REAL PROPERTY AND SOLAR An overlooked element

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REAL PROPERTY AND SOLARAn overlooked element

• Financing Solar Energy
• May 21 22, 2009
• Catharine Cresson
• Assistant General Counsel

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Questions you must ask

• Who owns the property?
• Is the property subject to a lease?
• Are there any liens on the property?
• Are the real property taxes current?
• Are there any private restrictions on the use or
  development of the buildings or land?

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Another major issue

• Real (a fixture) or personal property
•  A fixture stays on the land conveys with the
  land when the land is sold.
•  Personal property remains the property of the
  person who has been using the property and is
  legally removed when that person vacates.

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Buildings dont count

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• For valuable consideration, the receipt of which
  is hereby acknowledged, Hotel Monaco LLC hereby
  grants to IPED the following described real
  property situated in the City of Alexandria,
  State of Virginia
• Beginning at a point of beginning at the
  intersection of the southerly line of King Street
  with the easterly line of S. Pitt Street, thence
  east along said King Street for a distance of 250
  feet to the intersection of said King Street with
  the westerly line of S. Royal Street, thence
  south along said S. Royal Street for a distance
  of 250 feet to the northerly line of the property
  now or formerly owned by Redella S. Pepper,
  thence continuing west along said line for a
  distance of 250 feet to the easterly line of the
  aforesaid S. Pitt Street, thence north along said
  S. Pitt Street for a distance of 250 feet to the
  point and place of beginning.
•  
• Witness my hand and seal this twenty-first day of
  May in the year Two Thousand Nine.
• ________________ _________________
• Witness Hotel Monaco LLC

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Real property or personal property?

• The deed transfers the land and the buildings,
  the real property
• A separate agreement for the contents, personal
  property.

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Relevance to financing

• Solar equipment as personal property
• a filing under the Uniform Commercial Code signed
  by the owner of the equipment and filed with the
  Secretary of State
• Solar equipment as real property
• mortgage or deed of trust signed by the owner of
  the real property and recorded in the land
  records of the county.

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States rights

• Real property laws are individual to each state

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Elements that determine real or personal property

1. Is the solar equipment physically attached to the
   building or the land?
2. Can the equipment be easily removed without
   damage to the building or land?
3. Is the equipment related to the operation of the
   business that is being conducted on the property?
4. Is the equipment an essential part of the use of
   the building or land?
5. What is the intent of the parties?
6. Is it reasonable for a purchaser of a building to
   assume that the solar equipment is or is not part
   of the real property?

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Is it attached?

• Roof tops
• Canopies
• Ground mounts 

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A pile driver used for a SunEdison installation
in Alamosa, Co
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Can it be easily removed?

• Roof tops?
• Canopies? 
• Ground mounts?

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558.9 kW fixed canopy system for CSU-Dominguez
Hills in Carson, California installed by
SunEdison in July 2006.
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Is it essential to the business?

• A nine-hundred pound printing press?
• A crane?
• Electricity is ancillary.

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1.7 MW DC single-axis tracking ground mounted
system for the City of Rifle in Colorado is one
of SunEdisons most recent installations
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Is it essential to the building?

• HVAC
• PV a supplementary source

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Close up of a roof-top system at Stevens
Institute of Technology, Hoboken, NJ
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What is the intent of the parties?

• Prudent, if not vital, that the contract
  explicitly state the property status of the
  equipment.
• Who is responsible for the upkeep of the
  equipment?
• Consequences of a right to purchase the system.

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Assumptions of a subsequent owner of the land

• Explicitly addressed in the contract the system
  is personal property that does not convey with
  the land
• Disclosure obligations by
• Land owner
• Signatory to the agreement (the customer)  
• Disclosure obligations to
• a lender
• a prospective purchaser
• an incoming tenant 
• Disclosure by other means

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Consequences if realty

• Transfers to
• new owner or
• a lender

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Clarifying documents

• Documents to clarify the legal status of the
  system
• License 
• Lease
• Easement

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To protect personal property status, you must
know

• Who owns the property? 
• Is the property subject to a lease?
• Are there any liens on the property?
• Are the real property taxes current?

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And dont forget

• Are there private restrictions on the use or
  development of the buildings or land?
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• Examples
• No glare onto adjacent residential neighborhood
• Use can only be for residential purposes
• Approval or consent rights of major tenants
  and/or landlords

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And the moral is

• Real Property law can end up being the difference
  between
• an agreement that
• can be financed and
• one that cant.