real property and solar an overlooked element financing solar energy may 21 & 22, 2009 catharine...

REAL PROPERTY AND SOLARAn overlooked element

REAL PROPERTY AND SOLARAn overlooked element

Financing Solar EnergyMay 21 & 22, 2009

Catharine CressonAssistant General Counsel

Questions you must ask: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?

Another major issueAnother 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.

Buildings don’t countBuildings don’t count

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

Real property or personal property?Real property or personal property?

• The deed transfers the land and the buildings, the real property

• A separate agreement for the contents, personal property.

Relevance to financingRelevance 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.

States’ rights…States’ rights…

Real property laws are individual to each state

Elements that determine real or personal propertyElements 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?

Is it attached?Is it attached?

• Roof tops• Canopies• Ground mounts

A pile driver used for a SunEdison installation in Alamosa, Co

Can it be easily removed?Can it be easily removed?

• Roof tops?• Canopies? • Ground mounts?

558.9 kW fixed canopy system for CSU-Dominguez Hills in Carson, California installed by SunEdison in July 2006.

Is it essential to the business?Is it essential to the business?

• A nine-hundred pound printing press?• A crane?

• Electricity is ancillary.

1.7 MW DC single-axis tracking ground mounted system for the City of Rifle in Colorado is one of

SunEdison’s most recent installations

Is it essential to the building?Is it essential to the building?

• HVAC• PV a supplementary source

Close up of a roof-top system at Stevens Institute of Technology, Hoboken, NJ

What is the intent of the parties?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.

Assumptions of a subsequent owner of the land

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

Consequences if realtyConsequences if realty

• Transfers to:– new owner or – a lender

Clarifying documentsClarifying documents

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

To protect personal property status, you must know:

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?

And don’t forget…And don’t forget…

• Are there private restrictions on the use or development of the buildings or land?

• Examples:– No glare onto adjacent residential neighborhood– Use can only be for residential purposes– “Approval or consent” rights of major tenants

and/or landlords

And the moral is…And the moral is…

Real Property law can end up being the difference between:–an agreement that •can be financed and•one that can’t.