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Shared ownership property with solar panels - energy income lease restriction
Hello everyone
Is anyone here familiar with shared ownership leases?
Someone I know recently purchased a housing association/shared ownership property.
The H.A. property in question had solar panels fitted at the time of construction, by the developers. It was then sold to it's first shared owner, and then the second. Terms of the lease on the property state the H.A. reserves the right to claim any income for 'energy generating' equipment at the property, and that the owner cannot claim anything. At time of purchase, the belief of both the first and second owners -- and the people they spoke to at the housing association -- was that the H.A. were receiving some income via the feed-in tariff, but upon full staircasing, the ownership of the equipment would pass fully onto the property owner and they would then be able to receive any FIT income.
However, some six months after purchase, the new owner became suspicious when nobody had asked for any 'generation meter' readings, which are required quarterly under FIT. The previous owner confirmed they'd never been asked for these either. There is no export meter fitted at the property to measure exported energy (which would be necessary to claim for any non-FIT type of scheme). So the only other way anyone could possibly claim anything would be via the FIT, which requires regular generation-meter readings.
Subsequent enquiries, revealed that the property and equipment were NEVER registered with the Central FIT Register. Nobody is receiving or had ever received any FIT payments.
This means:
1. Nobody is benefiting from FIT payments NOW.
2. Nobody can benefit from FIT payments in the FUTURE*.
(*Any system commissioned before 2016, had to be registered by a date in 2016, or they became ineligible for any future payments.)
If the systems HAD been registered in 2016, they would have generated at least £5,000 in income for someone. Be it the owner, or the H.A. (and thus indirectly benefiting their customers.)
When the H.A. were informed the solar panels had never been registered by anyone for FIT, they seemed surprised. When informed the opportunity to register them was due to end in March 2019, the H.A. initially seemed willing to help the owners register for FIT before it's closure, but then came back and said the terms of the lease forbid tenants from claiming any payments and there was nothing more they could do. They simply refused to co-operate any further.
Since that time, the owner has discovered it was no longer possible to register for FIT, but they are nonetheless interested in claiming for the upcoming Smart Export Guarantee which is due to replace it soon. What they would like to know is why the H.A. is so insistent and adamant about preventing their shared owners from receiving any income and whether that's legally justifiable in any way. We are, after all, talking about a charitable housing provider, and a low income household, here ... and clearly the H.A. either can't claim, or does not care to claim, the income for themselves. Why refuse to claim the payments themselves whilst also obstructing their tenants from claiming them?
1> How does anyone benefit from this restrictive lease clause against energy income, given the facts as they currently stand?
2> Can a H.A. insist upon a lease clause which specifically denies income opportunity to a tenant if there is no clear benefit to the H.A.?
3> If there is no benefit to the H.A. in such a clause, but it harms the tenant, from a legal point of view, are they required to remove it?
4> Even if there was a potential benefit to the H.A. in the past, if there is no such benefit NOW, can the lease clause still persist or should it be removed?
5> If a reason for inserting a restrictive clause was valid at the time, but the reason is no longer valid because of a change in the law, is there still a legal basis for keeping it, or are they required to remove it on request?
6> Shouldn't a lease term have a clear benefit to one or both parties?
The only possible 'polite' explanation we can come up with for this state of affairs -- and the only reason we can think of why it might make sense for them to continue to insist upon this clause now -- is that the Feed-in Tariff cannot apparently be claimed for any solar panels which have already been funded via a public grant, or state aid scheme of some kind. Not until such grant money is repaid. Perhaps the property acquisition itself was funded via government grant money and so the panels count as having been funded via grant money too? And so, until full stair-casing, nobody can claim the FIT, and so until then, they're acting to stop tenants from attempting to claim the FIT. Hence the restrictive clause. But if this is the reason (and it is just educated legal speculation), why isn't this specifically declared anywhere as being the reason behind the restrictive lease term?
7> Shouldn't the reason for a restriction be clearly specified and included in a lease clause, or at least explained somewhere -- so that both parties understand why the restriction was placed on the lease, and thus when it might no longer be relevant / might need to be reviewed?
There is NO explanation provided in the lease, for the 'income restriction'. The lease simply states the leaseholder cannot claim any income from the panels at all. It doesn't provide any rationale for why this restriction is being applied. I strongly suspect the 'double funding / grant money' issue lies behind it. But if this rationale is the case, then it seems to me this clause needs to be reviewed in light of recent legal changes affecting FIT and SEG. But since no formal rationale was ever given for the restrictive clause, and it appears the H.A. doesn't even really know itself, it is enforcing the clause whilst lacking real awareness or comprehension of why it even exists at all. The lack of a formal written rationale for this restriction also makes it harder for tenants challenge the validity of this restriction - and this in turn, makes me think it would have been proper to offer a rationale for it from the get-go.
