What the Title Report Reveals About Solar on a Claremont Home

A buyer looking at a solar home sees hardware. A title officer looking at the same home sees whatever somebody recorded against the parcel, which is a completely different picture and often a more informative one.

The preliminary title report is the first document in a transaction that treats solar as a LEGAL FACT rather than as equipment. It is also the document most likely to be skimmed, because it is dense, procedural, and arrives at a busy moment.

It should not be skimmed on a house with panels.

What can show up

Solar reaches the public record by several routes, and they mean different things.

A FINANCING STATEMENT COVERING FIXTURES. Where equipment was financed and the lender secured its interest in the equipment as a fixture attached to the property, a filing may be recorded so that anyone examining title is on notice of it. It describes equipment, not the land, but it sits in the parcel's record.

A MEMORANDUM OR NOTICE OF A LEASE OR SERVICE AGREEMENT. Providers frequently record a short document announcing the existence of a long agreement without recording the whole thing. It puts the world on notice that a contract exists and, sometimes, that the provider claims an interest in equipment on the property.

A DEED OF TRUST. Some solar financing is secured against the real property in the conventional way, in which case it appears the way any other loan appears.

AN ASSESSMENT OR FINANCING OBLIGATION REPAID THROUGH THE TAX ROLL. Where an improvement was financed to be repaid on the property tax bill, that arrangement attaches to the parcel and continues after a sale. The tax-bill side of that is described in the assessor guide.

AN EASEMENT OR ACCESS RIGHT. Occasionally a provider is granted recorded rights to enter the property to service or remove equipment.

Why the distinction matters more than the label

People hear the word lien and assume the worst. That is not a useful reflex here, because these entries do not all behave the same way.

Something securing a debt in the seller's name is normally cleared at closing out of the seller's proceeds, the way any payoff works. That mechanic is set out in the loan payoff guide, and it is ordinary business.

Something announcing a contract the BUYER is expected to assume is not a payoff at all. It is a notice that there is an agreement to read, an assumption to qualify for, and a counterparty to satisfy, which is the process described in the lease transfer guide.

Something attached to the parcel and repaid through the tax bill is neither. It moves with the house whether anyone negotiates it or not.

Three entries, three completely different consequences. Reading only the total number of exceptions tells a buyer nothing.

How to actually read it

The exceptions schedule is the part that matters, and each entry has an underlying document behind it.

Ask the title officer to walk the list and identify, item by item, which entries relate to the solar system. That is a normal request and they are the right person to ask.

Then GET THE UNDERLYING DOCUMENTS. The one-line description in the report is a pointer, not the substance. A recorded memorandum may be two pages summarizing a thirty page agreement. The two pages will not tell a buyer what the thirty pages obligate them to.

Match every entry against what the seller has disclosed and against the contract documents in hand. A recorded item with no corresponding contract in the file is a question. A contract with no recorded item is also worth a question, because it may simply mean nothing was recorded, or it may mean the file is incomplete.

Timing, which is the whole game

The prelim arrives early in a transaction for a reason. Solar entries should be identified and understood while contingencies are still in place, because the resolution of any of them takes time and involves at least one party outside the transaction.

A payoff requires a demand from the lienholder. An assumption requires the provider's approval of the buyer. A subordination requires somebody at an institution to agree to something and then to produce a document. None of those happen in an afternoon because a closing date is approaching.

The costly version of this is the buyer who reads the prelim carefully for the first time three days before closing.

What resolution looks like

Broadly, four paths, and the right one depends on the entry.

PAY IT OFF AND RECORD THE RELEASE. Clean, common, and the buyer's interest is in seeing the release actually recorded rather than promised.

ASSUME THE CONTRACT. The buyer qualifies with the provider and takes it on knowingly, having read it.

SUBORDINATE. The holder agrees its interest sits behind the new mortgage. This is frequently what a lender wants and it is a document somebody has to produce.

NEGOTIATE THE ECONOMICS. If the obligation stays with the property, then it is a term of the deal like any other, and the time to price it is before contingencies are removed.

For sellers

Order a preliminary report before listing rather than after opening escrow.

The reason is simple. If there is a recorded filing on the parcel that the seller had forgotten about, or never knew about, the seller wants to be the first person to see it. Discovering it alongside a buyer, mid-escrow, converts an administrative task into a credibility problem, and credibility problems are what kill transactions that the underlying facts would have survived.

It also gives a seller time. A release that takes weeks to obtain is a nuisance in advance and a crisis on a deadline.

For the wider map, return to the solar guide. Title questions belong with the title officer and escrow; the meaning of a specific recorded document belongs with a qualified attorney. Anthony Grynchal has been licensed in California since November 2009.