10 Questions to Ask Before Signing a 20 Solar Lease Agreement

Suns Free Solar_bannerFREE SOLAR

“The Government is giving away FREE SOLAR.”

IF FREE SOLAR IS A NO BRAINER, WELL THEN  USE YOUR HEAD!

Free Solar is the new solar pitch which makes the SOLAR REVOLUTION and one visit close possible.  In the ad,  “LOOKING FOR 50 HOMEOWNERS” – language is  being used to mislead consumers into believing that the government is paying for everything, and that they are being selected to participate in a limited ( 50 families) government  program. Like condo timeshare companies sending out “You are a Winner” notices  through bulk mail,  companies like Roof Diagnostics, (a highly aggressive and fast growing solar company in the Northeast,) are using deceptive sales tactic to attract customers.

Other  solar companies  are using  “the green movement,” the concept of environmentalism, of social activism as a means to attracting customers  to boost  their bottomline.  While the offering of ” free solar” may be green, and solar may be good for the planet, it does not mean that every solar offering: every  PPA and Solar Lease Program that is being presented today is necessarily in  the best interest of the homeowner.

Solar may be simple, the solar contract not.

The allure of Free Solar is the basic formula that has lead to the great growth seen by the PPA and Leasing companies in recent years. The basic pitch is Solar Made Simple. But how simple is it really? No money out of pocket cost. No risk. No worries. To get Free Solar, all the homeowner needs to do is sign a 20+ page 20 year contract that is anything but simple. The goal of the financing company, its bondholders, and its shareholders, is to protect their investment. Their business goal is to generate cash flow from these residential solar systems uninterrupted over the next 20 – 30 years while safeguard their interests.
The customer in most cases will  realize some monthly savings through out the course of the agreement. However, these contracts are written to ensure the revenue to the financing company will be maintained and that the company will be protected from lose. In this way, the interests of the financier is not exactly in line with the interests of the homeowner.

Here is a list of 10 questions you should ask before signing anything.

1. What happens if I miss a payment?

Some lease agreements include stiff penalties for late payments. If for whatever reason, the homeowner is unable to meet the payment schedule they can be hit with fines. These fees can be much greater than what a utility would typically charge.

2. What happens if I want to remodel or need a new roof and have to move the solar panels?

Any interruption in electrical production is to the detriment of the leasing company. Leases often include language which require homeowner to notify and work with lease company if they need to remove panels and interrupt energy production. This can greatly complicate and make more expensive any work done on the house. In the case of PPAs, if the homeowner interrupts the solar energy production, they generally have to compensate the PPA provider.
Roofs may need to be replaced within the 20 year lease period. The cost of removing the system in many cases falls on the homeowner and again in most cases the removal will interrupt electrical production, which also must be addressed. Contract language varies on how the homeowner must deal with this circumstances, but it could prove expensive.

4. What happens if I decide to sell the house?

Most salesmen will tell the homeowner that this is an easy process of transferring the lease. But in reality, this is pure conjecture. A solar lease agreement is like having a second mortgage on the house, and it can complicate the sale . First, the leasing company must approve the new owner for the lease based on credit scores that are not delineated in contract. And secondly, the new homeowners must want to take over the lease agreement. If the new homeowner is not interested, some lease agreements require the owner to buy out the system at full price no matter when the lease is terminated.  You may be required to pay a great deal of money for that  solar electric system even 15 years down the road more than wiping out all your savings from the electricity the system generated. Think about how attractive a 10 year plus piece of technology is going to be to a new homeowner. See Green Bubble 3.  see section called:

Will homeowners in the future, be as eager to take over these PPA agreements as they are today?

5. What if the system is damaged?

Most proposals state that maintenance to the system is entirely maintained by the leasing or PPA company. However most leases contain language that carves out circumstances that are exempt. This group of events can include power surges from the utility or fire or damage caused by animals. Squirrels are a major cause of damage to solar electric systems, and in some leases, the system is not warrantied against such damage. With certain types of damage it is the homeowner’s responsibility to repair the system and even make up for the lost production. Though not generally stated as such, any homeowner who has solar put on their roof without having their own insurance coverage may be at risk.

6. Who’s responsible if trees shade the panels?

Most lease agreements contain language stating that the owner must take responsibility for their own solar production. They must keep panels clear of shading. Tree growth over a twenty year period can have tremendous impact on roof shading. In circumstances where trees are located on a neighbor’s property, the homeowner may not even have access to cut these trees. California is the only state that protects the rights of solar owners and allows them to cut neighbor’s trees to ensure production.

