Does receiving the home by a Lady Bird deed affect whether the solar debt sticks to the equipment or the real property? – North Carolina

Short Answer

In North Carolina, receiving a home through a “Lady Bird deed” style transfer generally does not change whether a solar lender’s rights attach to the real property or only to the solar equipment. That question usually turns on how the solar transaction was structured (loan vs. lease) and how the creditor “perfected” its interest (for example, a UCC filing as fixtures in the county Register of Deeds versus only a personal property filing). If the creditor recorded a real-estate-type lien or a fixture filing that shows up in the land records, a buyer’s title company will usually require a payoff and recorded release before closing.

Understanding the Problem

In North Carolina, when family members receive a house from a parent through a deed designed to pass title at death (often called a “Lady Bird deed”), a common question is whether an unpaid solar obligation “runs with” the house or only with the solar equipment. The key decision point is whether the solar company’s recorded paperwork treats the panels as part of the real estate (something that must be cleared for a sale) or as personal property collateral (something that may be handled differently at closing). Timing matters because a pending sale often requires clearing any recorded lien or recorded UCC fixture filing before the Register of Deeds records the buyer’s deed and the closing lender funds.

Apply the Law

Under North Carolina law, a change in ownership (including a transfer at death) does not, by itself, wipe out a properly recorded lien or security interest. For solar transactions, the “sticks to the real property vs. sticks to the equipment” issue usually depends on (1) what documents were signed (loan, lease, or power purchase agreement), and (2) where and how the creditor filed to put the world on notice (for example, a UCC financing statement filed as a fixture filing in the county land records). Separately, even when a lender agrees the lien should be released, title companies typically want a clear recorded release or termination that matches what was filed.

Key Requirements

• Identify what was encumbered: Determine whether the filing claims an interest in “fixtures” (often treated as part of the building/land for notice purposes) or only in “goods/equipment” (personal property).
• Confirm how the creditor gave public notice: Check whether there is (a) a deed of trust/security instrument in the Register of Deeds land records, (b) a UCC fixture filing recorded in the Register of Deeds, or (c) only a standard UCC filing (commonly searchable through the North Carolina Secretary of State).
• Obtain the correct recorded release/termination: The release must match the type of filing that clouds title. A UCC-3 termination addresses a UCC financing statement; a satisfaction/release addresses a deed of trust or similar real property security instrument.

What the Statutes Say

• N.C. Gen. Stat. § 45-36.10 (Satisfaction of security instrument) – Explains what a recorded “satisfaction” must include and that recording it terminates the effectiveness of the recorded security instrument.
• N.C. Gen. Stat. § 45-42.3 (Automatic release of ancillary security instruments) – Provides that when a recorded security instrument is satisfied/expired, certain related recorded instruments (including a recorded fixture financing statement) that secure the same obligation are deemed released in many situations, with listed exceptions.

Analysis

Apply the Rule to the Facts: Here, the house passed to two family members at the parent’s death under a Lady Bird deed approach, and the sale is now threatened by an unresolved solar “lien.” The ownership transfer itself typically does not decide whether the obligation is tied to the land records; instead, the deciding issue is what the solar creditor recorded and whether that recorded item is a real property security instrument or a UCC filing (including a fixture filing) that still appears as active. The advice to file a UCC-3 termination suggests the issue may be a UCC financing statement, but the closing risk usually remains until the termination is accepted and indexed (or until the creditor records an appropriate real property release, if one was recorded).

Process & Timing

1. Who files: Typically the secured party (the solar lender/assignee) files the termination or release; sometimes an owner or closing attorney submits it for recording after obtaining the secured party’s signature. Where: If it is a fixture filing recorded in land records, it is handled through the Register of Deeds for the county where the property sits; if it is a standard UCC filing, it is often handled through the North Carolina Secretary of State UCC system. What: A UCC-3 termination for a UCC financing statement, or a satisfaction/release for a deed of trust/security instrument. When: Before closing (and early enough for indexing/search updates), because many closings will not fund with an unreleased recorded encumbrance.
2. Match the fix to the filing: Pull the exact recorded document(s) found in the title search and confirm the file number/recording data. A UCC-3 that does not match the original filing information, debtor name format, or recording office is a common reason it gets rejected or fails to clear title.
3. Confirm clearance: After acceptance/recording, rerun the applicable search (land records and/or UCC search) and obtain the recorded stamp/indexing information to provide to the buyer’s closing team.

Exceptions & Pitfalls

• Loan vs. lease/PPA paperwork: A solar lease or power purchase agreement can create transfer/assignment restrictions that affect a sale even if there is no traditional “lien.” That is a contract issue separate from whether a recorded lien clouds title.
• Fixture vs. personal property confusion: Solar panels can be treated as “fixtures” for filing/notice purposes depending on the documents and installation. A title search flag often points to a fixture filing recorded in the land records, which typically must be cleared for a clean deed transfer.
• Wrong recording office: Some terminations must be filed with the Secretary of State, while others (fixture filings) are recorded with the Register of Deeds. Filing in the wrong place may not clear the issue the title company is seeing.
• Ancillary instrument not automatically released: Even though North Carolina has an automatic-release rule for certain ancillary security instruments, it has exceptions. If the ancillary instrument secures additional obligations or the documents say it does not release automatically, a separate termination/release may still be required.
• Owner not personally liable vs. title still clouded: Even when the heirs are not personally on the solar note, a recorded encumbrance can still block a sale until it is released or otherwise addressed at closing.

Conclusion

In North Carolina, a Lady Bird deed style transfer usually does not decide whether solar debt attaches to the equipment or the real property; the recorded documents and filing type control. If the solar creditor recorded a deed-of-trust-style lien or a UCC fixture filing in the county land records, it can cloud title until a proper recorded satisfaction or UCC-3 termination clears it. The next step is to identify the exact recorded filing and submit the matching release to the correct recording office before the scheduled closing date.

Talk to a Real Estate Attorney

If a home sale is at risk because a solar filing or lien will not clear, a real estate attorney can review the recorded documents, confirm the correct release path, and coordinate with the closing team and the creditor. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.