Legal advice on how to review a Solar Lease Document.
A lawyer lists general guidelines on what to look for when reviewing a solar lease agreement.
Ron Moss, Esq., LCSW Solar leases are gaining traction in the residential solar energy industry. Just recently, SolarCity and Best Buy entered into an arrangement in which SolarCity will have its salespeople in Best Buy stores offering solar leases. Of course, one of the main attractions of solar leases for consumers is that solar leases offer no money down deals for having solar cells installed on their homes. Like, everything else, however, consumers get what they pay for, and the devil is in the details. Understand that a lease is not the same as making installment payments on a purchase. You, known in the lease as a leasee, do NOT own the system. The same is true with a Power Purchase Agreement – where you are buying the electricity from the PPA provider. The equipment remains the property of the solar energy installer or financer, known in the lease as the lessor. In both situations, in most cases there will be a purchase option at the end of the term of the lease, which you can exercise . Key issues to keep in mind when reviewing a lease document:
- As with any lease, understand how much money you will have paid by the end of the lease compared to what you would pay if you purchased the system up front.
- Know whether you or the lessor have the right to available tax credits, renewable energy credits, carbon offset credits and other similar government incentives or tax benefits.
- Understand what penalties there may be for late or missed payments on the lease.
- Understand what happens if you default on the lease. You may be obligated to pay for removal of the system, interest on the unpaid portion of the lease, penalties and even attorney’s fees.
- Understand what rights you have, or do not have, to terminate the lease prior to the end of its terms and what your obligations would be if you do so.
- Know if you have the right to purchase the system at any time during the term of the lease, what the cost would be, in other words. Some leases give a right to purchase only at the end of the lease. Understand how the purchase price would be calculated at that time.
- Understand how the payments you have already made on the lease would be applied to the purchase price, and whether there would be any penalties, if you decide to purchase during the term of the lease.
- Know who owns the electricity generated by the installed system. In some cases, the lessor owns all the electricity generated and sells it to the leasee. If that is the case, understand how the price to you is calculated and whether it will vary, and, if the price does vary, understand the basis for any changes in price.
- Know what rights you have granted the solar energy company to enter your property.
- Know what obligation the solar energy seller has to maintain the system and whether there are any additional charges for their doing so. Understand the warranty on the system.
- Know what obligations you have to maintain the system.
- Know who pays for any required repairs, or how that is determined.
- Know what rights you may have granted the lessee to use your home in its promotional materials.
- Understand what happens in the event you want to remodel your home. Some leases require the lessee’s consent to any changes to your roof.
- Understand your obligation to maintain homeowner’s insurance on your home, and who has the obligation to insure the solar system.
- Understand what rights you may have granted the lessor to enter your premises.
- Understand what liability you may have if someone is injured by the leased system. In some leases you would be liable only if you are grossly negligent. In other leases you may be liable if there was even simple negligence on your part.
- Know what rights you may have granted the solar energy company to keep the system on your roof in the event you sell your home. Some leases say that the purchaser of your home must assume all obligations under the lease or that, if the buyer refuses to assume the lease, there will be a charge, payable by you, for dismantling and removing the system.
- Know what obligation, if any, the lessor has to restore your roof to its original condition in the event the system is removed for any reason, and keep in mind that such obligations may change depending on the reason for the removal.
- Know what rights you have at the end of the term of the lease. You may have the right to purchase the system, in which case you should understand how the price is determined, or you may have the right to renew the lease, in which case you should understand what would be the terms of the renewed lease.
- Understand what happens if there is dispute between you and the lessor. Most leases require the dispute to be arbitrated and require you to give up any rights you would otherwise have had to go to court.
Ron is available to answer specific question regarding any question you might regarding your solar contract, or any other legal questions that may arise in connection to solar or other issues. You can direct your questions via the PowerTWO website forum, or you may contact him directly.
Ron Moss, is a creative, strategic, outside-the-box attorney with over 30 years of international legal and business experience, including: business planning and strategy; corporate finance and governance; negotiation and drafting of contracts, including technology licensing agreements; initial public and secondary offerings; private placements; ’34 Act reports; mergers and acquisitions; and securitizations. He is also a Licensed Clinical Social Worker in New YorkState.