The lease was clearly written with the FIT in mind. The double-subsidy issue would be relevant there. I note that FIT application forms ask if you have received a subsidy or grant. FIT applications also ask for two documents which are the same two documents the H.A. is purposely withholding. But if the double-subsidy issue is the reason for the restrictive clause ... the FIT is no more and cannot be claimed any longer. FIT might have been considered a state subsidy scheme but the replacement scheme (Smart Export Guarantee) will NOT be a state subsidy scheme, and the government has confirmed that recipients of state aid or grants WILL be able to claim the new SEG. The new scheme doesn't subsidise the cost of any equipment being installed so there is no risk of 'double funding'. The SEG will simply require energy companies to buy any generated energy off their customers at market rates, if the customer so requests. This simply brings us into compliance with new EU laws which require energy generators to be fairly compensated for any energy they provide to the national grid.
The home owner has contacted the H.A. to inform them of the findings above, but the H.A. have already said they will NOT permit this. They simply state that it is forbidden by the lease clause. Therefore the clause is basically a blanket ban against their residents claiming income they would otherwise, seemingly, be legally entitled to.
I'm not sure where this leaves them or what their next move should be it. It seems to me that the H.A. needs to explain the rationale behind the clause, but they don't seem to be able to do so, and are simply falling back continuously on "the lease says no, we can't explain why, but you can't do this and that is the end of the discussion." It seems clear to me that enforcing this clause is actively harmful at this stage to the tenant and helps nobody at all, but nobody cares and it's not clear how to proceed in resolving this.
At this stage, I'd like to know what's reasonable in terms of a H.A. applying a lease restriction on a tenant's income. A H.A. is supposed to be a public interest organisation, a charitable organisation that helps their tenants. I would assume that any income restrictions of this type, would have to have some very strong legal rationale behind it other than "because we said so." The double-funding rationale (if it is correct) would fit the bill, but would now appear to be obsolete, and the clause that was written to support that, is obsolete too. Preventing tenants claiming the new scheme would not seem to be justifiable to me, but I'd like to hear from any legal experts who may be lurking in these parts on my interpretation on all this, and would be grateful for any suggestions or pointers on what our next move should be on this.
Huge TIA to anyone who is able to offer any help or advice!
Is anyone here familiar with shared ownership leases?
Someone I know recently purchased a housing association/shared ownership property.
The H.A. property in question had solar panels fitted at the time of construction, by the developers. It was then sold to it's first shared owner, and then the second. Terms of the lease on the property state the H.A. reserves the right to claim any income for 'energy generating' equipment at the property, and that the owner cannot claim anything. At time of purchase, the belief of both the first and second owners -- and the people they spoke to at the housing association -- was that the H.A. were receiving some income via the feed-in tariff, but upon full staircasing, the ownership of the equipment would pass fully onto the property owner and they would then be able to receive any FIT income.
However, some six months after purchase, the new owner became suspicious when nobody had asked for any 'generation meter' readings, which are required quarterly under FIT. The previous owner confirmed they'd never been asked for these either. There is no export meter fitted at the property to measure exported energy (which would be necessary to claim for any non-FIT type of scheme). So the only other way anyone could possibly claim anything would be via the FIT, which requires regular generation-meter readings.
Subsequent enquiries, revealed that the property and equipment were NEVER registered with the Central FIT Register. Nobody is receiving or had ever received any FIT payments.
This means:
1. Nobody is benefiting from FIT payments NOW.
2. Nobody can benefit from FIT payments in the FUTURE*.
(*Any system commissioned before 2016, had to be registered by a date in 2016, or they became ineligible for any future payments.)
If the systems HAD been registered in 2016, they would have generated at least £5,000 in income for someone. Be it the owner, or the H.A. (and thus indirectly benefiting their customers.)
When the H.A. were informed the solar panels had never been registered by anyone for FIT, they seemed surprised. When informed the opportunity to register them was due to end in March 2019, the H.A. initially seemed willing to help the owners register for FIT before it's closure, but then came back and said the terms of the lease forbid tenants from claiming any payments and there was nothing more they could do. They simply refused to co-operate any further.
Since that time, the owner has discovered it was no longer possible to register for FIT, but they are nonetheless interested in claiming for the upcoming Smart Export Guarantee which is due to replace it soon. What they would like to know is why the H.A. is so insistent and adamant about preventing their shared owners from receiving any income and whether that's legally justifiable in any way. We are, after all, talking about a charitable housing provider, and a low income household, here ... and clearly the H.A. either can't claim, or does not care to claim, the income for themselves. Why refuse to claim the payments themselves whilst also obstructing their tenants from claiming them?
