Writing Solar Into the Escrow Instructions on a Claremont Sale

The parties agree how the solar will be dealt with. Everyone is satisfied. Then closing arrives and the array is still in the seller's name, the payoff was never demanded, and the monitoring login belongs to somebody who has moved out of state.

Nobody reneged. The agreement simply never made it into the INSTRUCTIONS, and escrow only does what it is instructed to do.

This is an administrative failure, which is exactly why it is worth writing about. Administrative failures are the cheapest kind to prevent and the most irritating kind to discover.

What escrow is and is not

An escrow holder follows written instructions from the parties. It is not a party to the deal, it does not interpret the purchase agreement on anyone's behalf, and it does not know what was agreed in a phone call between agents.

If the solar handling is not in the instructions, it does not happen at closing. It happens later, informally, by goodwill, which is another way of saying that it happens if everybody is still motivated afterward.

Motivation drops sharply the moment funds disburse.

What actually needs instructing

Depending on how the system is held, some subset of the following.

THE PAYOFF. Where an obligation is being retired, escrow needs to know to obtain a written demand from the correct party, to pay from the correct side of the file, and to obtain evidence of satisfaction. A verbal balance is not a demand. The mechanics are covered in the payoff guide.

THE RELEASE OF ANY RECORDED ITEM. Paying an obligation and clearing the record are two acts. Escrow and the title company need instructing on which recorded entries are to be cleared and how, using the reading described in the title report guide.

THE TRANSFER OF A THIRD-PARTY AGREEMENT. Who submits the application, by when, what evidence of approval is required before closing, and what happens if approval does not arrive. That sequence is set out in the lease transfer guide.

PRORATION OF ANYTHING PERIODIC. Payments under a solar agreement, or an assessment collected through the tax bill, need the same treatment as any other periodic item, and it needs saying rather than assuming.

THE HANDOVER OF DOCUMENTS AND ACCESS. Warranty file, serial numbers, permit records, monitoring credentials. If it is not listed, it is not delivered.

ANY CREDIT OR HOLDBACK. Amount, condition, and what releases it.

Name the deliverable, not the intention

The most common defect in a solar instruction is that it describes a hope.

Weak: the seller will resolve the solar prior to closing.

Strong: escrow to obtain a written payoff demand from the named holder, pay it from seller proceeds, and receive written confirmation of satisfaction prior to close.

The difference is that the second one names a DOCUMENT, a PARTY and a MOMENT. An instruction that can be measured is an instruction that can be checked off. An instruction that expresses an intention leaves everybody at closing looking at each other.

Same principle on the transfer side. Written provider approval, in the file, before closing, is a deliverable. The parties will work with the provider is not.

Timing, which is the recurring theme

Every solar item in an escrow depends on somebody outside the escrow: a lienholder producing a demand, a provider approving an assumption, an administrator quoting a payoff, a title company recording a release.

None of them are on your timetable, and none of them are penalised by your closing date.

So the instructions should exist early and the requests should go out early. The failure pattern is always the same: the terms were agreed at offer stage, nobody translated them into instructions until the file was nearly closed, and then a third party took two weeks to do something everybody assumed would take an afternoon.

Who writes it

The instruction has to come from the parties, which in practice means the agents and, where the arrangement is complicated, the parties' own attorneys.

Escrow can and will ask what the parties want. It is not their job to invent it, and it is not their job to notice that a purchase agreement mentioned solar and to infer what should follow.

Where the underlying agreement is genuinely complex, and third-party solar agreements can be, an attorney should read it and say what the closing needs to accomplish. That is a legal question about a specific contract and it belongs with counsel rather than with a general article.

The buyer's check

Before you sign closing documents, read the instructions and confirm that every solar item you negotiated appears in them by name.

Not in the purchase agreement, which you have already read. In the INSTRUCTIONS, which are what escrow acts on.

If something you agreed is missing, that is a five-minute fix on the day and a permanent problem the day after. The wider list of what to establish before you get this far is in the first questions guide.

The seller's check

The same one, from the other side, plus this: make sure the file records what you are NOT undertaking.

A seller who has agreed to pay off an obligation has not agreed to guarantee the array's future performance, and a clean written record of what was and was not promised is worth having if anybody is unhappy later.

Start at the solar homes hub for how the rest of the transaction fits together.

Anthony Grynchal has been licensed in California since November 2009.