Solar contracts can be lengthy, and the fine print matters. Here are some red flags and common pitfalls to watch out for before you sign any solar lease or PPA agreement:
- Steep Escalator Clauses: Not all solar payments are fixed flat rates – many leases/PPAs include an escalator clause that raises your payments by a certain percentage each year (often 1–3% annually, sometimes up to 4–5%). That means your “cheap” solar bill now will grow larger over time. A 2.9% yearly increase doubles your payment in about 25 years! This is often buried in the contract. An escalator isn’t necessarily a deal-breaker (utility rates might rise too), but beware of anything above ~3%, which could outpace your utility’s rate hikes and eat away your savings. Ideally, negotiate the lowest escalator possible (or none at all). Always do the math: with a 3% escalator, a $150/month solar payment today could become ~$300 by year 25. If that sounds unappealing, look for a contract with a more stable rate.
- Selling Your Home – Transfer Clause: One of the biggest issues with solar leases is what happens if you need to sell your property. A good contract will spell out how you can transfer the agreement to the next owner. Red flag if the contract makes it very difficult or costly to transfer. In practice, the buyer will usually need to qualify (credit-wise) and agree to take over your payments, or you’ll have to buy out the contract. Some contracts even require you to get the solar company’s approval of the new buyer – meaning if the buyer doesn’t meet their standards, they can veto it. This can really complicate a home sale. Even if the buyer is willing, remember that certain loans like FHA will not allow a home purchase with a leased solar system attached. You might be narrowing your pool of potential buyers. To avoid surprises, read the transfer section carefully and ask: “What are my options if I move in 5 or 10 years?” If the terms sound restrictive, ask the company if they have a more flexible program or consider other options (like a loan or purchasing instead).
- No Home Value Benefit: Understand that leased panels do not increase your property value the way owned panels might. Since you don’t own the asset, you can’t sell it with the house for a higher price. In fact, some appraisers will assign $0 value to a solar system that’s leased, because it’s not the homeowner’s property. This isn’t so much a red “flag” as a reality check: don’t assume solar will boost your home’s selling price unless you own the system. A leased system is more like an appliance rental that the new owner has to take over, which could even be seen as a liability. Go in with eyes open that the benefit of a lease is monthly savings, not equity in your home.
- Hefty Termination or Buyout Costs: Check if there’s any early termination fee or how the buyout amount is calculated. Life happens – maybe 10 years from now you’re flush with cash and want to buy the system, or you need to exit the contract. Some leases won’t let you buy the system until a certain year, or they might charge a high fair market value price at the end. Others allow an early buyout but at a steep price. Make sure these terms are clear. A red flag would be a contract that locks you in completely with no option to eventually purchase or prepay. The flip side: if they promise you “you can buy it for cheap after 5 years,” get that in writing with a formula or set price. Don’t rely on a verbal promise.
- Maintenance and Repair Terms: One selling point of leases is that the company handles maintenance. Still, read what that actually covers. Are repairs and inverter replacements included at no cost? They should be. What about removing and re-installing panels if you need to replace your roof or do construction? Some contracts will cover one removal/reinstall at homeowner’s request, others won’t (or will charge). Know who is liable if the panels cause any roof leak or damage. Ideally, the contract should guarantee workmanship (e.g. if there’s a roof leak due to their install, they fix it). Red flag if the contract disclaims all responsibility for anything once installed. Also, look for a clause about performance or energy guarantee – do they promise a certain output or savings level? If not, that means if the system under-produces, it’s on you to notice and complain. If yes, see how they compensate (refund, credit, etc.). And check how quickly they promise to fix issues; you don’t want to be stuck paying full electric bills and a solar payment if the system goes down.
- Fine Print Surprises: Solar contracts can have other sneaky clauses. For example, mandatory arbitration (limiting your ability to sue), automatic renewal if you don’t give notice by a certain time, or even clauses about not disparaging the company. While many of these are standard, they’re good to note. One key piece of advice from consumer advocates: never rely solely on the salesperson’s summary of the contract. Salespeople might gloss over details or use different terminology. Always read the document yourself – every page – or have a lawyer/friend read it too. As the Massachusetts Attorney General’s office puts it: “Do not rely on someone else to tell you what a document is or to summarize it for you. Pay particular attention to any rights and obligations… including cancellation of the contract.” In other words, know before you sign. If something is important to you, it must be written in the contract. If you were promised “no lien” or “you can cancel anytime” or “we’ll move it for free if you need a new roof” – ensure those promises appear in writing. Verbal assurances mean little once you’ve signed a 20-year agreement.
- UCC-1 Filing Awareness: We discussed UCC filings above, but here’s a quick red-flag tip: check if the contract explicitly states they will file a UCC-1 on your property (it often does, in the fine print authorizing them to do so). That’s normal, but make sure it also says they’ll terminate it when obligations are done. And be aware, the filing might happen without further notice to you (some companies don’t send a separate notice when they record the UCC). So don’t be shocked later – keep a copy of the contract and any UCC filing statements for your records.
By watching for these red flags, you can negotiate better terms or at least enter your solar agreement fully informed. Many people have great experiences with their solar providers but the ones who don’t often cite these contract issues as the source of their headaches. A little diligence upfront can save a lot of trouble later.
