As solar energy continues to gain popularity, homeowners in California and across the United States are increasingly exploring the benefits of installing solar panels. While the environmental and financial advantages are well-documented, questions often arise about the impact of solar panels on property ownership, specifically regarding liens.
A common concern is whether a solar panel system can create a secondary lien on a house. This article delves into this important topic, explaining what a secondary lien is, how it relates to solar panels, and what homeowners need to know to make informed decisions about their solar investments.
Why Understanding Solar Panel Liens Is Important
Understanding whether a solar panel can become a secondary lien on your property is crucial for homeowners. This knowledge helps in assessing the long-term implications of installing solar panels, especially when considering selling the home or refinancing a mortgage.

A lien can affect your financial standing, your ability to sell your home, and even your credit rating. Therefore, before signing a solar panel agreement, it’s essential to be well-informed about how these systems could potentially impact your property ownership.
What Is a Lien?
A lien is a legal claim or right against a property that is typically used as collateral to satisfy a debt. If a homeowner defaults on their payments, the lienholder has the right to seize the property or force its sale to recover the owed amount.
Liens can be placed by mortgage lenders, tax authorities, or contractors who have provided services or materials to the property.
Primary vs. Secondary Liens
- Primary Lien: The primary lien on a property is usually the mortgage. It takes precedence over any other claims on the property.
- Secondary Lien: A secondary lien is any lien that comes after the primary lien. This could include home equity lines of credit (HELOCs), second mortgages, or in some cases, other financial obligations such as unpaid contractors or, as some may wonder, solar panel systems.
Do Solar Panels Create a Secondary Lien?
The question of whether solar panels create a secondary lien on a house depends on how the solar panels are financed and the terms of the agreement between the homeowner and the solar company.
Leased Solar Panels and Liens
When homeowners lease solar panels, they don’t own the system outright. Instead, they make regular payments to the leasing company. In most cases, a leased solar system does not create a lien on the property. However, some solar leasing companies might file a UCC-1 financing statement.
This document is not a lien but a public record that indicates the leasing company’s interest in the equipment installed on your property. While a UCC-1 statement can be concerning to potential home buyers, it is generally not considered a secondary lien and usually doesn’t affect the primary mortgage or home equity.
Financed Solar Panels and Liens
When homeowners choose to finance the purchase of solar panels through a loan, the situation can be different. If the loan is secured by the solar panels themselves or by the property, it could create a secondary lien. This lien could be similar to a home equity loan or a second mortgage.
The lien ensures that if the homeowner defaults on the loan, the lender can recover the owed amount by taking possession of the solar panels or even forcing the sale of the property.
PACE Programs and Liens
The Property Assessed Clean Energy (PACE) program is a popular financing option for solar panels in some states, including California. Under a PACE agreement, the cost of the solar panels is added to the homeowner’s property tax bill as a special assessment.
PACE liens are unique because they take priority over even the primary mortgage. This “super-lien” status means that in the event of default, the PACE lien must be paid off first, which can complicate refinancing or selling the property.

Potential Impacts of Solar Liens on Homeowners
Understanding the implications of solar liens is essential for homeowners. Here are some potential impacts:
- Selling the Home: If a solar panel system creates a lien on the property, it may complicate the selling process. Prospective buyers may be hesitant to take on a property with an existing lien, or they may require the lien to be satisfied before the sale can proceed.
- Refinancing the Mortgage: A lien from a solar panel loan could interfere with refinancing efforts. Mortgage lenders typically require all liens to be cleared or subordinated before approving a refinance.
- Credit Impact: If a homeowner defaults on a solar loan that is secured by a lien, it could negatively impact their credit score and result in foreclosure in extreme cases.
Frequently Asked Questions (FAQs)
Can I remove a lien created by a solar panel loan?
Yes, in most cases, a lien created by a solar panel loan can be removed by paying off the loan. However, the specific terms of lien removal should be reviewed in the loan agreement.
Does having a solar lien affect my property taxes?
Generally, a lien itself does not affect property taxes. However, financing solar panels through a PACE program can lead to an increase in your property tax bill due to the special assessment.
Will a UCC-1 filing by a solar leasing company affect my ability to sell my home?
While a UCC-1 filing is not a lien, it could be a concern for potential buyers. It is recommended to consult with a real estate attorney to understand how a UCC-1 might impact the sale of your home.
Conclusion
Whether or not a solar panel system creates a secondary lien on your home depends largely on how the system is financed. Leasing generally does not result in a lien, while financing or using a PACE program can. Homeowners should carefully review their solar agreements and consider the potential long-term implications of any liens on their property.
By doing so, they can enjoy the benefits of solar energy without unexpected complications in the future. Always consult with a financial advisor or real estate attorney if you have concerns about how a solar panel lien might affect your property.