Another example of an encumbrance on many properties is an existing mortgage or monetary lien. When one has a mortgage on their property, that mortgage is recorded at the Recorder of Deeds Office in the county courthouse of wherever the property is located. Most mortgages or other monetary liens will not authorize entrance into a Solar Lease Agreement or other commercial leasing transaction without the bank or mortgagee’s approval. The property owner should review their mortgage or other monetary lien documents early on in considering a Solar Lease Agreement to identify whether they preclude entrance into this agreement. In many cases the bank or mortgagee will give permission for the property owner to enter into a Solar Lease Agreement when requested. It is very important to identify the terms of your existing mortgage or monetary lien and to contact the lien holder to determine whether there are objections or obstacles to entering a Solar Lease Agreement.
Most Solar Leases will require the property owner to enter into a Subordination Agreement. A Subordination Agreement is a document signed by the Landowner and their bank or other creditor which allows the mortgage or other lien to be subject to the Solar Lease. This means that in the event of the property owner defaulting on their mortgage or lien, the creditor may foreclose the property but acknowledges that the Solar Lease will remain in place and not be erased by any foreclosure proceedings. Otherwise, if a creditor foreclosed on a property in 2021 with a mortgage that was recorded in 2010, and a Solar Lease Agreement was entered in 2020, because the Solar Lease Agreement would be recorded after the mortgage the Solar Lease Agreement would be eliminated unless the bank or creditor executed a Subordination Agreement. Subordination Agreements are very common and are a very important aspect of Solar Lease Agreements.