Checklist: Making Informed Solar Decisions
Before you jump into a solar contract, use this checklist to cover your legal bases and ensure peace of mind:
- Compare Ownership Options: Decide if leasing, financing, or buying makes the most sense for you. Owning (via cash or loan) lets you claim tax credits and adds asset value to your home, whereas leasing/PPA has no upfront cost but lower long-term payoff. There’s no one-size-fits-all answer just be clear on the pros/cons of each path. If you have the tax appetite and savings, a purchase or loan could save more in the long run. If not, a lease/PPA can still provide modest savings and green energy with less hassle.
- Research the Installer/Company: Work with reputable solar providers. Check reviews, ask for references, and even look up any complaints or legal actions. A company that has a track record of happy customers will likely handle things professionally if issues arise. Additionally, see if they use quality equipment and if the panels come with warranties (panel and inverter warranties often 10-25 years – though with a lease, the company handles warranty claims).
- Read the Contract (Seriously, every page): It’s long and boring, but this is a 20+ year commitment! As the AG’s office advises, don’t sign if you haven’t read and understood the whole agreement. Pay extra attention to sections on payment terms, escalator %, term length, what happens if you sell, end-of-term options, maintenance, and defaults/penalties. If anything is unclear, ask questions and get clarifications in writing. Do not rely on the sales rep’s summary.
- Check for Key Clauses: Find the escalator clause – note the percentage increase per year (and do the math over the contract life). Locate the transfer clause – what exactly must you (or a future buyer) do if you sell the property? Identify any early buyout or termination clause – can you end the agreement early, and at what cost? Knowing these will help you plan for the future and avoid nasty surprises.
- Understand the UCC-1 Filing Process: Confirm that you will get a UCC-1 lien release when the contract is done or the loan is paid. Usually, once you’ve paid off the solar loan or bought out a lease, it’s on you to ensure the lien is removed. For example, in some states the homeowner must formally request the termination statement and file it. The contract or an addendum should outline this. If you’re refinancing or selling down the line, remember to contact the solar company to handle the UCC-1. It’s routine, but it’s your responsibility to coordinate it.
- Plan for Home Sale (if applicable): If you think you might move before the lease is up, have a game plan. This could mean aiming to pay off the system before selling, or at least knowing the buyout cost in year 5, 10, 15, etc. Discuss with the solar company what assistance they provide in transfers. Some companies are willing to help find ways to make a transfer smooth. Also, be ready to inform any real estate agent about your solar contract upfront. Selling with solar is absolutely doable (thousands do it each year), but transparency and early planning are key.
- Consult a Professional if Needed: Solar contracts are binding legal documents. If you’re uncomfortable with any part of it, consider consulting a real estate attorney or consumer protection office. In fact, some state attorney generals (like Massachusetts) have published guides for homeowners considering solar, advising them to ask questions about how a UCC-1 filing may impact future plans and watch for home transfer restrictions. If you feel lost, you don’t have to go it alone. Guardian Core Solutions is one resource that can help connect you with vetted legal and solar professionals who know the ins and outs of these agreements. Getting an expert opinion can be priceless for a 25-year commitment. As one legal blog put it, doing your research and having an attorney review the agreement can help you fully understand the implications of installing solar panels on your home. A quick contract review could save you from decades of regret.
- Take Your Time and Don’t Succumb to Pressure: Finally, don’t rush into signing because “this deal expires tomorrow” or “the tax credit is ending” (the federal tax credit is in place at 30% through 2032, so no immediate rush). High-pressure sales tactics are a red flag in themselves. A reputable company will give you the time to make an informed decision. Solar is a big investment in your home and future, a few extra days or weeks to evaluate options is well worth it.
In summary, going solar can be one of the best decisions you make for your wallet and the planet as long as you navigate the legal stuff wisely. Understand your agreement, know your rights and obligations, and plan for the long term. With the tips above, you’ll avoid the common pitfalls and myths that often trip up solar newcomers. And remember, help is available. Whether it’s a seasoned solar homeowner on a forum, an attorney friend, or a service like Guardian Core Solutions that links you with solar-savvy professionals, you can get guidance to make the best choice. Solar technology is solid; it’s usually the paperwork that causes headaches, but now you’re equipped to handle that part too.
Here’s to making an informed solar decision and enjoying years of clean, affordable energy with no legal surprises down the road!
Sources:
- Pender & Coward Law Firm – What to Know about UCC Liens before Going Solar
- SolarReviews – Expert Guide to Solar Leasing: Pros, Cons, and Red Flags
- Spark Home – Top 4 Problems with Solar Leases
- Wynn & Wynn, P.C. – Disadvantages of Leasing Solar Panels
- WeSERV Realtor Association – FHA Loans and Leased Solar Systems
- Massachusetts Attorney General – Advice to Homeowners Considering Solar
- AES Renew – Purpose and Benefits of UCC-1 Filings in Solar Projects
Solar Leasing Guide: Pros, Cons, & Red Flags — SolarReviews
https://www.solarreviews.com/blog/solar-lease-everything-you-need-to-know
What to Know about UCC Liens before Going Solar | Pender & Coward
UCC-1 Filings in Solar Projects: Purpose and Benefits – Advanced Energy Systems
Energy Efficient Mortgages, FHA buyers and Leased Solar Systems – Government Affairs
THE DISADVANTAGES OF LEASING SOLAR PANELS – Wynn & Wynn
PPA (Power Purchase Agreement) and Solar Leases
AG Healey Offers Advice To Homeowners Considering Solar Panel Installations | Mass.gov
