Purchased a home with PrePaid Lease

[azbronco96]

Hi
I just purchased a home in Arizona with a "Solar City Prepaid Lease" with approx. 16 years left on it. (I wanted the home- and solar seemed like a plus, but was not a huge factor)
I have a bunch of questions about assuming the lease. They are sending docs over today; but I have not signed anything yet.

They did not file a lien against the house-but I am sure there is a tail to this deal somehow.

Is there any negotiation room-or do I have to accept the lease deal as is?

[J.P.M.]

I'd read the lease carefully, read it again, and then take it to a lawyer and see if you can simply not sign the damn thing.

What was in the contract you signed when you bought the house ?

Did you know what you were buying with respect to solar equipment that is on the property ?

[Sunking]

I am sorry you did that.

[azbronco96]

Agreed-I would not have leased it. But since it is pre-paid the lease appears to be not a bad deal for me.
The system has been producing pretty much all the power consumed on the property the last 3 years.
APS verified minimal billing.
The end of lease term I can have it removed if I don`t agree to the new terms.

[azbronco96]

I am sure there are better deals out there. But as I mentioned-we wanted the home with or without the solar.
I can refuse to assume the lease and they remove the panels-but new T`s & C`s are changing with APS July 1st.
The newer deals with APS are not as favorable it seems.

[FFE]

Prepaid, as in there will not be any payments till the lease is up? Then you can choose not renew and still owe nothing? If that is the case, then it sounds like a no brainer. Like others posted, make sure that the paperwork matches what you were told. It is common to be told one thing and then be asked to sign something that is not the same. Read everything on the paperwork.

One thing to look into is if you will get the same agreement with APS the previous owner had. You might end up with solar that reduces your bill instead of zeroing it out if the terms are different.

[john phillips]

Are you sure it is not a power purchase agreement where you pay SolarCity X for the power the PV system produces where APS would have charged you X+?

If it is a real lease you would be paying a fixed payment for a set number of payments. If it is prepaid the seller may have had to pay the lease off to get the house clear to sell. if it is a power purchase agreement SolorCity estimates how much power they will produce with the system on your house and bills you monthly for it. At the end of the year, they correct the number and may change the rate to figure your new monthly payment.

Consumer report says it is better to own and pay cash. Nest it is better to finance and own. Leasing a system and power purchase agreements are a way in with the low cost of entry and the least benefit.

[Ian S]

Prepaid leases were popular a few years ago here in Arizona. I have one and AFAIAC, there should be no issue with assuming one with the purchase of the home. You will have the use of the system for the remainder of the 20 year lease and at that point in time, supposedly you will have to negotiate a continuance of the lease in some manner or they will remove it from your roof. We had discussions about this over the years and IMHO, the leasing company will probably abandon the solar system rather than pay to have it removed from the roof and disposed of somehow. In the meantime, the lease documents should provide all the details of what may happen at lease end as well as establish the details of the warranty. That is one of the advantages of the prepaid lease: complete coverage of the system including inverter(s). You'd be foolish not to keep the system. It will be grandfathered under the old net metering rules through the remainder of the lease - a BIG advantage over a new system whether bought or leased. You will have nominal electric bills for the next 16 years with no cost to you! What's not to like?! Anyone suggesting you should be worried about it is just concern trolling IMHO. Once you get the lease documents, read and understand them thoroughly and if you have questions, it would be worth an hour of a lawyer's paid time to discuss those questions. I found my prepaid lease pretty straight forward to understand FWIW. Enjoy your new home - the prepaid solar lease you've inherited appears to be a screaming deal!

[cebury]

Get the details and post it, we can give you some more directed help. As Ian said, several years ago there were some amazing prepaid leases out there that you would be foolish to sign away as the previous homeowner already paid the nut on. As i recall, the inerve from SolarCity was detailed enough to account for the home sale cases.

[azbronco96]

Thanks for the replies-had a hectic day at work
I will post the lease details-

[john phillips]

What is he advantage of a prepaid lease over cash or a financed purchase?

[J.P.M.]

What is he advantage of a prepaid lease over cash or a financed purchase?

Prepaid leases have most of the same features, good and bad as individual perception may se them. In general, prepaid leases, as the name implies, requires all payment to be made in one lump sum, up front, rather than spread out over the term of the lease. Other than that , a lease is a lease, is a lease, and generally not as favorable in terms of cost effectiveness as paying cash up front.

[Heataholic]

I am sure there are better deals out there. But as I mentioned-we wanted the home with or without the solar.
I can refuse to assume the lease and they remove the panels-but new T`s & C`s are changing with APS July 1st.
The newer deals with APS are not as favorable it seems.

They are being blocked by one of the commissioners so I wouldn't bet on a July 1st rate change happening. With the water scandal unfolding and all the legal threats by one of the commissioners I wouldn't bet on anything happening before September.

Assuming the lease really is prepaid I don't know why you wouldn't just let it be but if you want to kick it to the curb and get a new system installed the current APS grandfathering allows you to replace the system, or repair it, with another system of the same size without losing your grandfathered status. That is both now and in the future.

[Ian S]

What is he advantage of a prepaid lease over cash or a financed purchase?

Well, for starters, you have comprehensive coverage of the system for a full 20 years. At the time these were popular, the lessors received, in addition to the federal tax credits, the ability to fully depreciate the systems over a relatively short period of time. The latter benefit is not something an individual can take advantage of and the value can be substantial to the lessor. My prepaid SunPower lease for a 6.9kW system installed required me to make one payment upfront of $6,729. No more payments for 20 years. Although, next year (2018) I can take advantage of a one-time buyout contract clause which would cost me an additional $844 and then I would own the system outright. There was nothing that could touch that deal at the time. It was a no-brainer.

More recently, when prepaid leases have been offered, the terms have been less generous and IIRC, the upfront price may be about the same as purchase after all the credits and what not have been figured in. You still have the comprehensive warranty with the lease. You also don't have to wait to receive tax credits and such a lease might be great for someone whose financial position was such that they had difficulty taking advantage of the tax credits. In my case, the "upfront" payment was due over a month after the system was up and running. I suspect if you purchase, you will have to put up a significant amount of the price before work is even started.

The discussion may be moot as I don't know if anyone is even offering such leases anymore.

[john phillips]

Ian S:
That is a great deal. Now even with the price of solar hardware coming down getting a system at less than $1 per watt is great. Best I have been able to talk installers down to was $3.00/ watt about $2.10 a watt after tax.
It would cost them more than $844 to remove the system from your roof and take care of any roof repairs.