Canceling a solar lease: What you need to know

When it comes to canceling a solar lease, the truth is that it can be a difficult process. Without some sort of legal action, it tends to be hard. 

It's important to understand how to cancel a solar lease because if you sign a contract you haven't read thoroughly, you can end up on the hook for thousands of dollars in fees or get stuck with an agreement you can't get out of.

Despite the savings you gain by installing solar panels, there are a number of reasons why you may want to cancel your solar lease.

Solar lease options usually have less financial benefit to homeowners than owning a system, but a good solar lease should save you anywhere from 10% to 30% compared to traditional electric service from a utility. Depending on the type of financing, installer, and equipment you choose, your solar panel system can save you as much as $65,000 over three decades, according to EnergySage Marketplace data.

Annual rate increases may cancel out your savings

The savings you see with a leased solar panel system will vary depending on how much electricity your solar panels generate, the rate your leasing company charges, and whether or not your contract includes an annual rate increase, also commonly referred to as an escalator. While it’s rare that someone pays more money on their electricity bill after going solar, it’s possible to experience higher monthly costs if you pay your solar leasing company higher rates than your utility charges for grid electricity.

Even if the introductory leasing rate was lower than what your utility was charging monthly, you may be paying a higher rate now if your annual rate increase outpaces your utility’s rate increases.

If you’re moving

Life happens, and you may end up selling your home during the 20 years of your solar lease contract. When you’re selling a home with a leased solar panel system on the roof, you have options outside of canceling the leasing arrangement.

• Transfer the lease to the new homeowner

• Buy-out the remainder of the lease and have the system removed

• Purchase the solar panel system at market-value and leave it on your roof 

Depending on the leasing agreement you signed, you may have some of these choices available. Speak to your leasing company to figure out what your options are. 

Prospective home buyers often consider rooftop solar panel systems an attractive feature, especially when it will save them money on their new utility bills, so they may be willing to take over your lease. However, some prospective buyers may not want to inherit a lease they didn’t sign up for. In that case, you’ll need to pay off your lease yourself even after you leave your current home. Buying out your lease early can come with hefty fees or unexpected charges, so make sure you review your contract for any hidden costs before telling your leasing company you want to terminate your lease prematurely.

Quality of service 

Another reason you may want to cancel a solar lease is because of the service you’re receiving from your solar lease provider. Large solar companies like SunRun have both positive and negative reviews regarding their customer service. Many complaints about solar leasing companies revolve around post-installation service, such as responding to maintenance calls, questions about bills, and more.

Most solar lease contracts are difficult to cancel without legal action. Lease agreements tend to last anywhere from 10 to 20 years given their ironclad structure. In one case, a prospective homebuyer got stuck with a lease even after the death of the previous homeowner because the lease was tied to the title of the home.

Even if you can’t cancel your solar lease, you often have other options. If you want to cancel your lease because you’re selling your property, you typically have the option to transfer your lease to the new homeowner. Otherwise, many solar leasing contracts offer specific buy-out options and prices directly in their contract, but you can get stuck with pricey buyout fees. For example, even if you only have $15,000 worth of payments left on your lease, your buyout price may be $20,000, meaning you have to shell out an additional $5,000 you may not have been expecting.

If your contract doesn’t specify exact dates and prices for buyouts, many solar leasing providers offer the opportunity to back out of a solar lease contract at any point by purchasing the solar panel system at the fair market value. However, an early buyout may cost more than finishing out your contract. This value will change depending on how long your system has been operating and market prices at the time.

Importantly, if you buy a previously-leased solar panel system, you won’t be eligible to claim the federal investment tax credit (ITC) given that it has already been claimed by the original owner of the system (the leasing company).

If you haven't had your solar panel system installed yet, you may still have the option to cancel your lease contract. Leasing contracts from Sunrun, Vivint, or other third-party-owned providers typically offer a short time frame where you can cancel the contract without incurring a penalty. The time period will differ from one leasing company to another, but a common timespan to cancel your lease is often within 30 days of signing your contract.

In addition, most leasing contracts specify other unexpected circumstances under which cancellations are allowed. For example, if you sign your contract before a roofing evaluation only to find out you need to re-roof before going solar, your leasing agreement may allow you to terminate the contract due to the unforeseen additional expense.

That's why it critical to read the fine print of your agreement and understand your rights to cancel before signing any solar contract, leasing or otherwise. You can save yourself thousands of dollars and plenty of headaches by making sure you thoroughly read your contract before making it official.

If you find the right installer, equipment, and financing option, you should gain significant solar savings and lower your electricity costs immediately. The best way to ensure you’re getting a good deal before signing a contract is to shop around. By signing up on the EnergySage Marketplace, you can receive up to seven quotes from local installers who are competing for your business. These quotes will include pricing and savings estimates that you can compare to each other. If you prefer to start with a ballpark estimate of solar costs and savings on your property, try our solar calculator.