Selling a Home With a Leased Water Heater or Solar Panels

Many Ontario homes have a water heater that is rented from a company, and a growing number have solar panels installed under a lease or similar contract. Neither is owned outright by the seller, and that surprises buyers who assumed everything attached to the home comes with it.

If you are selling, the main tasks are to find your contract, understand what it says about a sale, tell the buyer clearly, and agree on who will take over or pay out the contract. This article explains the general approach. The specific terms, fees and consents depend on your contract, so confirm them with the company and with your lawyer.

Why rented and leased equipment matters on a sale

A buyer who sees a water heater in the basement or panels on the roof will usually assume they are part of the property. If they are actually rented or leased, the buyer could end up with monthly payments they did not expect, or with equipment the company can remove.

For you, the issue is partly honesty and partly timing. If the contract needs the company's approval for a transfer, or a payout before it can end, that work takes time and can delay closing if you leave it to the last week.

There is no single rule that fits every contract. Water heater rentals and solar leases differ in term, payment, and what happens on a sale, so the document you signed is the starting point.

Find the contract and ask the right questions

Ontario consumer guidance on home service contracts tells homeowners signing water heater contracts to ask whether they will be responsible for transferring the contract on a sale or paying cancellation fees. As a seller, ask the same questions now, because the answers are in the contract you already have.

• Who is the contract holder, and what is the account or contract number?
• Is the equipment rented, leased, or financed, and do you own any part of it?
• What does the contract say about a sale of the home: transfer to the buyer, buyout, or removal?
• Does the company have to approve a buyer, and how long does it usually take?
• What fees apply to transferring or ending the contract, and who pays them?
• What is the payout or transfer process, and can you get the figure in writing?
• Is there any registration on title or any claim against the equipment?

Ask for written answers. A phone call that you cannot prove later is of little use if the buyer's lawyer raises it at closing.

Disclosure and what goes in the agreement

Tell your agent about any rented or leased equipment before the home is listed so it can be described correctly. Do not describe the water heater or panels as included if you do not own them.

The agreement of purchase and sale can then say plainly what is happening. Typical choices are that the buyer assumes the contract, that you pay it out before closing, or that the equipment is removed. Which is possible depends on the contract and on whether the company agrees, so it is worth confirming with the contract holder and with a lawyer before you write it in.

If you are not sure what the contract allows, say that to your lawyer rather than guess. A wrong statement in the agreement can lead to a dispute after closing.

Registrations on title and recent changes

Some companies that lease equipment have registered a Notice of Security Interest on the home's title to protect their interest. Since June 6, 2024, under the Homeowner Protection Act, 2024, a Notice of Security Interest cannot be registered on title for collateral that is consumer goods, and existing consumer-goods notices were deemed expired that day. Consumer goods are goods used primarily for personal, family or household purposes.

That change matters because an old notice on title can cause questions at closing. Whether it applies to your particular equipment, including a solar installation, depends on the facts and the contract, so ask your lawyer to search title and tell you what shows up.

If you have a mortgage, your lender may also have views on leased equipment attached to the property. Mention it when you arrange the mortgage discharge so nothing is a surprise.

What to do next

• Locate every rental, lease or financing document before listing.
• Contact the company and ask in writing what happens on a sale and what it costs.
• Tell your agent and lawyer about the equipment, and give them the documents.
• Make sure the agreement describes the equipment as rented or leased, not as included.
• Ask your lawyer to check title for any registered notices.
• Start the transfer or payout process well before closing.

Frequently asked questions