Residential Solar Leases Add Complexity to Home Sales

The introduction of third-party leases has helped rapid growth of rooftop solar but may be hindering home sales in California and other states. Lawrence Berkley National Laboratory (LBNL) found host-owned solar PV actually adds value to homes ($3-$4/watt); however, leased solar appears to introduce complexity in home resale. Before finalizing a sale, a homeowner with a solar lease may be required to either buy out the lease contract or find buyers willing and able to assume lease terms with sometimes stringent credit qualifications. Real estate professionals report a growing number of sales falling apart because of disputes over solar leases.

Key Details

  • Solar leases have been a strong driver of residential solar growth in states where the arrangement is permitted under law
  • Solar leases allow homeowners to install solar systems on their homes with no capital costs
  • Third-party providers own and maintain the system in return for a long-term contract, which usually spans 20 years
  • The sale of a home with a leased solar system may require one of the following criteria to be met:
    • The existing homeowner buys out the remaining lease payments, which can cost $15,000 to $20,000
    • The buyer assumes the solar lease but only after meeting credit qualifications of the third-party provider. Many potential buyers may not meet the credit qualifications

Implications

Residential solar may increase the value of a home, but the ownership structure is proving to be an important point of negotiation during the sale of a home. Consequently, challenges with solar leases at the time of sale may throw cold water on the third-party leasing trend which has been responsible for an explosion of residential solar installations.

More Information

This report is part of the Clean Tech & Sustainability Minute series. To view all featured Minutes, please click here.

View More

Contributing Authors

Paul Quinlan Clean Tech Manager

Welcome to ScottMadden!

Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.