The Estoppel Letter: Making a Solar Provider Confirm the Terms

A buyer reads the solar contract, understands it, and feels informed. That is a reasonable feeling and it is also incomplete.

The contract is what the parties agreed to at signing. It is not a statement of where the account stands today.

Between those two documents sits everything that has happened since: amendments, missed payments, an assignment to a different company, a buyout that was started and abandoned, a service claim that was never resolved. The contract records none of it.

What closes that gap is an ESTOPPEL LETTER, and it is one of the most under-requested documents in a solar transaction.

What the document is

The idea is borrowed from commercial leasing and from association practice, where it is routine. A party to an existing agreement is asked to state, in writing, the current facts of that agreement, so that a third party about to rely on those facts can do so.

The word estoppel points at the reason it works. Having put the facts in writing for somebody who is going to act on them, the party who wrote it is not in a good position to assert something different later.

Providers will not always use the word. Some call it an account status letter, a payoff and status quote, a transfer packet, or simply a written confirmation. The label does not matter. What matters is that a person authorized to speak for the counterparty has set out the current position in a document.

What to ask it to confirm

Be specific, because a vague request produces a vague answer.

THE PARTIES AND THE AGREEMENT. The exact legal entity that now holds the contract, and the document it is operating under, including any amendments or assignments. The company on the original contract is not always the company you will be dealing with, a problem explored in the orphaned systems guide.

THE STATUS OF THE ACCOUNT. Current, delinquent, in dispute, or in default. If there are arrears, what they consist of.

THE REMAINING TERM. When the agreement started, when it ends, and whether any renewal or extension has already been triggered.

WHAT HAPPENS AT THE END. Whether the agreement provides for purchase, renewal, removal, or something else, and what has to happen to elect any of those.

WHETHER TRANSFER IS PERMITTED, AND ON WHAT CONDITIONS. This is the one that decides whether the transaction is straightforward. Ask what the provider requires of an incoming owner, what the application process is, how long it takes, and what fees attach.

WHETHER ANYTHING IS RECORDED. Ask the provider to state what, if anything, it has filed against the property. Then match that answer against the preliminary title report, using the approach in the title report guide. Two independent sources agreeing is worth far more than either one alone.

WHO OWNS THE EQUIPMENT. Say it plainly and get a plain answer.

WHAT IS OWED TO TERMINATE. Even where nobody intends to terminate, a written figure with an expiry date on it is useful, because it prices the alternative.

Do not ask the provider to interpret the deal

Ask for facts. Do not ask for characterizations.

A provider representative describing what the agreement means, in a phone call, is worth nothing and can be actively misleading. The contract says what it says, and what it obligates a future owner to do is a question for the buyer's own attorney reading the buyer's own copy.

The estoppel letter exists to establish the current STATE OF PLAY. Interpretation is somebody else's job.

When to ask

At the front of the transaction, not the back.

Providers work on their own timetable. A request that reaches a queue may sit there. Some issue transfer packets promptly and some do not, and none of them are motivated by anybody's closing date.

The seller is usually the right requester, because the seller is the account holder and the provider will talk to them. A buyer asking cold will often be told, correctly, that the provider cannot discuss a customer account with a stranger.

So the sequence is: seller requests it, seller provides it, buyer and buyer's counsel read it against the contract, and any discrepancy becomes a question while there is still time to ask.

When they will not put it in writing

It happens, and it is information.

A counterparty that will not confirm in writing what it is happy to say on the telephone has told you something about how the rest of the relationship is likely to go. That is not a reason to abandon a house. It is a reason to price the uncertainty rather than to assume it away.

Where written confirmation is unavailable, fall back on documents that do exist. Recorded instruments. Billing statements. The permit file at the city. The utility interconnection record, which is the subject of the permission to operate guide. None of them replaces an estoppel letter, but together they build a picture.

For sellers

Request it before listing.

A seller who can hand a buyer a current, signed statement of exactly where the solar account stands has removed the largest single source of hesitation from a solar sale. It converts a vague worry into a read document.

It also protects the seller. Disclosure obligations turn on what a seller knows, and a seller who has asked the provider directly and passed on the answer is in a materially better position than one who guessed. The scope of that duty is covered in the disclosure guide.

Start at the solar homes hub for the wider transaction sequence.

Anthony Grynchal has been licensed in California since November 2009.