A homeowner in Sacramento called me last spring, three days before her installation was scheduled to start. She’d signed a 25-year solar lease nine months earlier and had just discovered her contract included an automatic annual escalator of 2.9% on her monthly payments. Nobody had explained that to her during the sales pitch. Over 25 years, that clause would cost her roughly $14,000 more than the flat rate she thought she was getting. The installer wasn’t breaking any laws. Every word was in the contract. She just hadn’t read it.

That situation isn’t rare. Solar contracts are long, dense, and written by lawyers whose job is to protect the company, not you. You’re making a decision that will be attached to your house for two to three decades, and in many cases you’re doing it after a 90-minute sales appointment. Slowing down to actually read the contract is the single best thing you can do before your system goes on your roof.

Understand What Type of Agreement You’re Actually Signing

Contract TypeOwnershipPayment StructureKey Risk
Cash PurchaseYou own systemUpfront paymentRequires careful review of warranty and scope
LoanYou own systemMonthly payments with interestUCC-1 filing or deed of trust can complicate refinancing
Power Purchase Agreement (PPA)Third party ownsPer kilowatt-hour rateLong-term energy contract with potential escalators
LeaseThird party ownsFlat monthly feeEscalator clauses (2.9%-3.5% common) add significant cost over time

Before you review a single line item, you need to know which type of contract you’re holding. They’re not interchangeable, and your rights and risks are completely different depending on the structure.

Cash purchase: You own the system outright. The contract is essentially a scope of work, a warranty document, and a payment schedule. Straightforward, but still requires careful review.

Loan (secured or unsecured): You own the system, but you’re financing it. Watch for whether it’s a secured loan, because some solar loans place a lien on your home through a mechanism called a UCC-1 filing or a deed of trust. That can complicate refinancing or selling your house.

Power Purchase Agreement (PPA): You don’t own the panels. A third party owns the equipment on your roof and sells you electricity at a set rate. You’re signing a long-term energy contract, not buying a product.

Lease: Similar to a PPA in that you don’t own the panels, but instead of paying per kilowatt-hour, you pay a flat monthly fee (sometimes with that escalator clause I mentioned above).

Each structure has legitimate use cases. But I’ve seen clients sign a lease thinking they were buying, because the salesperson used the word “go solar” instead of “lease solar.” Get clear on ownership from line one.

Production Guarantees and System Sizing: What the Numbers Actually Mean

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One of the most important sections in any solar contract is the production estimate. This is usually expressed in kilowatt-hours per year, and it forms the basis of every financial claim the company makes about your savings.

Ask yourself: where did this number come from? Reputable installers use tools like PVWatts (a free NREL calculator) or Aurora Solar to model your specific roof, orientation, shading, and local weather patterns. If your salesperson couldn’t explain their modeling methodology, that’s a problem.

Look for a production guarantee clause. Some contracts guarantee a minimum annual output. If the system underperforms, the company owes you a credit. Others include no guarantee at all, meaning if the system produces 30% less than projected, you have no recourse beyond warranty claims on defective equipment.

Read the fine print on how underperformance is defined and measured. Some contracts measure production at the inverter, some at the utility meter. The difference can be 3 to 8% depending on losses in your wiring. That gap matters over 25 years.

Also check whether the production estimate assumes you’ll clean the panels. Dirty panels in dusty climates can lose 15 to 25% of output. If you want to handle maintenance yourself, a solar panel cleaning kit can work for most residential arrays without the cost of a service call. (Disclosure: this site may earn a commission on purchases.)

The Financial Terms You Can’t Afford to Skim

This is where most people get burned. Here’s what to read slowly, line by line:

Escalator clauses: For leases and PPAs, find the annual rate increase. Anything above 1.5 to 2% deserves serious scrutiny given current utility rate trends. Some contracts carry 2.9% or even 3.5% annual escalators baked in for 20 to 25 years.

Prepayment penalties: Can you pay off a solar loan early without a fee? Some financing products include prepayment penalties that eat into your savings if you refinance your home or come into money.

Federal tax credit responsibility: If you’re using a loan product through the installer, read this section extremely carefully. Many solar loans are structured around the assumption that you’ll apply your 30% federal Investment Tax Credit (ITC) toward the principal within 18 months of installation. If you don’t, your loan payment can step up significantly, sometimes by several hundred dollars a month. The U.S. Department of Energy’s homeowner guide to going solar explains how the ITC works, but your contract is where you’ll find out what happens if your tax situation doesn’t allow you to use it fully.

