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Miles Brignall guardian.co.uk, Friday 23 March 2012 23.00 GMT Comments (64)

The owners of this house have been refused a new mortgage because of the solar panels. Photograph: Graeme Robertson Thousands of households that agreed to rent their roofs to solar panel companies, in return for free electricity, could find their properties are unsaleable. It has emerged that lenders have begun turning down mortgage applications from homeowners who signed up to the schemes. Guardian Money has been contacted by a Southampton couple who were refused by several companies when they tried to remortgage. The refusals were on the basis that they had agreed to allow a firm to install solar panels on their roof for the duration of a 25-year lease. Although their existing mortgage provider agreed to the scheme, the couple are now worried they won't be able to sell if potential buyers also struggle to find a loan. Money believes that their case, which is probably the first of its kind, threatens the viability of "rent a roof" schemes and could result in a raft of legal disputes. And anyone else who signed up to such a deal will be prompted to get out the paperwork and pore over the fine print. John and Rebecca Welton had the solar panels installed just before Christmas 2011. The installation was offered by My Energy Station, a trading name of Birmingham-based Norton Energy Solutions. They were promised the free electricity the panels would generate during daylight hours, worth around 150 a year, while My Energy Station would

pay for the panels. But in return the company would pocket the lucrative feed-in-tariffs, which are worth 10 times that figure. "Before we agreed we checked with our current mortgage provider, RBS, and our mortgage adviser, that it would not cause any issue when we came to remortgage or when we try to sell the house," says Rebecca. At the time, both said that it was not a problem but the couple heard a different story when they tried to remortgage in February. A broker found them a better deal with the Skipton building society and they paid a booking fee for the loan. However, when the it learned of the solar lease, it pulled out. It has since told the broker it will not look at any remortgage deals where there is a solar lease in place. The Weltons then tried the Nationwide. Again, Rebecca says, they were turned down flat, and didn't even get to the point where a submission was made. RBS has offered them an alternative mortgage on the basis that it had approved the solar installation, but their broker is struggling to find a cheaper deal with another lender. "We signed up to this scheme on the basis that we were doing the green thing, but it has turned out to be a nightmare," says John, who works as an air traffic controller. "The implications for us are that we cannot remortgage our house on a lower interest rate. We would still have a mortgage but one on the standard variable rate which will increase with the Bank of England interest rates. "We are extremely concerned that we will not be able to sell our house as no buyer will be able to get a mortgage on it. We can't be the only people in this position, can we?" The problem is, they could be the first to come up against this barrier. Solar leasing deals were heavily marketed last year as a host of companies sought to cash in on the generous feed-in-tariffs payable to those with solar PV panels on their roofs. Salesmen toured housing estates giving homeowners the hard sell. The most scrupulous firms sought their customers' mortgage provider's agreement, but many didn't. It seems few people who agreed to solar leases have tried to switch mortgage since. Last year the Council of Mortgage Lenders produced a guide to try to help the panel providers and the mortgage companies standardise the process. However, it seems mortgage departments are ignoring, or are unaware of, this guide, and are turning down such applications, possibly because they haven't seen one before. The issue does not affect those who paid for their panels to be installed. Money understands lenders are concerned they will not be able to dispose of homes where a PV lease has been agreed by the previous owner. The leases run for 25 years, and so

would have to be passed on to any buyer. Crucially, they would restrict a mortgage provider if it was forced to repossess. The lease company will only remove the panels if the lender can show it has tried and failed to sell it. A spokeswoman for the Skipton told us the society does accept applications where a PV lease scheme exists. However, its guidance to brokers, updated on 20 February, clearly states: "The society will NOT lend where the panel provider is supplying and fitting panels free of charge, is taking income from the grid tariff scheme and is creating a long-term lease against the roof and roof air space." The Nationwide told Money it was committed to lending on such projects, but the Weltons' broker was told, on two occasions, by Nationwide staff that it would not lend on a home where a PV lease was in place, unless it had been agreed by Nationwide originally. Sue Anderson, who represents the Council of Mortgage Lenders, cautions against reading too much into one case. "I am not aware that there has been any wholesale policy change from lenders it has always been a commercial decision for lenders, and they take different views. But I certainly haven't heard of any universal move not to allow remortgage business for properties with leased solar panels," she says. Sarwar Ahmed, a director at Norton Energy Solutions, says this is the first such problem his company has come across and says it is "something that we need to look into more deeply". He adds: "There needs to be a clearer policy from the banking sector with regard to solar schemes. You mentioned that Nationwide has refused the Weltons a remortgage but has been happy to give its consent to existing customers who want to participate in free solar schemes." Ahmed says the lease offered by the company has been drawn up in accordance with guidance from the Council of Mortgage Lenders. He adds that the couple could buy out the scheme for around 15,000, which would solve the problem. "I would like to get this individual case resolved from a customer perspective, but also appreciate the fact that they have highlighted an issue that will become increasingly relevant as solar leases mature," he says.

When PV investment pays off

While Guardian Money has cautioned against the rent-a-roof solar PV schemes in the past, buy-it-yourself solar investment still looks a good deal, according to the experts. Cathy Debenham, who runs YouGen.co.uk which champions the use of renewable energy, says there is still time to sign up for a solar scheme before 1 April when tougher rules on energy efficiency come into play.

Although the feed-in tariffs have been halved to 21p per unit, the purchase price of a PV system has fallen by the same amount, meaning there is still a good return if you can pay up front and have a suitable roof. The predicted increase in PV sales before the 1 April deadline hasn't happened, Debenham says. "For some installers, sales have dried up completely. There is a consensus among the ones I've spoken to that it's mainly because the public think the feed-in tariff has come to an end." She says it's "still a pretty good deal" especially given that energy prices are likely to keep on rising. "My 2.1kW system cost 9,000 in February 2010 with discounts, but my installer says he is now able to fit 4kW systems, with good-quality panels, for 8,000," she says. "That's a return on investment of 10%-12%." To claim the top rate of feed-in tariff after the deadline, all buildings with solar PV panels must have an energy performance certificate (EPC) of at least band D. As the average house in England and Wales doesn't quite make it into band D, this means that many people will have to improve the energy efficiency of their property to qualify. Footnote added on 11 May 2012. This article quotes Cathy Debenham of YouGen.co.uk estimating a return on investment of 10%-12% for a 4kW solar panel system. To clarify: this is an effective annual return based on the tax-free feed-in tariff and grid export income, and from savings on home energy bills, assuming an installation cost of 8,000. The amount saved on home energy bills will vary according to the volume of electricity consumed. The payback period on this basis but not taking into account maintenance costs and increased income from the inflation-linked tariff would be about nine years.