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3 Rules to Avoid Shady Solar Contracts

10/13/15

  04:47:00 pm, by Jim Jenal - Founder & CEO   , 873 words  
Categories: All About Solar Power, Solar Economics, Residential Solar, Ranting

3 Rules to Avoid Shady Solar Contracts

Just sign here...

So you’ve decided to go solar (congratulations!) and you are about to sign on the dotted line. Before you do, please take a moment and follow these three simple rules to avoid getting burned.

Rule #1 - Read the Contract!

It goes without saying that for a project as elaborate as a solar installation, a written contract is required.  But a written contract will do you no good, and could do you a great deal of harm, if you don’t take the time to read it!

I know, I know, contracts are boring. But lawsuits are not, and the best way to avoid such excitement is to spend a little tedious time now laboring over the fine print.

We see examples of solar contracts all the time, and some of them are pretty appalling. Written in tiny fonts, they just beg you to give up and simply ask, “Where do I sign?” Resist that temptation at all costs, less you discover the hard way that some unscrupulous contractor (or even worse, his unscrupulous lawyer) has snuck some awful prevision into your contract. Think I’m exaggerating? Take this beaut for example, from a section on Change Orders:

The change in the Contract Price caused by such Contract Change Order shall be as agreed to in writing, or if the parties are not in agreement as to the change in Contract Price, the Contractor’s actual cost of all labor, equipment, subcontracts and materials, plus a Contractors fee of 12% shall be the change in Contract Price…

Holy smokes! According to this, if the parties disagree as to the cost of a Change Order (more on this in a moment), then the cost is whatever the contractor says he has spent, plus 12%! What thinking person would agree to sign such a contract - or choose to do business with someone who is presenting it? Someone who didn’t take the time to read it, that’s who!

Rule #2 - Be Sure the Essential Terms are There!

A contract is formed when someone - a contractor in our example - offers to do something - in this case install solar on someone’s home - and a second person - the homeowner here - accepts the offer and agrees to pay to have the work done. In order for a contract to be binding, the parties must actually agree on all of this, which is to say that the homeowner must know certain essential terms. For example:

  • Products - what products does the contractor intend to put on your home? At the very least, this should call out the specific solar panels and inverters (down to the model number) that will be used. I cannot tell you how many contracts we have seen (to say nothing of bids) that omit these terms. But you wouldn’t buy a generic “car,” would you?
  • Price - how much is this going to cost you? If the system is financed (you aren’t really going to lease this, are you?), what are the total payments over the life of the financing. What about additional costs, say for outside structural engineering - who pays for that? Is it included in the quoted price? If it is to be billed separately, is the cost simply passed through, or can the contractor take a markup on someone else’s work? (We have seen contractor’s markup such services by 200% or more, never disclosing that fact to the homeowner.)
  • Start date - when will all of this happen? What contingencies are there that might delay things?
  • Duration - how long will this take? Are there any obstacles or conditions that need to be changed before the project can be completed? For example, some projects require trenching (say from a detached garage where the solar will be installed back to the house where the service panel is located), and it is not uncommon for the homeowner to have that done by someone else. But such a contingency should be called out in the contract so the responsibility for that work is clearly understood.

Rule #3 - When in Doubt, Wait!

Finally, if you are feeling rushed by the contractor (or his sales agent) to “just go ahead and sign already!” - then it is time to take a break. A legitimate contractor wants you to be comfortable with what you are signing.  After all, a legit contractor doesn’t want there to be any confusion about what is going to be done or how much it will cost.  So the legit contractor will be happy to answer your questions before you sign, knowing that creating understanding now, will help eliminate disputes later on.  But the shady contractor just wants you to sign now - and give them a check!  (Oh, and a word about initial payments - for a residential project, California law prohibits a solar contractor from asking for more than $1,000.  A contractor who asks for more before work is done is violating the law.)

Worst case, go full stop and tell the contractor you want more time to review the deal before you sign.  If you have doubts, consult a lawyer - yeah, yeah, I know all about lawyers (I used to be one!) but a little time spent now may save you major aggravation down the road.  And you don’t want to end up on the wrong end of a bad deal.

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Comment from:
kimberly_davis
5 stars
Excellent article, Jim! The distinction between ‘equipment warranty’ and ‘installers’ warranty’ should also be clear. If something goes wrong, we really don’t want the customer wandering around up there. I developed a “Users Manual” for our solar projects - residential leases and commercial PPAs - which addressed safety, maintenance, when to call your installer, etc. The manual was custom to each customer and included spec sheets of the panels, inverters, and racking. We found the generic template and excellent marketing tool, as it put minds at ease as to how the thing worked and what would happen if something went wrong. (We were also able to customize for maintenance in very dusty areas like AZ, or snowy ones like VT.) With the extent of Chapter 11/13 and M&A going on in the solar manufacturing - as well as contractor - space, it is fair to wonder what the Plan B is. And that leads me to defend the lease model if working with an established, reputable solar company: Prices have indeed come down dramatically, and the end of the cash-grant 1603 makes investor financing for small DG projects less common. But it can be a great way of financing your system - the Fair Market Value purchase option at the end of the lease period means you then own your system with FREE power afterwards!
10/14/15 @ 06:41
Comment from: Jim Jenal - Founder & CEO
Hi Kimberly - thanks for taking the time to comment, and your kind words. I agree completely with your observations (with the exception of the value of the lease model - there we will simply have to agree to disagree!) We also provide a similar “Owner’s Manual” with all of our projects - it collects everything in one, attractive binder for future reference. I think long-term maintenance issues are important - it is one reason that we like microinverters as down-the-road panel substitutions (for a defective panel) should be easier. Fodder for a future post…
10/14/15 @ 07:31


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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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