1> How does anyone benefit from this restrictive lease clause against energy income, given the facts as they currently stand?
2> Can a H.A. insist upon a lease clause which specifically denies income opportunity to a tenant if there is no clear benefit to the H.A.?
3> If there is no benefit to the H.A. in such a clause, but it harms the tenant, from a legal point of view, are they required to remove it?
4> Even if there was a potential benefit to the H.A. in the past, if there is no such benefit NOW, can the lease clause still persist or should it be removed?
5> If a reason for inserting a restrictive clause was valid at the time, but the reason is no longer valid because of a change in the law, is there still a legal basis for keeping it, or are they required to remove it on request?
6> Shouldn't a lease term have a clear benefit to one or both parties?
The only possible 'polite' explanation we can come up with for this state of affairs -- and the only reason we can think of why it might make sense for them to continue to insist upon this clause now -- is that the Feed-in Tariff cannot apparently be claimed for any solar panels which have already been funded via a public grant, or state aid scheme of some kind. Not until such grant money is repaid. Perhaps the property acquisition itself was funded via government grant money and so the panels count as having been funded via grant money too? And so, until full stair-casing, nobody can claim the FIT, and so until then, they're acting to stop tenants from attempting to claim the FIT. Hence the restrictive clause. But if this is the reason (and it is just educated legal speculation), why isn't this specifically declared anywhere as being the reason behind the restrictive lease term?
7> Shouldn't the reason for a restriction be clearly specified and included in a lease clause, or at least explained somewhere -- so that both parties understand why the restriction was placed on the lease, and thus when it might no longer be relevant / might need to be reviewed?
There is NO explanation provided in the lease, for the 'income restriction'. The lease simply states the leaseholder cannot claim any income from the panels at all. It doesn't provide any rationale for why this restriction is being applied. I strongly suspect the 'double funding / grant money' issue lies behind it. But if this rationale is the case, then it seems to me this clause needs to be reviewed in light of recent legal changes affecting FIT and SEG. But since no formal rationale was ever given for the restrictive clause, and it appears the H.A. doesn't even really know itself, it is enforcing the clause whilst lacking real awareness or comprehension of why it even exists at all. The lack of a formal written rationale for this restriction also makes it harder for tenants challenge the validity of this restriction - and this in turn, makes me think it would have been proper to offer a rationale for it from the get-go.
The lease was clearly written with the FIT in mind. The double-subsidy issue would be relevant there. I note that FIT application forms ask if you have received a subsidy or grant. FIT applications also ask for two documents which are the same two documents the H.A. is purposely withholding. But if the double-subsidy issue is the reason for the restrictive clause ... the FIT is no more and cannot be claimed any longer. FIT might have been considered a state subsidy scheme but the replacement scheme (Smart Export Guarantee) will NOT be a state subsidy scheme, and the government has confirmed that recipients of state aid or grants WILL be able to claim the new SEG. The new scheme doesn't subsidise the cost of any equipment being installed so there is no risk of 'double funding'. The SEG will simply require energy companies to buy any generated energy off their customers at market rates, if the customer so requests. This simply brings us into compliance with new EU laws which require energy generators to be fairly compensated for any energy they provide to the national grid.
The home owner has contacted the H.A. to inform them of the findings above, but the H.A. have already said they will NOT permit this. They simply state that it is forbidden by the lease clause. Therefore the clause is basically a blanket ban against their residents claiming income they would otherwise, seemingly, be legally entitled to.
I'm not sure where this leaves them or what their next move should be it. It seems to me that the H.A. needs to explain the rationale behind the clause, but they don't seem to be able to do so, and are simply falling back continuously on "the lease says no, we can't explain why, but you can't do this and that is the end of the discussion." It seems clear to me that enforcing this clause is actively harmful at this stage to the tenant and helps nobody at all, but nobody cares and it's not clear how to proceed in resolving this.
At this stage, I'd like to know what's reasonable in terms of a H.A. applying a lease restriction on a tenant's income. A H.A. is supposed to be a public interest organisation, a charitable organisation that helps their tenants. I would assume that any income restrictions of this type, would have to have some very strong legal rationale behind it other than "because we said so." The double-funding rationale (if it is correct) would fit the bill, but would now appear to be obsolete, and the clause that was written to support that, is obsolete too. Preventing tenants claiming the new scheme would not seem to be justifiable to me, but I'd like to hear from any legal experts who may be lurking in these parts on my interpretation on all this, and would be grateful for any suggestions or pointers on what our next move should be on this.
Huge TIA to anyone who is able to offer any help or advice!
