Solar Panel Contract Red Flags: Six Clauses to Check Before You Sign
This page is general information, not legal advice.
A solar panel contract sets the terms for putting a system on your home, whether you buy it outright, finance it, lease it or sign a power purchase agreement to pay for the electricity it produces. Many of these deals last as long as a mortgage, and they can affect your roof, your monthly bills and your ability to sell or refinance the house. Sales often happen at your door or kitchen table, with a tablet signature and a focus on projected savings rather than the fine print. This page covers six clauses that often move cost and risk onto the homeowner. For each one you get an illustrative example, why it matters, and wording you can propose. Consumer protection and home-solicitation rules in some places give you a period to cancel certain home contracts, but the details vary by jurisdiction, and many installers will negotiate terms before installation.
If the job also involves roof replacement or other work on the house, see home renovation contract red flags as well.
The example clauses below are illustrative. They are not taken from any real solar company's contract.
1. A very long term with a steep buyout
A typical clause might read: "The Term of this Agreement is twenty-five (25) years from the In-Service Date. Customer may terminate early only by purchasing the System at the Early Purchase Price set out in Schedule [X], plus all amounts then due and any removal costs."
Why it works against you
A lease or power purchase agreement can outlast your plans for the house, your roof and possibly the company that sold it. If you want out early, the buyout price may be set by a schedule or formula you can't easily check, and it may be far more than the system is worth by then. See early termination fee clauses explained.
What to ask for instead
Sample wording to propose: "Customer may purchase the System at any time after year [number] for the lower of the amount in Schedule [X] and its fair market value as determined by an independent appraiser. The Early Purchase Price schedule is attached and will not change during the Term."
2. A lien or filing that follows your home
A typical clause might read: "Customer authorizes Provider to file a UCC financing statement or fixture filing and any other notice in the public records evidencing Provider's ownership of or security interest in the System."
Why it works against you
A filing like this can show up when you try to sell or refinance. A buyer's lender or title company may ask questions, require the filing to be released or subordinated, or delay closing. Some financed systems also come with a lien on the property itself. Ask exactly what will be filed, against what, and how and when it's removed.
What to ask for instead
Sample wording to propose: "Any filing will describe only the System and will not create a lien on the real property. Provider will, within [number] business days of Customer's request, provide documents reasonably needed for a sale or refinance, including any temporary release or subordination, at no charge to Customer."
3. A savings or production "guarantee" with heavy conditions
A typical clause might read: "Provider guarantees that the System will produce at least [number] kWh per year, subject to the exclusions in Schedule [X], including weather, shading, grid outages, utility rate changes, Customer actions and system downtime for maintenance. Provider's sole obligation is to pay the shortfall at the rate in Schedule [X]."
Why it works against you
Savings projections in a sales pitch are often based on assumptions about your usage, utility rates and incentives, none of which the company controls. A production guarantee can sound strong, but a long list of exclusions, a low shortfall rate or a requirement that you claim within a short window can leave little real protection. Some contracts offer no performance promise at all. See warranty disclaimer clauses explained.
What to ask for instead
Sample wording to propose: "If the System produces less than [percentage] of the estimated annual output in Schedule [X] in any year, Provider will pay Customer the shortfall at Customer's then-current utility rate within [number] days, without the need for a claim. Exclusions are limited to grid outages and damage caused by Customer."
4. Hard or expensive rules for selling your house
A typical clause might read: "If Customer sells the Property, the buyer must assume this Agreement, subject to Provider's credit approval. If the buyer does not qualify or declines, Customer must pay the Early Purchase Price before closing. A transfer fee of [amount] applies."
Why it works against you
A buyer may not want to take on your solar payments, or may not pass the company's credit check. That can leave you choosing between paying a large buyout at closing or losing the sale. Strict timelines for transfer paperwork can also hold up closing. See assignment clauses explained.
What to ask for instead
Sample wording to propose: "Provider will not unreasonably withhold approval of a buyer and will respond to a transfer request within [number] business days. No transfer fee applies. If the buyer does not qualify, Customer may [prepay the remaining payments at a discount of [percentage] / relocate the System at Provider's standard rate]."
5. Roof damage and removal costs land on you
A typical clause might read: "Customer is responsible for maintaining the roof. Provider is not liable for leaks or roof damage except as covered by its [number]-year workmanship warranty, and Provider's total liability shall not exceed [amount]. Customer shall pay for removal and reinstallation of the System if roof work is required."
Why it works against you
Mounting panels means drilling into your roof. If a leak appears years later, a short workmanship warranty and a low liability cap may leave you paying for the repair. When the roof needs replacing, removing and reinstalling the system can add a significant cost. Also check who must insure the system. See limitation of liability clauses explained and insurance requirements clauses explained.
What to ask for instead
Sample wording to propose: "Provider will repair any roof leak or damage caused by installation, operation or removal of the System at its own cost for the Term. Provider will remove and reinstall the System once during the Term at no charge for roof replacement. Provider will insure the System against loss and damage."
6. Auto-renewal, assignment to a new company and arbitration
A typical clause might read: "This Agreement renews automatically for successive five-year terms unless Customer gives notice. Provider may assign this Agreement to any third party without notice. All disputes shall be resolved by binding individual arbitration, and Customer waives any right to participate in a class action."
Why it works against you
Automatic renewal can extend a long contract when you'd planned for it to end. Your agreement may be sold to a company you never chose, which may service it differently. And if many customers have the same problem, a class-action waiver can make it hard to bring a claim worth pursuing. How enforceable these terms are varies. See auto-renewal clauses explained, mandatory arbitration clauses explained and class action waiver explained.
What to ask for instead
Sample wording to propose: "At the end of the Term, Customer may renew, purchase the System at fair market value, or have it removed free of charge. Provider will give [number] days' written notice of any assignment, and the assignee must honor all terms. Either party may bring an individual claim in small claims court."
Also worth a look
Check who keeps any tax credits, incentives or renewable energy credits, whether payments escalate each year (see automatic price increase clauses explained), and what happens if the company goes out of business. If you finance a purchase, read the loan separately (see personal loan agreement red flags) and look for any personal guarantee. Also check how storms and outages are handled (see force majeure clauses explained).
Scan your own contract free
A solar panel contract can follow your home for decades. Upload your contract to the ScanMyTerms freelance contract review as a PDF, DOCX, TXT or MD file, photograph it (up to 30 pages), or paste the terms. In about a minute you get a list of clauses that work against you, with the risk level, the exact wording, why it hurts and how to change it. The free preview shows the risk count and the first two findings. The full report is $5 per document.
This page is general information, not legal advice. Consumer protection, home-solicitation and property rules vary by jurisdiction, so for decisions about a specific contract, talk to a qualified lawyer where you live.
Sources
- All clause examples on this page are illustrative and written for this guide. They are not quoted from any real solar company's contract.