Part 6 of 6 in the series SolarCity

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.

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.”

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.”

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.”

Paart 5 — Con­gres­sion­al lead­ers charge ‘poten­tial­ly decep­tive sales tac­tics’ by SolarCi­ty, others
Part 4 – SolarCity’s $750M tax gift shroud­ed in secrecy
Part 3 – SolarCi­ty and oth­ers backed Chi­nese solar-pan­el mak­ers flood­ing U.S. market
Part 2 – SolarCi­ty sky­rock­et­ing stock depen­dent on gov­ern­ment tax giveaways
Part 1 — Cus­tomers tell hor­ror sto­ries of solar com­pa­ny that gets $422M in tax dollars