Solar Lease Agreement: 12 Clauses to Check Before You Sign

Quick answer: A commercial solar lease agreement should settle twelve things in writing before you sign: who owns the system and for how long, what you pay and how it can change, who must consent to the installation, who insures and maintains it, what happens if it underperforms, who receives the export income, what ending it early costs, what your options are at the end, what happens if you sell or sub-let the building, what counts as a default, and who claims the tax relief. Have your accountant and a solicitor read it. This is a checklist of questions, not legal advice.

The paperwork is where a lease’s economics are decided. Two quotes with the same monthly rental can differ widely in what you can do with the system, how you exit and what you owe if something goes wrong. This checklist is for the business side of a commercial solar lease. It is not about domestic rent-a-roof agreements, which are a different product with different problems.

The 12 clauses

1. Who the parties are, and what security is asked for

Find out who the lessor is and whether the agreement can be assigned to another funder, which is common. Then ask what security is required: a deposit or rentals paid in advance, a guarantee from a parent company or a director, or a charge over assets. A personal guarantee is a real exposure, so ask whether one is required, how much it covers, and whether it falls away after a set period.

2. Term and rentals

Get the primary term and the full rental schedule for the whole term in a table, not a headline monthly figure. Check whether rentals are paid in advance or in arrears, and whether they are flat, stepped or indexed. If they are indexed, ask what to, and whether there is a cap. VAT is charged on each rental, so confirm the figures are quoted with or without it. A secondary period at a nominal rental should be written down, not implied.

3. Title and your right to use the system

Under a lease the lessor owns the system throughout and you have the use of it. That means you cannot sell it, charge it or sub-let it, and the lessor will often have a right to mark the equipment and to inspect it. Check that your right to use the system is protected for the term so long as you pay, and that the lessor cannot interfere with your use of it.

4. Landlord and lender consent

If you rent your premises, the installation affects your landlord’s building. Expect the lessor to want the landlord’s written consent, rights of access for its engineers, and a waiver confirming the landlord will not claim the panels as part of the building. Also ask what happens if your own lease of the premises ends before the solar lease does. If you own the building and it is mortgaged, your own lender’s consent may be needed under its security terms. This is the item most often left until late and the one most likely to delay a start date.

5. Insurance, risk and maintenance

Check who insures the system, to what value, and whether the lessor must be noted on the policy. Under many leases the risk of loss passes to you from delivery. Ask who maintains the system, who pays for an inverter replacement part-way through the term, and what happens on a total loss, which usually triggers a settlement payment rather than ending the obligation.

6. Performance, warranties and unconditional payment

Many leases make the rentals payable regardless of how the system performs and regardless of any dispute with the installer, a clause often called “hell or high water”. If yours does, a performance shortfall is a claim against the installer under its warranty, not a reason to withhold rental. So check three things: whether the installer’s performance guarantee and the manufacturer’s warranties are documented, that their periods match the lease term, and that they survive if the lease is assigned. Ask for the installer’s yield forecast in writing and how it was calculated, and test it against the method in our guide to working out your solar cost per kWh.

7. Export income and the grid connection

Find out who is registered to receive Smart Export Guarantee payments and whose name is on the connection paperwork: a G98 notification for a small installation, or a G99 application above 16 A per phase, which is about 3.68 kW on a single phase. A lease should not hand export income to the lessor unless the rental reflects it. Rates are set by suppliers, not by Ofgem, so if export matters to your case, get the actual rate you will be paid before you model it.

8. Early termination and the settlement figure

Ask exactly what you would pay to end the lease early: how the settlement figure is calculated, whether future rentals are discounted, what charges are added, and who does the calculation. Request an illustrative settlement figure at years two, four and six before you sign, and check whether you can settle part of the facility. The mechanics are covered in how to get out of a solar panel lease and whether it is worth doing in buying out a solar lease.

9. What happens at the end of the term

The usual options are to continue on a nominal secondary rental, return the system, or buy it. For each, ask the practical questions. If you return it, who pays to remove it and make good the roof? If you buy it, is the price fixed in the agreement or a market value assessed by someone you do not control? And check any automatic rollover: miss the notice window and you can roll into another period.

10. Selling, sub-letting or changing the building

If you sell or sub-let the premises, or the ownership of your company changes, can the lease move to the new occupier, and does the lessor have a right to consent? Some agreements require early settlement on a sale. Since a sale is the most common reason a lease ends early, this clause deserves as much attention as the rental.

11. Default and remedies

Read the events of default. They typically include late payment, insolvency, breach of the agreement and cross-default with other facilities. Check the cure periods, the lessor’s right to enter and recover the system, and the default interest and costs. A cross-default clause links this lease to your other borrowing, so it matters if you have bank covenants.

12. Tax and accounting

The agreement should say who claims the capital allowances. Solar PV is special-rate expenditure, and under a lease it is normally the lessor that claims, passing some of the benefit through the rental. For longer leases HMRC’s long funding lease rules can change that: a lease whose term is seven years or less is a “short lease” under section 70I(2) of the Capital Allowances Act 2001, with exceptions for connected-party and leaseback arrangements, so the term you agree is one of the things that decides who gets the relief. Rentals are normally a deductible cost for the lessee.

On the balance sheet, the FRC’s amendments to FRS 102 apply to accounting periods beginning on or after 1 January 2026 and bring most leases onto the lessee’s balance sheet as a right-of-use asset and a lease liability, with exemptions for short-term and low-value leases. Our guide to the FRS 102 lease changes covers what finance directors need to know.

The seven-year line and the funding-lease tests are set out in long funding leases and solar allowances.

Five red flags

• A rental schedule you cannot see in full. A headline monthly figure with indexation or step-ups left vague.
• Automatic renewal with a short notice window.
• A guarantee with no cap and no end date.
• Unconditional payment with no documented installer warranty. You carry the performance risk with nobody to claim against.
• No illustrative settlement figure. If the lessor will not show one, you cannot price your exit.

What to ask for in writing before you sign

1. The complete rental schedule, with VAT shown separately.
2. Illustrative settlement figures at two, four and six years.
3. The end-of-term options with their prices or the way they are set.
4. The insurance requirement and who bears risk of loss.
5. The landlord and lender consents needed, and who obtains them.
6. The installer’s yield forecast and warranty documents, and confirmation that they travel with the lease.

If you are still choosing between routes, our solar panel lease vs buy comparison sets the tax, VAT and balance-sheet differences against ownership, and the finance lease and operating lease pages explain the two structures. You can see the financed side of the numbers on the solar finance calculator.