ADT Closed Its Solar Division. What Happens to Its Customers?

The recent news of ADT closing its solar division may be leaving you with one big question: What happens to me if my solar company closes down? What happens to its warranties? 

The good news is ADT will honor its warranties, an ADT representative told CNET in an email:

"ADT stands behind the products we sell and our work. We back up this conviction with strong warranties that help protect our customers," the representative said. "Regardless of ADT's change in strategic direction, our commitment and follow through on the 25-year limited Workmanship Warranty and 25-year Power Production Guarantee we have provided in our contracts will remain in place. Additionally, all manufacturer's warranties remain unchanged and will cover major system components: panels, inverters, racking and mounting system."  

The solar industry has exploded in the last few years, breaking residential install records and adoption rates. Where there's a lot of money to be made, a market can quickly become saturated and often you see businesses fail. 

"It's a pretty crowded market," said Gilbert Michaud, an assistant professor in the School of Environmental Sustainability at Loyola University Chicago. "With that comes more companies that are playing in the sandbox." 

ADT, for example, best known for home security, jumped on the solar bandwagon when it purchased Sunpro Solar in 2021 and expanded its solar footprint into 22 states. Now, just a few years later, it's jumping back off the bandwagon, citing lackluster financial numbers.

The solar business is changing quickly, and companies come and go.

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Your solar company folding might seem like a nightmare scenario -- and it certainly is challenging -- but there are strategies to keep your solar array in tip-top shape even if your installer is no longer in business. In fact, there's a lot you can do upfront, like choosing a reliable installer, to prevent the worst outcomes. 

Here's what we learned after talking to experts. 

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Why do solar companies go out of business?

There are all kinds of reasons a solar installer might go under, according to Michaud. Here are some of the common factors:

• Some companies are only in the game to take advantage of government subsidies, doing low-quality work and eventually flaming out. These are the proverbial "bad apples."
• Sometimes companies simply merge or get bought out by a larger firm.
  
• Some installers get into the industry for the right reasons, but they lack experience and can't survive.
  
• Other installers aren't specialized and might do other kinds of work like roofing or electrical. These contractors might eventually stop doing solar or go out of business altogether.
  
• A combination of poor customer service and low-quality equipment can quickly take out a solar company that racks up bad reviews.
  
• Bankruptcy or legal action (which might result from any of the factors mentioned above) can also lead to the demise of a solar company.
  

What happens to my solar lease or loan if my solar company goes out of business?

If you took on a solar lease or loan through a solar company that has gone out of business, the lease or loan should be transferred to a new company -- at least in theory.

It depends on your original contract, so Michaud advises digging that out and reading the fine print. You might even get notified that your installer has stopped operating and that your solar panels have a new leaseholder.

If your solar loan is through a bank independent of the installer, nothing should change: You just keep making payments to the lender.

What happens to my warranty if my solar company goes out of business?

If the warranty on your solar panels is with the actual solar panel manufacturer -- usually a different company than the installer -- then your warranty shouldn't be affected at all, Michaud said.

That said, you might still want to contact the panel company and ask some questions. Michaud advises looking for a phone number on your equipment and calling the manufacturer. "You can leverage the equipment to help figure out what to do next," he said.

For example, if your solar installer is SunPower, the solar panel equipment will likely be from Maxeon (CNET's pick for best solar panel), the manufacturer. 

If your warranty was with the solar installer that is no longer in business, the warranty might be transferred. Technically, a company is obligated to honor the warranty, so there should be some mechanism in place to do that, unless they're a truly shady actor.

How to protect yourself if your solar company goes out of business?

The best way to protect yourself in this situation is to prepare before it happens. Michaud stresses the importance of finding a solid company in the first place, but there are other steps you can take:

• Buy an extended warranty through the manufacturer of the solar panels, to hedge against the installer going out of business.
• Keep your paperwork in a safe place so that you can reach it easily if you need to re-read your contract or find a phone number.
  
• If your panels need maintenance that you and your installer can't do, look into solar operations and management companies that specialize in maintenance. But the same advice applies here: Do your due diligence before hiring anyone. 
  
• If you feel you have been scammed, consider finding legal help.
  
• If you think you've been taken advantage of, the Department of Energy says on its website that you can report suspected scams, fraud and overall "bad business practices" to the Federal Trade Commission. 
  
• On a state level, laws vary. This tool by USA.gov allows you to search for your state's local consumer protection office. 
  

What are 'fly-by-night' solar companies and how do they affect the industry?

A "fly-by-night" solar company is the type of firm mentioned above. It's one that's taking advantage of customers and tax credits to generate a lot of revenue while doing the lowest quality work and hoping no one notices.

Michaud said these have a dramatic impact on the solar industry as a whole. "Word of mouth and reputation matter," he said. "Even one person that has a bad experience … they go tell their neighbors and friends." That can snowball into a larger sentiment that solar as a whole is some kind of scam, and hurt adoption rates.

As with anything, people who've good experiences are usually not as loud as those who've had bad ones, so the fly-by-night companies create a skewed reputation of the whole industry.

Why it's important to choose a reliable solar company

Working with a reputable company in the first place can save you a lot of headaches. Here's a detailed guide to finding the right installer for you.

Michaud advises that homeowners look at reviews, ask their neighbors and make sure the company they choose has insurance and certifications, has been in business for at least five years, and uses high-quality materials. If an offer looks too good to be true, it probably is. "You get what you pay for sometimes," he said.

Check with the North American Board of Certified Energy Practitioners before signing with an installer.