7. What happens if my roof leaks?

Make sure the contract warranties not just the system but your roof as well. There are dozens of  holes being drilled into your roof. Only a couple of mounting systems – Quick Mount is one – will not void your roof warranty when solar is installed. If a roofing manufacture has not certified a mounting system they will not honor the warranty. Though leaks are extremely rare in solar installations to date,  the leasing company should be responsible to repair any leaks due to their equipment over the course of the contract.

8. What happens to my lease agreement if the financing company goes out of business.

Find out who holds the lease if the company goes out of business. What would happen to the system on your roof. Same goes for the installation company. Ask them for copies of the warranty and any info and manuals on the equipment. You want to have that material in your possession in case the company goes out of business.

9. Is there an escalator in my lease agreement, and are there any additional charges that I will be responsible for in the future?

Homeowners may sign agreements not fully aware of the fact that their payments are scheduled to go up every year. Companies often put in escalators to make the initial monthly payments lower and more attractive. But in doing this the financing company is assuming electric rates will rise a higher percentage each year. If rates do not climb enough , the homeowner may  be stuck paying more to the solar company than they would being paying to their utility. Also some contract agreements contain language that allows the financing company to pass on any future costs that may be incurred by the financing company. For example, utilities are lobbying to force PPA companies to work on a level playing field and charge tax for the electricity they sell to their customers like any electrical provider. This tax as well as any required re-permitting, or re-inspection fees etc that may occur in course of the agreement  can all be passed on to the homeowner.

10. What is the installation schedule? Ask when will my system be installed?

Get a commitment on the installation schedule. The internet is filled with complaints from people who signed up for solar and then ended up waiting months up to a year to get installed.  Solar companies can easily oversell and over commit. Make sure you let them know you expect to be installed in a timely fashion. Bottomline is solar companies do not want to loose you as a customer. Chances are they have already added you to their income projections.  If you run into problems, there are ways to move them along.

Read the Fine Print

The “one visit close” would simply not happen if salesmen were required to fully disclose and review the entire language of the contract. Most people do not read the contract or get legal advice before signing these 20 year commitments. Homeowners look through the proposal, and they often proceed, not appreciating the potential obligations they are agreeing to. The solar industry is not unique in this respect. Very few of people read the fine print when they sign up for phone service or for cable or for credit cards. But in contrast, these contracts are for one or two years. And these are more mature industries and are more regulated. The solar industry is new, it’s financing is largely unregulated and the contracts are for a full 20 years. Homeowners need to appreciate the fact that if a company is putting $30,000 worth of equipment on their roof “For Free,” that company will do whatever is necessary to safeguard their investment.

The language of the proposal is to convince the homeowner to sign. The language of the contract is to protect the interests of the financing company that is actually paying for the FREE SOLAR.

Know your rights. Many agreements contain language that actually limits your recourse if you are not happy with the agreement or service you are receiving:

• Lease  agreements  may include language where the homeowner waives all their right to sue the leasing company if they are not happy with the program. They waive their rights to seek damages if the company fails to perform or even goes out of business.
• leases may contain language where the home owner waives their right to speak disparaging the company in anyway in the future.

Read your lease agreement word for word, and/or have a lawyer look over the agreement.  Know your rights. You may be getting a “Free” solar electric system placed on your roof, but the financing company is getting a twenty year commitment from you. As we pointed out in our earlier blog post Bubble 1, they are making the lions share of profit off this venture, and they are taking the financial risk. That contract you are signing is to ensure that they get their return of their investment.

Each lease agreement is different. There are good solar companies out there that are pro-consumer and are transparent and fair and are proactive in respecting the rights of the homeowners. But problems arise when general assertions made in the sales proposal and pitch are not consistent with the actual lease agreement, or when details in the lease agreement are not brought to light during the sales process.

Finally, in any meeting with a solar installer your last question should be: “Do you mind if I take some time to review the contract agreement – and have my attorney look at it?   I will  get back to you on my decision.”

Disclaimer: we are not legal experts. We are writing here about general areas of concern.  We recommend you do your own research, ask questions and consult with an attorney regarding any legal matters. We advocate for regulations that require standardization and full disclosure of all items in these lease and PPA agreements. We strongly recommend that before signing any contract, a homeowner have a legal adviser review the document . If you have any further questions or comments get back to us!

PowerTWO staff

 

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