Interconnection and permit costs: Confirm whether these are included in your quoted price. Some contracts list a base price and then have a line allowing the installer to pass through “unforeseen utility fees.” That’s a real number that can run $500 to $2,500 depending on your utility.

Warranty Coverage: Equipment vs. Workmanship vs. Performance

A solar contract typically bundles three separate types of warranty, and they’re not the same thing.

Equipment warranty: Covers the panels and inverter against manufacturing defects. Top-tier panels carry 25-year product warranties. Inverters typically carry 10 to 12 years, sometimes extendable for a fee. String inverters from established brands like SMA or Fronius or microinverters from Enphase or APsystems usually have solid warranty backing. Panels from less-established manufacturers may have warranties that sound good on paper but are backed by companies that may not exist in 15 years.

Workmanship warranty: Covers the installation itself (roof penetrations, wiring, racking). A respectable installer offers at least 10 years. Some offer 25. If you see fewer than 5 years on workmanship, walk away.

Performance warranty: This covers panel degradation. Most quality panels guarantee at least 80% of original output after 25 years. Read the degradation curve because some manufacturers guarantee linear degradation while others allow steeper drops in early years.

Check whether the warranty is backed by the installer, the manufacturer, or a third-party insurance product. Installer-backed warranties disappear when the installer goes out of business. Manufacturer warranties are only as stable as the manufacturer. Third-party warranted products add a layer of protection, but read the claims process carefully.

What Happens When You Sell Your House

This section gets skipped constantly, and it causes real estate transaction nightmares. The Solar Energy Industries Association (SEIA) has noted that panel ownership and transferability are among the most common sources of confusion for solar homeowners, particularly in resale situations.

If you own your system outright, it transfers with the house like any other fixture. That’s clean.

If you have a lease or PPA, you generally have two options when selling: transfer the agreement to the buyer, or buy out the contract. Buyout prices are sometimes defined in the contract, sometimes calculated by formula. Get the buyout schedule before you sign, not after you get an offer on your house.

Lease and PPA transfers require the buyer to qualify for the third-party agreement, which means they need to meet a credit threshold. If your buyer doesn’t qualify, the deal can fall apart.

For loans with UCC-1 filings, the lien must be resolved before title transfers. Some title companies flag these filings and others miss them entirely. Know what’s on your property before a buyer’s title search finds it for you.

If you’re planning to sell within five to eight years, a lease or PPA is probably the wrong product for your situation. The math gets messy fast.

Step-by-Step Contract Review Checklist

Before you sign anything, go through this list. Print it out if you need to.

Step 1: Identify the agreement type. Cash purchase, loan (note whether secured or unsecured), PPA, or lease.

Step 2: Confirm system ownership. Who owns the equipment on your roof on day one? On year five? On year 25?

Step 3: Find the production estimate and its source. Is there a production guarantee? What’s the remedy if it’s missed?

Step 4: Read all financial escalators. Write the annual rate increase on a Post-it and do 10 and 25-year math before you proceed.

Step 5: Locate the tax credit language. What does the contract require you to do with the ITC? What happens if you don’t or can’t?

Step 6: Review all three warranty types. Equipment, workmanship, and performance. Note durations and who backs each one.

Step 7: Read the early termination and transfer sections. Get a buyout schedule or formula in writing.

Step 8: Confirm permit and interconnection cost responsibility. Is this included, or can the installer pass costs to you?

Step 9: Check for arbitration clauses. Many solar contracts require binding arbitration rather than allowing you to sue. Know what dispute resolution looks like before a dispute happens.

Step 10: Ask for 72 hours minimum before signing. Any company that pressures you to sign the same day the salesperson visits is a red flag.

The goal isn’t to make you suspicious of the industry. Most solar companies are operating in good faith, and going solar is still one of the smarter home investments available to most homeowners right now. But the contract is where “good faith” meets legal reality, and those two things aren’t always aligned. Read it, ask questions about anything you don’t understand, and if a company makes you feel like taking time to review the paperwork is an inconvenience, treat that as the answer you need.

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Disclosure: As an Amazon Associate, we earn a small commission from qualifying purchases at no extra cost to you. We only recommend products that genuinely support the topics covered in this article.