How to transfer utilities from seller to buyer. What happens when a buyer fails to transfer leased utilities like solar panels into their own name?
Q: I’m confused about when sellers are supposed to shut off utilities and how these get transferred. I thought that typically, within a day or two post-settlement, the buyers would transfer utilities into their name, establish new accounts, etc.
Here’s what happened to me. I recently sold a home that included a leased solar system, which the buyer was required to assume the lease, similar to the normal utilities for the property. The buyer switched the rest of the utilities into his name but failed to assume the solar lease. A short time after settlement, one of the buyers had a stroke which may have overtaken other mundane matters like the assumption of the lease.
Since the lease was part of the sales agreement, is there a default on the part of the buyer? Am I required to continue making payments and if so, do I have any recourse?
A: Here’s the bad news: While your sales contract may have required the buyer assume the lease on your solar panels, the obligation on that lease is yours. You entered into a lease with the solar company to lease the panels. Under that agreement, they’re your landlord and you’re the tenant.
Your problems started when you assumed that because you required the buyer to assume the lease, that it would happen automatically. You took your foot off the gas pedal but you shouldn’t have. Before you closed on the sale of your home, you should have received a document from the solar company indicating that the buyer had been approved as a new tenant under the solar lease. It was up to you to make sure that the buyer had assumed the lease before the closing. The closing was your leverage.
How to Transfer Utilities from Seller to Buyer
When it comes to general utilities, like electricity, gas, cable, phone, TV, sewer, and water, in most cases, the sellers cancel their service and the new buyers set up their new service. Some municipalities may require the seller to pay off any balances owed on water, sewer and other local charges, bills and penalties, before allowing the sale to occur. But once the sale occurs, the seller is on the hook to pay whatever was owed before the account was shut off and the buyer is on the hook for whatever is owed from and after the new service was established. And, if the buyers don’t establish new service for these utilities, well, that’s on them.
Has your buyer defaulted under the contract? In a sense, yes, but your remedies under the contract might be limited. In many states, there is a legal concept that says the obligations and representations made by the parties in the contract end at the time of the closing. In some other states, those obligations that clearly should survive the closing can be enforced even after the closing or settlement.
What If the Buyer Doesn’t Transfer Leased Utilities like Solar Panels into Their Name?
Assuming that you can use the contract to go after the buyer, it may be expensive to do so. On the other hand, if the buyer is using the solar panels and is not paying the lease costs, and you’re not paying the bill, your credit history is being harmed. The solar panel company will report you as not paying on the lease or paying late. In either case, your credit score and credit history are negatively affected, so there is a cost to you.
Are your buyers confused about who actually owns the panels? Perhaps your buyers believe they own the solar panels and may not remember that the solar panel company exists. The solar company likely has the right, under the lease, to repossess the solar panels. That would encompass taking them off the roof and haul them away along with the other equipment they own.
That would be unfortunate. So, you should have a conversation with your buyers to discuss what would happen if the solar panels are repossessed, and to remind them that they need to move the contract into their name. Start with a friendly conversation. After all, they’ve had some hard luck since moving into the home and perhaps this just hasn’t risen to the level of “emergency,” with so many other considerations.
If you try and they still won’t take action to change the name on the lease, talk to an attorney that litigates cases to sue the buyer to enforce the terms of the contract.