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Surprised solar customers find themselves with liens

By   /   April 15, 2015  /   News  /   No Comments

Part 8 of 11 in the series SolarCity
Photo courtesy of Jeff Leeds

A SORRY PURCHASE: SolarCity panels cover the roof of Jeff Leeds’ home. The panels have been nothing but trouble, he says.

By Tori Richards | Watchdog.org

Jeff Leeds says installing SolarCity’s panels on the roof of his home in the Northern California city of El Granada was the sorriest day of his life.

Agreeing to the company’s 20-year lease was like partnering with the devil, he claims. He says he has endured skyrocketing electric bills, installation of an inferior system and contract violations because SolarCity refuses to clean the panels or to provide a payment for his system’s poor performance.

The latest surprise: a notice from his bank telling him that SolarCity had placed a lien on his home, and that his equity line of credit application could not proceed until the lien was removed.

“I was totally surprised by this and very pissed off,” Leeds said. “When I talked to the bank they told me it was a lien. I had to pay the bank a $48 fee for removal. They held me up from closing my loan to buy a vacation home so I had to borrow from another account. It cost me time in calls to both Wells Fargo and to SolarCity.”

SolarCity say it’s not a lien, but a “fixture filing” that stakes the company’s claim to the panels, which it owns if consumers have taken part in its popular lease program. Owning the solar electricity-generating system allows SolarCity to claim lucrative state and federal subsidies available only to system owners. SolarCity has received approximately $500 million in tax subsidies and grants over the years.

Photo courtesy of Jeff Leeds

A SOLARCITY HOME: The front of Jeff Leeds
house had this small promotional sign in 2012 after Leeds said he bought into a sales pitch.

During a Feb. 12 Capitol Hill hearing of the Senate Committee on Energy and Natural Resources, U.S. Sen. Jeff Flake, R-Ariz., grilled Department of Energy Secretary Ernest Moniz about solar company liens. Flake singled out SolarCity’s rival Stealth Solar as the offender.

“After entering into these long-term agreements, a lot are in for a surprise when they realize they have to pay off a lien put on their house,” said Flake. “What role, if any, can or does DOE plan to play in ensuring these companies who access federal tax incentives in particular  … aren’t misrepresenting what they are doing to their customers?”

Moniz was apparently caught off guard by the question and stammered that he didn’t know anything about liens but would look into it.

According to SolarCity’s contract: “The Fixture Filing is intended only to give notice of its rights relating to the System and is not a lien or encumbrance against the Property. SolarCity shall explain the Fixture Filing to any subsequent purchasers of the Property and any related lenders as requested. SolarCity shall also accommodate reasonable requests from lenders or title companies to facilitate a purchase, financing or refinancing of the Property.”

The contract also states “SolarCity will … file no lien against the home.”

SolarCity’s website, in a consumer Q&A format, says: “Is there a lien on the solar home? No … the UCC-1 protects our interest in the solar energy system and prohibits the lender from taking ownership of it.”

A March 10 email from a Wells Fargo Bank employee to Leeds states: “I already requested a recorded copy. To the bank, it’s a lien on the title. The lien release removes it … it needs to be done correctly. Without it recorded, it does not exist. I do not know what the underwriter will say or if she will be okay with it.”

Photo courtesy of Sal Balsamo

Sal Balsamo

Whatever you want to call the filing, “(i)t’s parsing words to a ridiculous degree.  I don’t think there’s any question that it’s a lien,” said real estate attorney Sal Balsamo, owner of Barrister’s Title Services in North Carolina, who has been involved with closing some 40,000 home loans as both an attorney and title underwriter. “Someone can say it’s nothing more than a security interest, but that’s nonsense. At best they are mincing words and at worst they are being intellectually dishonest. A fixture filing is a lien.”

In the world of liens, it’s first come, first served in most states, he explained. By attaching a fixture filing to the property, SolarCity is second in line to collect proceeds behind the original mortgage lender in the event of a default. Any future lender — whether providing a refinance or equity loan — would not want to be third in line and will demand that SolarCity remove the lien, Balsamo said.

Signing lengthy contracts like those involving solar companies is risky because consumers often don’t realize what’s contained in the contract, he said.

