Lease, PPA or loan: know what you have
Your options depend on which kind of solar agreement you signed, so find the contract first.
| Agreement | Who owns the panels | What you pay | At sale |
|---|---|---|---|
| Solar lease | The solar company | A fixed monthly payment | Transfer, buy out, or remove |
| Power purchase agreement (PPA) | The solar company | A set price per kilowatt-hour produced | Transfer, buy out, or remove |
| Solar loan | You | Loan payments | Pay off the loan from proceeds |
| Paid in cash | You | Nothing ongoing | Sells with the house |
The U.S. Department of Energy describes leases and PPAs as arrangements that “allow consumers to host solar energy systems that are owned by solar companies.” Leases “entail fixed monthly payments,” while with a PPA you “agree to purchase the power generated by the system at a set price per kilowatt-hour.” Because you don’t own the system, DOE notes, you also don’t get the tax benefits.
If you have a solar loan, the sale works like any other lien payoff. The rest of this page is about leases and PPAs.
Option 1: Transfer the agreement to the buyer
Lease and PPA contracts generally spell out how the agreement can pass to a new owner, usually with the solar company’s approval. The usual steps:
- Read the transfer section of your contract: who approves, what credit standard applies, any transfer fee, and how long approval takes.
- Tell buyers up front. Include the monthly payment or per-kWh rate, the remaining term and any escalator.
- Start the transfer once you have a signed contract. The company typically runs the buyer’s credit and sends them a new agreement to sign.
- Confirm the transfer is complete before closing, and get it in writing.
A Lawrence Berkeley National Laboratory study of third-party-owned solar home sales in San Diego found that these systems “add some complexity to the real estate transaction,” but that the overall effects on sale price, time on market, agreement transfers and satisfaction were “largely neutral and in some cases a net positive.” That study covered 118 homes sold from 2010 to 2013, so treat it as a small, early sample rather than an Ohio forecast.
Option 2: Buy out the system
If your buyer doesn’t want the lease, or doesn’t qualify, you can usually buy the system from the solar company. Your contract may set the buyout price or a formula. Once you own it, the panels convey with the house like any other fixture, and the lease payment disappears.
A buyout adds a payoff to your closing statement and takes time to arrange, so ask the solar company for a written buyout quote as soon as you decide to sell. Compare the buyout cost with what the system’s lower electric bills might be worth to buyers in your price range.
Option 3: Remove the panels
Some agreements let you pay the company to remove the system. This is usually the costliest choice, because you pay for removal and any roof repairs, and you may still owe a termination amount. It can make sense if the roof needs replacement anyway or the panels are in poor condition.
How lenders and appraisers treat leased solar
The buyer’s loan type matters. HUD Handbook 4000.1 tells FHA lenders that the property value “must not include the value of any equipment, including an energy system, that is not fully owned by the Borrower.” The lender must also review the lease to make sure it doesn’t contain “Legal Restrictions on Conveyance.”
HUD’s solar policy adds that the borrower “must own, not lease,” a system for it to count as an eligible improvement, and that “leased equipment and Solar Power Purchase Agreements (SPPA) may not be financed under any FHA Title II programs.”
In practice, an FHA buyer can still buy a house with leased panels if the lease terms pass the lender’s review, but the panels won’t add to the appraisal. A cash buyer has no lender review at all. See FHA appraisal repair requirements for the rest of what FHA appraisers check.
Title and recorded filings
A solar company may record a notice or financing filing against the property to show it owns the equipment. The buyer’s title search will find it. Before closing, the title company will want either:
- confirmation that the agreement is being transferred to the buyer, or
- proof of buyout and a release or termination of the filing.
Ask the solar company early how it handles its filing at sale. A filing that no one releases can hold up closing in the same way an old mortgage does; our guide to what a title company does explains how those requirements get cleared.
Disclosure and timing
Treat the solar agreement as part of your disclosure. Ohio’s residential property disclosure form under R.C. 5302.30 covers the physical condition of the property within your knowledge, and roof penetrations or leaks around the panel mounts belong on it. Separately, give buyers the agreement itself so they know the payments and term.
Build the solar steps into your timeline:
- Before listing: get your contract, the remaining term, and a buyout quote.
- When you accept an offer: start the transfer application or schedule the buyout.
- Before closing: confirm in writing that the transfer or buyout is complete and the filing will be handled.
Selling as-is with leased panels is possible too, if the buyer accepts the agreement or you buy it out. Our guide on how to sell a house as-is in Ohio covers the rest of that process.
