Do Lease Obligations Follow a Home Sale?

What do solar panel and liquid propane gas service contracts say about buyer who purchase homes with these contracts in place?

Q: We purchased a home with liquid propane (LP) gas service to heat the pool. We did not heat the pool and did not use the LP gas at all. Now the gas company wants to charge us for the LP gas tank rental fee. Are we required to pay the tank rental fee and any maintenance costs to maintain the LP gas home system?

A: You pose an interesting question. Do lease obligations follow a home sale?

Solar panel lease obligations

One of the first things that comes to mind is a solar panel installation. Frequently, homeowners finance or lease the installation of solar panels. The financing or leasing is typically for a period of up to twenty years. If you buy a home with solar panels, be aware that you’re going to have to pay the ongoing fees for years to come.

In most circumstances, the financial obligations of the seller are satisfied at closing. The buyer is not then held responsible for the actions of the seller. For example, the seller’s mortgage and home equity line of credit must be paid off at the closing. Or, if a seller has financed home renovations, the financing must be paid off at the closing as well.

Do solar lease obligations follow a home sale?

With solar panels, the seller can pay off the installation. But, buyers must insist that the seller pay off that obligation. That way, the buyer would not become bound to those future payments.

Some of these financial items affect the title to the property. They could remain attached to the title after you purchase the home. Want to know if they are? Do a title search for the property. You will see if what, if any, financial obligations are tied to the title.

Title report should show solar panel lease obligations

Let’s say you’re buying a home with a solar panel lease. When you receive the title report on the property, it should show the existence of the solar panel lease or financing obligation. Buyers should ask the seller whether the solar panels are paid off or whether the buyer will have to assume future payments for the panels. And, for how much longer.

But you should be on notice of that obligation when you review the title report on the property you are buying.

To be clear, many people may not look at the title report. But in states where attorneys represent buyers in their purchase of a home:

  • The attorney should review the title report and
  • Alert the buyer to the existence of a solar panel lease or financing agreement.

In states where buyers purchase a home without an attorney:

  • The buyer’s lender may let the buyer know
  • But does not have a duty to the buyer.

Let’s say the lender allows the solar panel lease to stay on title to the property and the buyer does not object. The buyer would take on the obligation to make the monthly lease payments to the solar panel company.

Do liquid propane lease obligations follow a home sale?

If you live in an area where homes have liquid propane tanks, find out who owns the tank. Is it the seller or the liquid propane company? This is vital to know. Is the buyer obligated to make payments to that company for future deliveries of propane? Ask if there are monthly payments due for a lease or account payments. Even if you don’t use what’s in the tank or receive any future deliveries.

Generally, when companies place leased items on property they do not own, the lease document is recorded against the title to the property. The propane tank company would record or file a simple document against the title to the property. That lets third parties know that the owner of that property has an ongoing obligation to pay on a lease. This way, a prospective buyer is put on notice that they will be responsible for future payments on that lease.

We see this quite often with laundry leases in apartment buildings. Third-party laundry machine providers lease their equipment on a long term basis to a building owner with the expectation that they will receive monthly rental income on the laundry equipment or can collect the revenue from the machines. The laundry machine company records or files a document against the title to the property. Then, future owners are on notice that there is a financial obligation.

Look to title report for information on liquid propane company 

Back to your question. You need to determine whether the title to your property contained any information about the liquid propane company’s tank. If the propane tank company placed a notice on the title to your home, you’ll need to abide by the terms of the arrangement. You may have the ability to terminate the arrangement but will need to know the terms of the contract.

Another option: Call the company to remove the tank. If the tank clearly has identifying information to state that the tank is owned by the propane tank company, you could have called the company to have them remove the tank when you purchased the home. Even better: asking the seller to call the company before closing.

If nothing on title, and tank has no identifying marks, service agreement might not bind buyer

But consider this:

  • If the propane tank company did not record or file anything against the property
  • And, the tank has no marks to identify the ownership of the tank
  • There may not be a service agreement in place with the prior owner
  • Or, if there is an agreement, it might not bind you and you’d be able to cancel.

As to whether you’d owe any money to them, that’s another good question. How would you know to pay them a fee if you had no notice of the arrangement? Ask how the seller’s obligation for future payments would transfer to you without any notice or agreement on your part. And please let us know how it turns out.

Read more about lease obligations

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©2023 by Ilyce Glink and Samuel J. Tamkin. Distributed by Tribune Content Agency. A1612