“It’s up to the vendor to explain it to them,” Balsamo said. “Either it wasn’t explained so customers understood, or, more likely, the vendor did not tell them” about the filing.

Balsamo suggested that solar customers have an attorney read any contract before signing.

When Jeff Leeds talked to SolarCity recently about his home title woes, “they referred me to a paragraph sunk deep inside their contract,” he said. “That UCC-1 is what they kept telling me on the SolarCity side, but Wells Fargo Bank considered it a lien and charged me $48 for the fact that it was there.

“SolarCity acted like everyone knew what this UCC thing was, but the bank considered it a lien, period. And nobody explains that to you when you buy it. They give you a huge contract to read and nothing is explained,” Leeds said.

A California banker, who requested anonymity because she is not authorized to speak on this topic, says she encounters enraged homeowners with Leeds’ same scenario five to 10 times a day.

“This is my nightmare for 2015,” the banker said. “(Homeowners) have no idea what they’ve gotten themselves into. (Fixture filings) are definitely liens.”

The banker said she frequently sees contracts with “a provision that allows solar companies to block the sale of your home so they can notify the buyer to enter into an agreement with themselves. Green energy is so popular with lawmakers that it allows these companies to say, ‘This is ours, our property.’

“That lease will follow you until you die,” the banker deadpanned.

A remedy for consumers

Beginning Jan. 1, solar customers who live in Arizona will be protected by the nation’s most comprehensive transparency laws. One of those regulations prohibits any type of secretive lien process.

SB-1465 had unanimous approval with dozens of transparency regulations most people would think should be commonplace with contracts of such magnitude. Among the items solar contracts must contain:

  • At least 10-point type and contain no blank spaces
  • Total price must be stated over the life of the contract, including interest
  • Potential tax ramifications
  • Disclose restrictions or impacts the buyer may have to transfer or modify the property
  • Depreciation schedule
  • A right to cancel up to three business days after purchase.

“We have to have better transparency and better truth in lending,” said Rep. Paul Gosar, R-Ariz. “This is becoming a bigger and bigger problem across the country as (solar) systems are getting transferred. Solar is getting to be our future and we don’t need people who are pulling shenanigans on the homeowner by not allowing them to know the full story of what they are signing. We are now living in an environment where it’s OK to lie and you just back up one lie with another lie – from the spokespersons at the White House all the way down to SolarCity.”

Debbie Lesko

Debbie Lesko

SolarCity and another solar contractor, Sunrun, vigorously opposed the Arizona bill as it wound its way through the legislative process on its way to the governor’s desk. The companies hired lobbyists and deluged lawmakers with press releases and meeting requests, said Arizona state Sen. Debbie Lesko, one of several who authored the bill.

The companies claimed the bill would kill solar and make it difficult to do business in the Grand Canyon State. In the end, Lesko agreed to make a few concessions, but the bill remained largely intact.

Lesko’s district includes the retirement community Sun City, and she has been inundated with complaints from constituents, including a couple in their 80s who were unable to sell their home because it had a solar-panel lease, which was held by SunPower.

“My legislation gives the consumer as much education as possible so they can make an intelligent decision when they make long-term commitments to lease or purchase rooftop solar systems,” Lesko said.

SolarCity spokesman Jonathan Bass said the company has dealt with thousands of home sales and refinancing where solar panels are present.

“In many cases we and our financing partners have covered the upfront cost of equipment and installation in return for future payments, and the fixture filing merely secures our interest in the solar system,” he said. “The filing does not prevent the customer from selling or refinancing their home and it does not change a mortgage lender’s priority interest to the home.”

But for Leeds, this latest go-round with SolarCity is the just one more example of how he believes “these guys just friggin’ lied to me in the sales process.”

If he had been alerted to the fixture filing by the sales person, he would have thought twice about signing the contract. He has even filed a complaint with the state of California regarding SolarCity’s business practices.

“I would love to tell them how they bamboozled me, a Ph.D.,” Leeds said. “Imagine what they can do with the average schmuck out there.”

Part of 11 in the series SolarCity

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Tori formerly served as staff reporter for Watchdog.org.