The 10 Red Flags in Every Solar Contract (and How to Spot Them)
The short version: Most solar contracts have 3 to 5 problems hidden in them. Your salesperson didn't explain them. Here are the 10 most common red flags. The escalator clause raises your payment every year. The UCC-1 lien can block your home sale. The hidden dealer fee adds thousands to your loan. The transfer restriction can cost $7,000 to $30,000 to exit. If two or more apply to you, the contract deserves a closer look.
Not every solar contract is a bad deal. But most of them have things in them that your salesperson probably didn't take the time to explain. Some of these can cost you thousands of dollars. Some block you from selling your home. And others trap you in a 25-year deal you didn't fully understand.
Here's a checklist. If two or more apply to your contract, get a closer look.
Red flags 1 to 7 cover solar leases and PPAs. Red flags 8 to 10 cover solar loans. Red flag 11 covers everyone.
---
Red Flag 1: The Escalator Clause
Your payment goes up every year. Usually about 2.9 percent. Over 25 years, a $150 payment grows to more than $300. Most homeowners were never told about it at the sale.
Check your lease for words like "annual escalator," "payment adjustment," or "rate increase." If you see a percentage after those words, that's your escalator.
---
Red Flag 2: The UCC-1 Fixture Filing (a Lien on Your Home)
Some solar companies file a UCC-1 with your county. This is a lien. It tells anyone looking at your property that the solar company has a legal claim on equipment attached to your home.
A UCC-1 can:
Block or delay a home sale
Scare off buyers
Create title insurance problems
Check your county recorder or assessor website. Search for your address. If a UCC-1 shows up, you have a lien.
---
Red Flag 3: Auto-Renewal Terms
Some contracts automatically renew at the end of the original term. The cancel window is often short — 30, 60, or 90 days before the end. Miss that window and you're locked in again.
Check your contract for "auto-renew," "automatic extension," or "renewal notice period." If you see a deadline to opt out, mark it on your calendar now.
---
Red Flag 4: Transfer Restrictions
If you sell your home, the buyer may have to qualify to take over your solar lease or PPA. If they don't qualify — or don't want to — you may have to pay off the full remaining contract to close the sale.
Typical buyout: $7,000 to $30,000 or more. It depends on system size and remaining term.
This is the one that surprises homeowners at closing. By then, it's too late to negotiate.
---
Red Flag 5: Performance Guarantees That Don't Match Reality
Your contract may promise a certain amount of energy production per year. But if the system was oversized, badly installed, or the estimates were inflated at the sale, actual production falls short.
Some contracts have a "make-good" clause. Many don't. And if your installer went bankrupt, there's nobody left to honor it anyway.
Check your contract for "production guarantee," "performance warranty," or "make-good." Compare your actual monthly production to the number your salesperson promised.
---
Red Flag 6: Cancellation Penalties
Some contracts charge thousands to cancel early. Some have no cancel option at all. If the cancel terms weren't explained to you at the sale, that can affect what you can do about it now.
Look for "early termination fee," "cancellation penalty," or "buyout amount."
---
Red Flag 7: Missing or Vague Savings Projections
Did the salesperson promise specific dollar savings? Check the contract. If those numbers aren't written down, there's no way to hold anyone to them.
Verbal promises don't survive the signature page. If it's not in writing, it doesn't exist.
---
Red Flag 8: Hidden Dealer Fees in Your Loan
Did you finance your system with a solar loan? There's a strong chance a dealer fee was added to your loan balance. Usually 15 to 30 percent of the total loan. It got rolled into the principal. It wasn't listed as a separate charge.
That means you've been paying interest on money that went to the solar company's margin. Not to your panels.
The federal Truth in Lending Act says every fee must be shown in writing. A hidden or mislabeled dealer fee can be a federal violation. That's one of the strongest paths to renegotiate or exit a solar loan.
---
Red Flag 9: Your Total Loan Cost Doesn't Match What You Were Told
Take your monthly loan payment. Multiply by the number of months on your loan.
Is that total close to what the salesperson said the system would cost? For many homeowners, the total is thousands — sometimes tens of thousands — more than they were quoted.
If the total cost of financing wasn't properly disclosed, that's another potential Truth in Lending Act issue.
---
Red Flag 10: You're Paying Solar AND a High Utility Bill
This is the one that catches most homeowners off guard. You were told solar would lower or eliminate your electric bill. Instead, you're paying a monthly solar payment AND a utility bill that barely moved.
