Julie Griffiths* wanted to reduce her carbon footprint by installing solar panels. The cost would have been a prohibitive £12,000, so she signed a deal to lease part of her roof to a solar power company, which would fit the panels for free. It would pocket the newly introduced feed-in tariffs (FITs) – subsidies paid by the government for the electricity generated. She, meanwhile, would have lower energy bills. At the end of the 25 years, the panels and the tariffs would be hers.

It seemed a win-win situation until recently, when she needed to sell the house. Her buyer’s mortgage application was refused because of the lease agreement, which had effectively signed over a large part of the roof to the solar company.

“A clause in the lease allowed us to buy out the panels for a fee to compensate the company for the loss of their FITs,” she says. “We were prepared to do it to be able to sell our house and move on with our lives, but the company had passed the management of the panels on to an agent, who seemed reluctant to let us proceed.”

Eventually, after the Observer intervened, Griffiths was allowed to buy the panels for £20,500, an uncosted sum that she was told was non-negotiable. Not only was this nearly double the price she’d have paid to install the system herself, but she had also missed out on nearly eight years of FITs worth, around £7,300. All in all, the “free” system has left her around £16,000 out of pocket.

I am retired with MS and need to sell my house, but the buyer is refusing to go ahead unless I have the panels removed

The government introduced the generous incentives in 2010. The FITs, funded by a levy on all energy bills, have encouraged 800,000 households to go solar, but they have also spawned a multitude of startups that have exploited homeowners.

Homeowners who wanted to do their bit for the environment but could not afford the outlay were promised up to 50% off their bills if they signed over the airspace above their roof for 25 years. For the startups it was a bonanza. Payouts would earn them an average of £23,000, more than triple their investment. But unscrupulous contracts obliged owners to seek permission if they wanted to extend or sell their home, or compensate them if the panels were temporarily removed for roof repairs.

Since 2012, as installation costs have plummeted, the feed-in rates have been slashed for new installations by 90%, and they will be abolished for those who install solar panels after 31 March next year. The profiteering startups have all but disappeared, but their legacy will blight the lives of homeowners and unwitting buyers for two more decades.

Many are discovering the high price of their “free” deal as they try to sell. The 25-year leases apply to the property regardless of who owns it, and they have to find a buyer willing to take on the remaining years. And even if a buyer is happy, mortgage lenders may not be. The deal is treated as a leasehold, and contracts skewed in favour of the company are deemed risky by banks and building societies.

Claire Hunt discovered that her elderly father had signed up to a leased solar installation when his roof began leaking. He had been talked into the 25-year contract in 2011, when FITs were at their peak, and the company has since ceased trading.

“We were directed to another company which has apparently taken over the contract, but we’ve been unable to engage with them by phone or in writing,” says Hunt. “It is only because of the leak that I have finally had sight of the contract and I am devastated to find there isn’t even a buyout clause to end it. We are therefore arranging to remove the solar panels ourselves and will put them back when completed. A very expensive fix.”

Fiona Baker is similarly trapped after agreeing to leased solar panels in 2010. “I am retired with MS and myotonic dystrophy, and need to sell my house, but the buyer won’t go ahead unless I have the panels removed,” she says. “This is apparently not possible until the lease expires at the end of the 25 years.”

Meanwhile, Simon Norris is unable to remortgage because the firm that installed his leased panels appears to have breached building regulations. “The lender wanted a structural survey, which concluded that the roof should have been reinforced before the panels were fitted,” he says.

Most lenders will agree a loan on a property with leased solar panels provided the contract meets certain conditions, one of them being that the installing company be accredited, the installation be approved and insured, and panels removable without penalties for missed FIT payments. Crucially, a lender’s permission needs to be obtained if an existing borrower decides to install leased panels.

In the race to profit from FITs, many companies ignored these conditions. They also did not inform customers of the full value of subsidies they would be entitled to if they bought the panels outright or the implications for current or future mortgages as required by the Renewable Energy Consumer Code (RECC).

Since most of the original companies have ceased trading, it can be difficult for sellers and buyers to find out who owns their panels. Jim Cowan recently bought his house without receiving the contract for the leased panels. He can’t find out who owns them since the installing company no longer exists and may find himself unable to remortgage or sell. Householders in this predicament have to submit a subject access request to energy regulator Ofgem’s FIT register team and provide proof that they are the property owners.

Now that FITs have all but dried up, profiteering has taken a new form. This time companies are targeting those who bought panels outright between 2010 and 2015 and continue to receive the old higher-rate subsidies. They offer a tempting-looking lump sum in return for the FIT for the remainder of the 25 years. However, the offered price is invariably less, sometimes by 75%, than the sum customers would receive from their FIT and the conditions are often similar to the lease stitch-up.

Government subsidies on solar panels will cease at the end of next March. Miss the deadline and it would take a working household up to 70 years instead of the current 20 to recoup the average £6,500 cost. Those hoping to install panels should get quotes only from companies listed on the RECC website and request a written estimate of the output from the system and the financial benefits. Anyone buying a house with leased solar panels should ensure the contract complies with the minimum requirements laid down by the Council of Mortgage Lenders.

* All names have been changed