoke to the seller's agent today and I have the same scenarios as above.

1) Prepaid lease $9,360 which covers 20 years with maintenance and warranty, etc...

2) Purchase system outright: $13,447.20 / 3,120 watts = $4.31 per watt.

- (Prepaid lease) Is there a prepaid lease price I should aim for?
- (Purchase) It looks like I should aim for $3.5 to $4 system installed before incentives?

The condo is located in southern california (inland empire).

Thanks.

If that's in a community of new construction you may not have the option of saying no, as you have found out. You are now at the mercy of paying SolarCity whatever they ask for, pre-paid or purchase, or you walk away from the condo. What an arrangement for them!

Did they say the ITC is available or did you assume it or get info from another source?

If you decide to go forward and have the ability to claim the ITC, I'd say purchase. Just know you are paying over $3000 more than standard market rate. They are making the purchase price the same as their pre-paid lease after ITC so you will choose the lease. I'd only choose pre-paid lease after reading it in detail, knowing what strings are attached (if any) vs. purchase. But it's certainly a lot "cleaner" as a purchase when it comes time to sell, best case scenario the lease offers one or two benefits that may not be needed.

[earsly]

Thanks you both for your guidance. As Cebury mentioned, I am not in a good arrangement but don't really want to go look at other places since we're in the final stages of closing.

For the purchase price of $13447, the ITC is available. I'm trying to see if I can get it down to $11,000 which brings down the price to $3.52 per watt before ITC.

[foo1bar]

Thanks you both for your guidance. As Cebury mentioned, I am not in a good arrangement but don't really want to go look at other places since we're in the final stages of closing.

You have only mentioned the seller's agent - not a RE agent that is looking out for your interests.
What does your RE contract say?
If it doesn't say anything about the solar, then you are likely in a *very* good spot for negotiating.
At this point I'd probably tell the seller's agent "Hey, I am really not happy with this last minute solar thing. I can justify a purchase of a new system for $9000. I know that you and Solarcity say that it has to be more, so as much as I hate lawyers I will have to talk to a lawyer about what my options are."

BTW - is this a new system? Will you be the first owner/user of the system? If so you *may* be eligible for the 30% tax credit. You will need to check into that *very* carefully.
If you aren't eligible, then I'd say $9k is too much.

[foo1bar]

Also remember that at closing time the seller is counting on that sale. It is quite possible they are going to be willing to make concessions to make the sale close. This is the time when a good RE agent can save you thousands. A good RE agent will be able to negotiate and may use the old salesman tactic of "Oh, can't you give me a little more? I don't know if my boss will agree to that".

Without your own agent or other insight you may be at a disadvantage to know just how much interest there is in the property and how critical closing is to the seller. (for example I bought a condo and the seller had to give some concessions to me because they needed it to close. They needed it to close so that they could get a loan to finance the further condo-conversion of the other units)

[Remmy700P]

What a mess. They're hammering you to sign a lease contract. Therefore, I'd bet $$$ that the ITC has been captured by SC. That's the only way the install made sense to them. They sure as heck didn't install it on spec that the subsequent condo purchaser would pay a premium to buy it!

Again... what a mess. I'm in the IE. I'd love to know where this condo complex is at.

[GammaRat]

Hi Guys,

I created this account to post to this thread.

The buyer should ALSO consider the possibility of reselling the condo. At that time, he will run into the same issue, except from the other side of the transaction. More than likely he will be stuck with a buyout, because the new buyer won't be interested in taking over the lease.

He should also look into the assignability of the lease. Will he be able to transfer the lease to the new buyer?

[sunner]

Before taking decision on leasing /buying a product we need to consider these facts
*Operating lease
* Capital lease
If you need to research more on this topic please refer this Blog truckloancenter.com/blog/leasing-options/making-a-lease-purchase-work-for-you/