If you’re like most homeowners, you probably went solar with the intent of saving money on your electricity bill. But what do you do if you find yourself in a contract that’s costing more than you’re saving?
Or you signed the contract on a whim and now you are having buyer’s remorse. Or maybe you want to move or sell the house. Or still, you are not happy with the service or the solar company went bankrupt.
Does the fact that you signed the solar lease contract mean that you are stuck with the panels and monthly payments for the pre-agreed 20 years, even if you are no longer using the solar installation?
In this article, we’ll outline some steps to help get you out of your solar panel contract without breaking the bank. Keep reading to learn more!
Going solar is the best thing you can do for yourself, your fellow beings, and the planet. And, most solar customers are happy with their decision. However, for you to make the best of the opportunity, you should make the right choices – buy or lease, suitable financing option, hiring a good solar company for installation, and a good leasing agreement.
If you choose well, the solar installation can save you considerable energy bills for 20-25 years. On the other hand, if you sign a lease without understanding the fine print, you may end up with a solar lease that can drain your resources rather than save you money.
Even if you did everything right and you are happy with the solar energy installation, you may want to cancel the lease for a variety of reasons. Here are some of the common circumstances that force solar customers to cancel their lease.
If you purchased the solar energy system outright, every unit of solar energy generated will turn out as a profit for you. However, if you choose the leasing solar panel option to go solar, the financial benefit may not be as good. You would be able to save somewhere between 10 and 30% of the energy bill.
Your savings will depend on the solar energy generated, the monthly lease amount, and the annual increase in the lease amount as stipulated in the agreement. At the beginning of the lease agreement, you may be happy with the savings. But as years go by, the annual increase in the lease amount may outpace the rise in the utility rate. This means your savings will come down.
You may not have planned for this eventuality when you signed the lease agreement. That is life and you just have to adjust to the new circumstances.
Even in this case, you have some options to avoid the cancellation of the lease. If you are selling the house, you have the option to transfer the lease to the new owner. If the terms of the agreement permit, you can also buy out the remaining period of the lease and have the solar panel equipment removed. Some leases have provisions that allow homeowners to buy the solar power system at the current market value.
Selling a home with a solar system is harder, more so if it has a lease attached.
You must have chosen the solar company based on your market research but found their service less than desirable later on. Naturally, you don’t want to continue the lease arrangement.
Similar to Sungevity that went bankrupt in 2017, this is a possibility that cannot be ruled out. If the solar company you chose is a large one with a national presence, you may not have to worry. Another solar company will buy them and take over the service.
However, if the solar company you dealt with is a small one, you may find it difficult to continue with the lease. The company may not find a buyer or even if they do, you may not want to deal with the new company. You can safeguard your interest by choosing a third-party service provider. This means, even if your solar company goes bankrupt, you will continue to enjoy service.
How to get out of a solar lease? If you are unhappy with the present lease arrangement, this question must be tormenting you day in and day out.
As explained earlier, for each circumstance, there are many choices to avoid the cancellation of the solar lease. However, if you still want to go ahead with it, be warned that it is not an easy proposition. Experts say that it is difficult to cancel the lease without legal implications.
Most lease agreements are iron-clad, making it extremely difficult for homebuyers to cancel them. One of the prime reasons for this is that the lease agreement is tied to the title of the home and not to the homeowner in person.
Let’s explore some options for getting out of a solar panel contract.
Many solar companies include a buy-out option along with the price in their lease agreements. Typically, this is the balance amount you owe the solar company in the lease agreement. For example, you can purchase the system for $16,000 during the fifth year of the lease.
Once you prepay the specified buy-out amount, you can do whatever you want with the solar panels. You can continue to use them or even have them removed. Unfortunately, this is usually a costly option for you to choose unless you desperately want to cancel the lease contract.
In case your lease doesn’t specify details about buy-out, it may offer you another way out of the lease. Such as purchasing the solar system at market value.
Most lease agreements have a clause that says an appraiser will determine the market value of the solar panel systems. Various factors influence the market value, including its age, the purchase price of the installation, the savings it generates, and comparable products in the market.
Moreover, solar installation is linked to an essential commodity, electricity whose rate is always increasing. This means, unlike many movable assets like an automobile, the market value of a solar installation may not go down. Instead, it can go up. It is considered an appreciating asset.
In other words, you may end up paying a hefty sum for the solar system if you choose this option. Much more than what you would have paid as monthly lease payments. You can easily purchase the solar panel for a lower sum with financing.
Another downside to this arrangement is your ineligibility to claim the federal investment tax credit (ITC). It can be claimed only once for a solar system and the leasing company already must have claimed it when it was initially installed.
If your reason for wanting to cancel the lease is moving or selling the house, you can just transfer the lease agreement to the new owner. Moreover, solar homes are expected to fetch better prices. This may look like a win-win situation.
Unfortunately, it may not work that well for most homeowners. Selling a solar home is much harder. Even if you manage to find one, the new homeowner may not be interested in continuing with the lease arrangement. They may want to own the system. This makes the asset a liability.
And, this will get you back to square one – the buy-out clause.
In case you have signed the lease agreement but the solar energy system is not yet installed, you have a way out if you are experiencing buyer’s remorse. The timeframe for this will differ based on the policies of the solar companies. This can be anywhere between a few days to one or two months.
The main condition to invoke this clause is the fact that the solar system is yet to be installed. And, you need to inform the solar company within the specified period. However, to use this option, you need to give the solar company a convincing reason. Such as your roof needs repair or replacement.
This option to opt out of the lease agreement is covered in the “unexpected and unforeseen additional expenses” clause in the solar lease contract.
You wanted to take a positive step by going solar and allowed the smooth-talking person from the solar company to talk you into signing the lease agreement. If you did not pay enough attention and verify the facts, you have only yourself to blame for getting into this situation.
You can follow these guidelines to avoid such an eventuality.
The good news is, you don’t have to be stuck with a contract. You do have some options to avoid being locked into your current solar panel lease agreement if it just doesn’t work for you anymore.
The steps described here can help you get out of this commitment and start looking for better energy options.
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