Can APS Installations Be Removed From A Property - For Property Sales & Rentals?
The Eskom energy or power crisis in South Africa led to a proliferation in alternative power supply (APS) installations or equipment to assist individuals and businesses with additional power generation or power savings.
These include the use of petrol generators, solar water heaters, battery powered inverters and photovoltaic (PV) installations, amongst others.
APS installations have now become a common feature in properties across the country and should therefore always be considered in any property transaction - i.e. whether it is included or excluded in the sale of the property or whether the tenant can remove his or her APS installation at the end of the lease period.
- Which APS Equipment Can A Property Seller Remove When Vacating The Property?
When the buyer purchases a home, he or she receives the land, any permanent physical improvements (such as any buildings erected on the land), along with all items that are permanently attached to any of the buildings on the land. This includes all upgrades along with any fixtures and fittings of a permanent nature. If a seller wants to take these with him or her when they sell, the buyer will need to agree to this before it can be removed.
There are four aspects to consider when defining whether a fixture or fitting is permanent:
- Was the item attached to the land or the structure erected on the land?
- Was the intention to serve the land on a permanent nature?
- Would removing it cause damage to the structure or land?
- Was your intention as the homeowner to attach the item permanently?
While not currently dealt with separately, as a system apart from the rest of a property's electrical system, solar installations will undoubtedly need to feature more prominently on the mandatory immovable property condition report required in terms of section 67 of the Property Practitioners Act 22 of 2019, in respect of both the sale and lease of immovable property.
By using the common 'fixtures and fittings' test, it is debatable if such an installation is deemed a fixture, or if it was the intention of the client to merely keep it movable. The tried and tested method to determine what is classified as fixtures and fittings, is to figuratively turn the property on its roof and whatever stays put, can be deemed a fixture, or a fitting.
However, the installation of an APS may well fall outside of this category, because although an APS will in most probability remain fixed in an upside-down house, the intention of the client takes priority. The mere function of such appliance poses a tremendous safety risk if not done by qualified and accredited installers, and therefore the permanence of any APS can be argued. For example, there is a difference between a trolley-inverter that can be moved around the house, and a statically placed inverter that plugs into the main distribution network of the home. Both serve the same purpose - to provide alternative power supply in the event of a power outage. In the 'fixtures and fittings test' these will have opposite outcomes and should therefore be very clearly addressed by the client before any transaction takes place.
Currently there is no default position in terms of whether any type of APS is deemed a movable or a fixture. And unless tested in court, any uncertainty can be avoided if properly declared from the outset. It would be as easy as 'included' or 'excluded' from the agreement.
This inclusion or exclusion may well be a dealmaker or deal-breaker - depending on the needs of the clients. Property Practitioners are therefore encouraged to keep an eye out for any APS and address it accordingly in their negotiations between clients.
- What Happens When The Property Seller Does Not Own The PV Installation?
A solar system (PV installation) can increase the value of your property. Prospective buyers are also attracted to homes with reduced energy costs, environmental benefits, and the growing demand for a power supply independent from Eskom.
The property practitioner should however always determine who owns the PV installation - as part of the legally required (and signed by the seller) Seller Declaration which needs to be presented to the buyer before he or she makes an offer on the property.
If a solar lease or a power purchase agreement (PPA) is in place, the property practitioner needs to obtain a copy of the solar lease or PPA, as these can be long term agreements with complications and issues for the homeowner if they do not understand how it works. Other practical issues here could include contractual terms and commitments which the buyer should be made aware of - such as permanent property access by the service provider for maintenance and repairs of the system.
If the rooftop solar photovoltaic system is leased, then the seller cannot (acting alone) legally convey ownership to the buyer as the PV installation are only truly his or hers once the lease has been paid in full.
There are two ways to go about selling a home with leased panels.
2.1 One option is to transfer the remainder of the lease to the new homeowner. Finding a buyer who is willing to take on the extra expenses might not be a simple task, but with the growing popularity of renewable energy, it is not entirely unlikely.
2.2 Alternatively, the property seller needs to pay off the rest of the lease in full. This places the solar power system under your ownership which allows it to be appraised as a part of your property, increasing the selling price of your home.
- What Happens At Lease Termination When A Tenant Installed An APS?
Most leases contain a clause regarding any improvements on a property and while they do differ, they generally either state that all improvements must remain on termination of the lease, or that the tenant may remove the improvements but must restore the property to the original condition.
Should the tenant require a generator or an inverter to be installed at the property, but the landlord cannot provide one, then this will be for the account of the tenant. This applies to both the residential property sector as well as the commercial property sector, including retail, industrial and office tenants.
It's important to understand that once installed on the property, the generator or inverter will be considered a fixture to the property and will become the property of the landlord, unless there is a prior agreement - in writing and signed by both parties - that the tenant will remove the installation upon termination of the lease agreement.