By Mandy Ellis

As residential solar installations continue to grow, homeowners could find themselves touring more than a few homes with leased solar systems. To help you understand if buying a home with a solar lease is right for you, here is some advice on the process from real estate and solar experts.

Solar panels on a roof at sunset
Before you buy a house with a solar lease, be sure you understand the pros and cons (Credit: vchal/Shutterstock)

What to know going in

“Understand the lease terms and conditions, including if there’s a buyout or purchase clause, and know if there are demonstrated savings,” explained Rob Madden, broker at Phoenix, Ariz.’s Green Leaf Realty, certified Eco-Broker and holder of the National Association of REALTORS’ (NAR) Green designation.

Experts recommend also asking these questions at the beginning of the process:

  • What are the homeowner obligations?
  • Did the seller make an upfront lease payment?
  • Is there an escalator clause increasing the payments?
  • How much contract time remains?
  • How has the system impacted the electric bill over the past 12 months?
  • What is the cost compared to the utility’s rate?
  • Is there a production guarantee or a clause explaining reimbursement for production loss?
  • Who last installed or evaluated the system? Are they still in business and what are their reviews?
A home with a red roof and solar panels
Before buying a home with a solar lease, find out how the solar system has affected the energy bill over the last year (Credit: anweber/Shutterstock)

Connecting with a qualified real estate agent

Shawn Kunkler, Realtor at Compass Real Estate in San Francisco, Calif., said, “If solar panels are a really important feature to you, ask during initial consultations and interview at least three agents.”

Choosing an agent with green certifications, like an Eco-Broker or the Green designation from NAR, or a track record of solar home transactions is critical, explains Madden. Your broker should be able to explain the system, understand utility bills and advise you based on their knowledge and experience.

Pros of purchasing a home with a solar lease

The most attractive plusses are the solar system’s already running, there’s clear information on savings and payments, previous issues are documented and the home reduces your carbon footprint. Homes with solar leases also pay less per kilowatt-hour for electricity, save money even with monthly payments and most contracts have routine maintenance plans where the installer regularly evaluates system functionality and performance.

Cons of homes with solar leases

Because it’s a lease, the system doesn’t add extra value to your property, and the buyer inherits the 15 to 25-year contract, making them responsible for the system for whatever amount of time remains. Plus, if the seller overpaid for the system originally, the buyer ends up paying more overall and the buyer could acquire a dated system.

“If the system was installed three to six years ago, it can look dated and be less efficient than today’s sexier-looking panels, which put more power in smaller spaces,” explained Ruben Ugarte, business development director at Horizon Solar Power in Temecula, Calif.

 

A blue home with solar panels on the roof
Homes with solar leases pay less per kilowatt-hour for electricity (Credit: CL Shebley/Shutterstock)

Should you purchase a home with a solar lease?

If you understand the lease’s terms, reviewed the pros and cons for your specific situation and there are clear cost benefits, experts give the purchase a green light. Always evaluate panel age and efficiency, advised Kunkler, and “do your due diligence; don’t make a blanket statement that if the home has solar, you’ll make an offer,” he explained.

Purchasing a home with a solar lease also means completing the lease transfer, which usually includes a transfer form, a review of system functionality by the installer and, in some instances, completing credit checks, paying application fees and filing documents with the county.

If the buyer doesn’t qualify for the transfer, ask the lease company about any other available eligibility avenues. In the event the buyer still isn’t able to acquire the lease transfer, they should consider waiting to purchase the home until they’re financially healthy or looking at properties with owned solar systems instead.