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How Does the UCC Lien Work?

close up of woman going through a file drawer for post How Does the UCC Lien Work?

If you’ve recently financed solar panels or other large purchases, you may have encountered the term “UCC lien.” Understanding how it works is essential, especially if you’re a homeowner wondering how it impacts your property. Let’s break it down in simple terms.

What Is a UCC Lien?

A UCC lien is not a traditional real estate lien that you might associate with mortgages or property taxes. Instead, it’s a lien against personal property under the Uniform Commercial Code (UCC). In the case of solar panels, this lien applies to the solar panels and associated equipment installed on your home, not the home itself.

How Does It Work?

Think of a UCC lien as similar to the lien a bank places on your car when you finance it. Even if the car sits in your driveway or garage, it’s still personal property—not part of your house. Likewise, solar panels count as removable personal property, even though they’re installed on your roof or land.

The lender or solar company uses the UCC lien to secure their interest in the solar panels until your loan is paid off. If you default on the loan, the lien gives the lender the legal right to repossess the panels.

Key Points About UCC Liens on Solar Panels

  1. Not a Real Estate Lien:A UCC lien does not encumber your house. It only affects the personal property associated with the lien, such as your solar panels and their related equipment.
  1. Does It Affect Selling Your Home?You can still sell your home with a UCC lien in place. However, buyers or their lenders may ask you to pay off the lien before finalizing the sale. That’s because the lien is tied to the solar panels, not the property itself.
  1. Can You Remove the Solar Panels?Removing or relocating the solar panels without settling the lien may violate the terms of your financing agreement. This could lead to legal complications or repossession of the panels.
  1. Why Do Lenders File UCC Liens?

Filing a UCC lien is a standard practice to protect the lender’s financial interest. It ensures that, in the event of non-payment, they have recourse to recover their investment.


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What Should You Do if You Have a UCC Lien?

  • Understand Your Loan Agreement: Review your financing documents to understand the terms and conditions of the lien.
  • Communicate With Your Lender: If you’re planning to sell your home or make changes to your solar panels, notify your lender in advance.
  • Seek Legal Advice: If you’re unsure about the implications of the lien or encounter issues, consulting a legal professional can help you navigate the situation.

The Bottom Line

While a UCC lien might sound intimidating, it’s simply a way for lenders to secure their investment in the solar panels or other financed equipment. It doesn’t prevent you from selling your home or making changes, but it does require careful attention to your loan obligations. When you understand how it works, you can confidently handle any situation involving the lien.

If you have questions about UCC liens or need assistance with your solar panel financing, reach out to a legal or financial expert. Having the right information can save you time and stress.

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Nothing herein is intended, and does not, create an attorney client relationship and is for informational purposes only. The Prevost law firm is licensed in Texas and is licensed to practice law in all Texas state courts and in multiple Federal Courts and Arbitration in 46 states. Solar sales are governed by both state and federal law. The attorney client relationship will only be created after the parties enter into a signed letter of representation.