Pull your utility bills from the last 12 months. Compare what you're paying the utility plus the solar loan against what you'd pay the utility alone. If the numbers don't work, the savings projections you were sold didn't match reality.
---
Red Flag 11 (Applies to Everyone): Who Actually Owns the Panels?
Do you own the panels on your roof? Or does the solar company?
This is the most basic question. A surprising number of homeowners don't know the answer.
If you signed a lease or PPA, the solar company owns the panels.
If you took a loan, you own the panels.
This changes everything. Your rights. Your costs. Your options to exit the deal. Pull out your contract and look at the top of page one. It will say Solar Lease Agreement, Power Purchase Agreement, or Loan Agreement.
---
How to use this checklist
Pull out your contract. Go through it page by page. Don't skim.
Can't find the answer to one of these red flags? Not sure what the legal language means? That's normal. Solar contracts are long and written in language most people aren't meant to fully understand.
If you spot two or more red flags, we strongly advise you get some help to have a closer look at what you signed. That's what a free Solar Relief Assessment is for. A senior consultant reads your contract with you. They tell you what's in it in plain English. And they tell you what your options are.
How Many Red Flags Are in Your Contract?
If you spotted two or more red flags — or couldn't find the answers at all — the next step is talking to a senior consultant who reads these contracts for a living. A free Solar Relief Assessment walks you through what's in your contract and what relief you and your family may qualify for.
[Get free Solar Relief Assessment →](https://solarhomeadvocate.com/free-assessment?utm_source=substack&utm_medium=article&utm_campaign=launch&utm_content=red-flags)Get free Solar Relief Assessment →**
No charge. No obligation. No high-pressure pitch.
---
"Sal says: The average homeowner we hear from has 3 to 5 of these red flags in their contract. Most didn't know about any of them until they looked."
---
Frequently Asked Questions
What are the biggest red flags in a solar contract?
The 10 most common red flags: (1) the escalator clause that raises your payment 2.9% per year, (2) a UCC-1 fixture filing that acts as a lien on your home, (3) auto-renewal terms with a narrow cancel window, (4) transfer restrictions that can cost $7,000 to $30,000 at home sale, (5) performance guarantees that don't match actual production, (6) cancellation penalties, (7) missing or vague savings projections, (8) hidden dealer fees in your loan (often 15-30% of the loan), (9) total loan cost that doesn't match what you were quoted, (10) still paying a high utility bill alongside your solar payment.
How do I know if my solar contract has an escalator clause?
Look at your contract for "annual escalator," "payment adjustment," or "rate increase." If you see a percentage (usually 2.9%) after any of these phrases, your payment goes up every year. Over a 25-year lease, a 2.9% escalator turns a $150 payment into more than $300.
What is a UCC-1 fixture filing on a solar contract?
A UCC-1 is a legal filing with your county that creates a lien on solar equipment attached to your home. Some solar companies file UCC-1s as standard practice. A UCC-1 can block or delay a home sale, scare off buyers, and create title insurance problems. Check your county recorder's website for filings against your address.
How do I find out if my solar loan has hidden dealer fees?
Pull your loan paperwork. Compare the "amount financed" on your disclosure to the actual system cost you were quoted. The difference is typically the dealer fee — usually 15 to 30 percent. If the fee wasn't listed as a separate finance charge, that can be a federal Truth in Lending Act violation.
Can I cancel my solar contract if the salesperson lied to me?
Possibly. Every state has a consumer protection law that covers deceptive sales. The federal FTC Cooling-Off Rule gives you 3 business days to cancel a door-to-door sale. If your salesperson didn't provide proper cancellation notice, the cancellation window can extend. If the contract misrepresented savings, rebates, or total cost, state consumer fraud laws may apply. Your exact options depend on your state, your contract, and how it was sold.
What should I do if I find 2 or more red flags in my contract?
Get a free contract review. Don't sign anything else. Don't stop making payments (that damages your credit). Document what the salesperson told you at the sale. Save your contract, loan paperwork, and any texts or emails from the installer. Then talk to someone who reads these contracts for a living. A free Solar Relief Assessment walks you through what's in your contract and what your options are.
Will I lose my home if I stop paying my solar loan?
Your solar loan usually isn't a mortgage — it's a personal loan secured by the panels (and sometimes a UCC-1). Missing payments hurts your credit but usually won't cost you your house. But that's state-specific and lender-specific. Keep paying the loan while you investigate your options. Use a contract review to figure out legal paths before stopping payments.