Solar panel contracts come in three main forms: cash purchase, lease, and Power Purchase Agreement (PPA). Leases and PPAs are marketed as 'no upfront cost' solar — but they involve 20–25 year agreements that attach to your home, complicate property sales, and include escalation clauses that may make the economics worse over time than staying on grid power. Understanding the structure before you sign could save you from a decision you regret for two decades.
What is a Lease vs PPA?
In a solar lease, you rent the equipment from the solar company for a fixed monthly payment and receive the electricity it generates. In a PPA (Power Purchase Agreement), the solar company owns the equipment and you purchase the electricity generated at a contracted per-kWh rate. In both cases, the contract runs 20–25 years, the solar company retains ownership of the panels, and the agreement typically transfers to any buyer of the property — or requires payoff on sale.
Red flags to watch for
Most solar leases and PPAs include an annual escalation rate. At 3% annual escalation, a $100/month lease payment becomes $180/month by year 20. If grid electricity prices don't rise at the same rate, you may pay more for solar than you would have for grid power.
When you sell your home, the solar agreement either transfers to the buyer (who must qualify for it) or you must pay a buyout. Buyers who don't want to assume a 20-year contract may require you to buy out the lease as a condition of sale — potentially tens of thousands of dollars.
In a lease or PPA, the solar company typically owns and maintains the equipment. Check what the process is if panels underperform or fail — particularly whether the company guarantees minimum production and what remedy applies if the system underperforms.
At the end of the lease, what happens to the panels? Check whether the company will remove them, whether there is a purchase option, and who is responsible for any roof restoration costs after removal.
Solar companies often file a UCC-1 financing statement against your property, which can appear as a lien in a title search. This can complicate refinancing or home sales. Ask whether any lien or financing statement will be filed, and whether it will be released on request.
Your legal rights
Solar contracts are governed by state contract law. There is no specific federal cooling-off right for solar agreements, but the FTC's 3-day Cooling-Off Rule may apply to contracts signed at home following a door-to-door solicitation. California (SB 288), Connecticut, New Jersey, and other high-solar states have specific consumer protections for residential solar agreements including disclosure requirements and cancellation rights. The FTC Act prohibits deceptive solar marketing. If a solar company misrepresents your expected savings, you may have a fraud or misrepresentation claim.
Questions to ask before you sign
- 1Is there an annual escalation clause, and if so, what is the percentage and how does my total cost compare to projected grid prices?
- 2What happens when I sell my home — can the agreement be transferred, and what is the buyout cost if the buyer declines?
- 3What is the guaranteed minimum electricity production, and what remedy applies if the system underperforms?
- 4At the end of the contract, what are my options — purchase, removal, or renewal — and who pays for roof restoration?
- 5Will a UCC financing statement or lien be filed against my property, and will it be released if I sell or refinance?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.