One customer found a way to settle through a Federal Trade Commission act
When you terminate a car lease early, your contract will often require you to pay the remaining lease amount, an early termination fee, any remaining depreciating costs and more penalties, according to dmv.org. These costs can vary from dealer to dealer, and the DMV encourages lessees to carefully read lease contracts to be sure there are no surprises if they must terminate the lease early.
The same goes for solar leases—but the stakes (and costs) are even higher. Though the contracts can be many pages long, the pain of scouring through them will be far less than that of surprise cancellation horrors. After residential installer Sungevity went bankrupt and distributed its assets to multiple companies, those who had leases through the company flocked to solarpowerworldonline.com to figure out what to do next.
On Solar Power World’s news stories about Sungevity’s bankruptcy and subsequent merger, commenters questioned what to do next about their leases. A commenter named Amber Brown asked, “The real question—do we have to pay the lease still??” Another commenter going by “Veronica in New York” said, “I am worried I purchased a 20 year lease with Sungevity in June 2016 and now they filed for bankruptcy in March 2017. My inverter went down 2 months ago and I can’t get a repair team to come out to get me back on line.”
One unhappy customer contacted us directly to tell us she was in a particularly confusing situation. Jean Kleber’s husband works for the government. While they expected to stay in New Jersey for the life of their 15-year Sungevity lease, he ended up being relocated six years after they signed.
Kleber was aware that government jobs can always come with a hint of uncertainty, so she did her due diligence up front to ask Sungevity what would happen if they did have to move before the lease was up. She said the solar company assured them many times that even if they had to move and sell the home before the lease ended, they’d have no trouble.
“There were plenty of assurances this is not going to be a problem. ‘Worst case-scenario, you can terminate it, no big deal,'” Kleber said.
When they found out her husband was being relocated to Florida for work near the end of 2017, Kleber went through weeks of stress trying to figure out the best way to proceed—whether it be purchasing the panels, trying to get the next buyer to assume the lease or terminating it outright. After being given the run-around by the companies that took over Sungevity’s assets, namely Omnidian, she finally decided to file for arbitration on the basis of violation of the Consumer Leasing Act. She and the leasing services company that took over Sungevity’s assets settled at Kleber paying an undisclosed amount to terminate the lease and for the company to leave the panels on the home. She said the company plans to get the next homeowner to pay it for monitoring.
“I’m very familiar with Jean Kleber’s case, and those of many other consumers left holding the bag after Sungevity’s bankruptcy,” said Omnidian CEO Mark Liffmann via email. “Having personally spoken with Mrs. Kleber, I understand her frustrations. Many partners have been pulled in to help Sungevity customers, including our firm. Our role is system monitoring and maintenance. We guarantee that systems perform as expected and we continue to serve thousands of Sungevity lease holders. But Omnidian does not own these assets. We don’t have the authority to change or terminate a Sungevity lease because we don’t own the lease.”
Kleber’s situation was made more complicated by a bankruptcy, but other solar lessees could have similar issues.
While vehicle leases are usually five-year contracts, solar leases are often for longer than 15 years. Consumers must be sure they’re staying put for a long time before they put pen to paper.
“As a consumer, 20 years feels a little too long to me. There are not that many things in life that you sign for that long,” said Vikram Aggarwal, CEO of consumer-facing solar quote comparison company EnergySage.
People can be attracted to the solar leasing option for a number of reasons. For one, it’s a simple way to save money on electric bills and lower a home’s carbon footprint. Also, the solar company providing the lease will typically handle maintenance, so it’s hassle-free. And consumers don’t have to take out a loan like they would to buy a solar system.
For retirees with no taxable income who can’t benefit from the ITC or other tax incentives, leases may be the only way they can go solar.
“It’s an extremely simple process and it gets them a small savings,” Aggarwal said.
But the downsides shouldn’t be overlooked. Lessees can’t take advantage of the ITC and state-specific solar rebates and incentives because they don’t own the system. And a lot of the money a consumer saves on energy bills will go toward paying the leasing company.
The value of the system seems to be an afterthought in a solar lease, much different from when a consumer is looking to purchase solar. Kleber said she had no idea what the panels on her roof were worth when she started looking more closely at her lease.
“What we see is when consumers are looking at owning the system, they’re very focused on the quality of the equipment that is being installed,” Aggarwal said. “Whereas the leasing company basically downplays the value of the equipment. ”
Kleber ran into this problem when she considered selling the panels with the home, but the appraiser told them the panels only added $1,000 in value to the home. Meanwhile, the solar company told her the array was worth $21,000.
“We didn’t even know the value of them when they put them on our house,” Kleber said. She couldn’t find the value written anywhere in her lease either.
If a lessee does have to move before the lease is over, the options can include buying the system outright, trying to get the new homebuyer to assume the lease, or paying to terminate it and have the panels taken off the roof.
Because equipment value is often not at the forefront in leases, homeowners who buy the panels and own the equipment may find the equipment is not the right quality for their needs.
Unhappy customers like Kleber are bad for the industry. She said she will never consider solar again because of this experience, and discourages friends from trying it too. Solar installers and leasing companies can avoid disgruntled customers by being much more transparent up front. Aggarwal said one solution could be to offer shorter lease options, similar to the structure of solar loans. Another is for solar companies to be conservative in their calculations of how much money the solar lease will actually save the customer based on realistic utility energy inflation rates.
An industry-wide standardized leasing contract could also help clear up the murkiness of solar leases. SEIA released a template that would do just that, if many companies chose to adopt it.
Despite the murky areas in solar leasing, Aggarwal said leases do have an important role to play in the industry.
“We are hoping that there is some more innovation in this space where leases are made more flexible, have different terms, different options for the customer, let the customer select their equipment, really help them make the right decision,” Aggarwal said.
Those who are struggling with Sungevity leases are encouraged to look into the Consumer Leasing Act, a ruling by the Federal Trade Commission. If you’re a homeowner considering solar, you can visit solarunitedneighbors.org for assistance. The nonprofit calls itself “the only organization in the country dedicated to representing the needs and interests of solar owners and supporters.”
Updated with Omnidian’s comments on Jan. 5, 2018