UCC Lien Filing's Effect on Solar Leasing

By Isaac Ost
03 July 2018
What is a UCC-1 Lien or fixture filing?

Although the price of a solar panel system is going down consistently year after year, it can still cost a homeowner well over $10,000 to own and install one in most cases. Fortunately, there are various kinds of financing options available to enable your residence with solar power.

Power purchase agreements (PPAs) and other solar leasing models give these individuals a way to use a solar panel system at their home without having to take responsibility for the ownership of the system. A PPA allows a homeowner to purchase energy from the third-party owner (TPO) at a rate per kWh.

This is different than traditional leasing agreements that have a fixed sum that the consumer pays each month, with periodic increases in those payments over time.

A UCC-1 Lien or Fixture Filing is present in all leased and PPA agreements. A lien is type of security interest that is granted over a piece of property to give the lender protection in case any problems arise from the borrower. In solar leasing and PPA agreements the lender almost always files a UCC-1 financing statement so that they can protect their solar property in the case of a borrower defaulting on the contract.

UCC-1 Fixture Filing for Home Solar Panel Systems

Some people call the UCC-1 a lien, but it can also be referred to as a financing statement and commonly goes by the name “fixture filing”.

Fixtures are defined in section 9-102 of the UCC as, “goods that have become so related to particular real property that an interest in them arises under real property law.” It goes further to include solar energy systems as a category of fixtures.

When a homeowner leases a solar panel system from a TPO, or goes through a PPA, the owner of that solar panel system files a UCC-1 financing statement to show that they are the true owners of the property that is the system. This makes it so other debtors cannot claim the property in case of a breach of contract or default on their payments.

Once the UCC-1 fixture filing is complete, it gives the owner of the system protection in case of, for example, a home foreclosure. This would prevent the bank from claiming the solar system as part of the homeowner’s property.

UCC-1 for Solar is Not a Typical Lien

For solar leases and PPAs, liens are only over the solar property. They are not a lien over your home. If you want to refinance your solar panel system, the UCC-1 lien can be removed, the system can be refinanced, and the lien can be put back on. Overall, the UCC-1 fixture filing, or lien, is not something that you should be worried about or prevent you from taking on a solar lease or PPA.

On the contrary, for people who do not want to own a solar panel system, a solar lease or PPA is a more attractive option than for example, some of the available PACE financing programs. One such PACE initiative, the HERO program, utilizes a property lien rather than a lien over the solar panel system. This is why it is recommended for many consumers to look into leasing options before PACE financing programs.

Fixture Filing as Part of a Solar Lease

If you decide to lease a solar panel system or partake in a PPA, do not be surprised when you find yourself with a lien on the solar array. The UCC-1 lien or fixture filing is filed for practically every consumer who leases a solar system and is only there to protect the owner of the system if you default on your payments or your home is foreclosed.

As long as you are aware of the financial obligations that you are signing up for and can manage them, then there is nothing to be concerned over.

Whether you want to lease a solar panel system or own one, you can go over all of these details and more with one of our experienced Energy Advisors. They know everything from what hardware you should use to what policies and incentives there are that you should be aware of. Get started today!

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