What Happens at the End of a Solar Lease?
Approaching the end of your solar lease? Understand your agreement and explore your choices to secure your home's energy future.
The end of a solar lease presents homeowners with important decisions about their home’s energy future. After years of enjoying solar power without upfront costs, understanding your options is key. This article guides you through choices as your lease ends, helping you make informed decisions.
Understanding Your Lease Terms
As your solar lease approaches expiration, thoroughly review your contract. Leases commonly span 20 to 25 years; your agreement’s specifics dictate available pathways. Identify the exact lease end date and any required notice periods for termination or renewal. Many contracts stipulate a 30 to 60-day notice period to avoid automatic renewals or penalties.
Locate end-of-term clauses outlining options from your solar leasing company. These cover renewing the lease, purchasing the system, or its removal. Pay close attention to financial terms like pre-determined buyout prices, potential renewal rates, or removal costs.
The lease may also specify details regarding system ownership transfer, including conditions or timelines, if a purchase option is exercised. Ensure you have contact information for your lessor, as direct communication is necessary to formalize your chosen path.
Renewing Your Solar Lease
One common option at lease end is to extend the agreement. When considering renewal, evaluate current electricity rates against proposed renewal rates. Solar leases often include an annual escalator, typically increasing payments by 1% to 5%, impacting long-term energy costs.
Assess your existing solar system’s performance, as panel efficiency can gradually decrease over time, though modern panels retain high efficiency for 25 years or more. Beyond finances, renewing the lease maintains hands-off maintenance, as the leasing company remains responsible for system upkeep and repairs.
To proceed, contact your solar lease provider to express interest in renewal. They will provide a new lease agreement or addendum outlining updated terms, which may include a new lease duration, often one to ten additional years.
Carefully review these new terms, as aspects like the new monthly payment or maintenance responsibilities may be open to negotiation. Once satisfied, formalize the renewal by signing the new agreement and completing administrative steps.
Purchasing Your Solar System
Acquiring ownership of your solar system from the lessor is a significant option at lease end. The purchase price is typically determined by a pre-determined buyout price in your original lease or the system’s fair market value. An independent appraisal can clarify the system’s current value, beneficial if the lease allows fair market value negotiation. Financing can be achieved through personal loans, home equity loans, or cash payment.
Understand the implications of ownership transfer, as you become responsible for all future maintenance, repairs, and insurance. While owning the system makes you eligible for incentives, like the federal solar tax credit, this credit applies to initial installations, not to purchasing an aged, pre-existing leased system. Therefore, you cannot claim this credit if you buy out your lease, as the leasing company already claimed it.
Owning solar panels may also have property tax implications, varying by location. This ownership could also increase your home’s value.
To proceed with a purchase, formally notify the lessor of your intent to buy the system, adhering to contractual timelines. This notification initiates negotiation and agreement on the final price and terms, culminating in a purchase agreement.
Upon signing the purchase agreement, complete the sale by making payment and handling the transfer of title and necessary paperwork, such as lien releases and official system documentation. This process ensures a smooth transition to full system ownership.
System Removal Options
If you decide not to renew or purchase, the final option is to have the solar panels removed. Consult your original lease agreement to confirm contractual obligations regarding system removal. This includes identifying which party is responsible for de-installation costs and any necessary roof repairs or restoration.
Some solar companies may offer free removal at lease end, while others may charge a fee. If fees apply, expect costs ranging from $200 to $500 per panel, or $4,000 to $10,000 for a typical 20-panel system, depending on the scope of work.
Consider your home’s energy needs after system removal and plan for alternative energy solutions. Arrange for a professional roof inspection both before and after removal. This helps document the roof’s condition and ensures any damage caused during de-installation is properly addressed. Notify your solar company of your decision to remove the system, allowing them to schedule de-installation.
During de-installation, technicians will carefully remove panels, wiring, and mounting equipment. The lease agreement should specify the solar company’s responsibility to repair any damage to your roof or property from installation or removal, restoring it to its pre-installation condition. After removal, conduct a final walkthrough or inspection to confirm the work complies with lease terms and your property is satisfactorily restored.