New financing options for solar panels on commercial buildings

Under the current law, section 38 of the Danish Registration Act (in Danish: tinglysningsloven), separate rights cannot be maintained over a solar panel system installed on a building if the system is: 

1. integrated into the building; 
2. acquired at the owner's expense; and
3. acquired for the use of the building. 

This means that the solar panel system is considered part of the property on which it is installed, and any existing (or subsequently registered) mortgage will automatically include a security right over the solar panel system. As a result, third parties cannot register a separate security right (mortgage) over the solar panel system or reserve separate rights. Furthermore, the solar panel system cannot be removed from the property by, for example, a leasing provider or a seller with a reserved title, even in cases of non-payment by the owner. This leads to a higher risk on part of the lessor in terms of leasing of solar panel systems.

The proposed addition of a new section 15 to the Danish Promotion of Renewable Energy Act (in Danish: lov om fremme af vedvarende energi / VE-loven) makes it possible, under certain conditions, to reserve separate rights over solar panel systems installed on commercial properties. Section 15 provides that, notwithstanding section 38 of the Danish Registration Act, separate rights may be reserved over solar panel systems installed on commercial buildings or similar properties connected to the collective electricity grid, provided that: 

1. the solar panel system can be removed without causing significant damage to the building; 
2. a declaration regarding the separate right is registered no later than at the time when the installation of the solar panel system begins; and
3. the existing mortgagee, covered by the Danish Financial Business Act (in Danish: lov om finansiel virksomhed) or the Danish Insurance Business Act (in Danish: lov om forsikringsvirksomhed), has consented to the registration. 

The addition of Section 15 aims to create incentives for financing options beyond mortgage-secured loan financing in order to contribute to the expansion of solar panel systems on commercial buildings. The addition will allow businesses to finance solar panel systems through leasing, as the leasing companies can maintain ownership of the solar panel systems. For businesses, this provides greater flexibility, making it easier to replace or upgrade systems without requiring large upfront investments.

Several stakeholders in the solar industry have pointed out that rooftop areas on commercial buildings are suitable locations for installing solar panel systems. Given the extent of such areas, initiatives supporting establishment of solar panel systems on commercial properties align with the government's ambition in relation to quadruplication of the electricity production from renewable energy facilities in 2030. 

At Plesner, we will continue to follow the ongoing development on this matter, and we are available to advise clients on how the development could impact their property strategies.