By: Isabel harrison
As of 2021, around 29% of all housing in the United States exists within a community association (including condominiums, cooperatives, and homeowners’ associations).[i] In 2012, less than ten years prior, just 24% of homes were.[ii] This upward trend shows no signs of slowing down—67% of the homes completed and 78% of the homes built for sale in 2021 were in a community association.[iii] Simultaneously, solar energy is increasing its share of the energy market—the first quarter of 2021 saw the most first quarter U.S. solar installs in history.[iv] The passage of the Inflation Reduction Act will likely feed this growth.[v] Getting solar panels on the roofs of community association property is an essential part of getting a greener grid, but some homeowners’ associations (HOAs) impede property owners’ ability to go solar.[vi]
HOAs often limit a property owner’s ability to install solar panels through covenants that restrict the property owner from building any new structures or changing any existing structures on the exterior of a property without approval by an architectural review committee.[vii] Some of these review committees specifically regulate the installation or placement of solar panels on property, and these regulations can decrease the efficiency or affordability of solar systems.[viii] Other committees regulate aesthetics of the exterior of the property, and solar panels simply get caught in the crossfire.[ix]
Most states have passed legislation limiting the ability for such restrictive covenants to interfere with the ability of property owners to install solar panels on their homes.[x] Generally, without such legislation, it is nearly impossible to successfully challenge a restrictive covenant because they are binding private agreements.[xi]
A recent case decided by the supreme court of North Carolina demonstrates the necessity of such a statute for protecting solar power, but it also highlights weaknesses in the legislation.[xii] In Belmont Ass’n v. Farwig, an architectural review committee cited “aesthetic” problems and denied a property owners’ request for approval of solar panels installed on their roof.[xiii] The property owners challenged this decision based on a state statute providing that “any . . . binding agreement that runs with the land that would prohibit, or have the effect of prohibiting, the installation of” solar panels is “void and unenforceable.”[xiv] The court found that the architectural review committee’s restriction of the solar panels for aesthetic reasons a had “the effect of prohibiting” the installation of solar panels and was void unless a statutory exception applied.[xv]
The major debate in the case became the interpretation of a subsection in the statute that set out such exceptions. The subsection provided that a covenant “prohibit[ing] the location of solar collectors . . . that are visible by a person on the ground” in an area “open to common or public access” is allowed.[xvi] The HOA argued that this exception should be read to include covenants—like the architectural review committee’s—that had the effect of prohibiting the installation of solar panels.[xvii] The court disagreed and concluded that the plain meaning of the statute meant that only covenants that specifically prohibited the location of solar panels visible from the ground in common areas would be exempt.[xviii] Three dissenting justices thought that the statutory construction mandated the opposite conclusion.[xix] This close decision (and the divided panel in appeals court) suggests that this statute is not well equipped to protect the interests of homeowners.
Unfortunately, the construction of the North Carolina statute is not unique in its pitfalls. A common shortcoming in some states’ statutes is the allowance of “reasonable restrictions” on the installation of solar systems.[xx] Indiana’s statute is a prime example. It allows “reasonable restrictions” on solar systems, defined as those which “do not significantly increase the cost of the system or significantly decrease its efficiency” or those which “allow for an alternative system of comparable cost and efficiency.”[xxi] The statute fails to define “significantly” and leaves the door open for an HOA to argue that a 30% more expensive or less efficient system is reasonable.[xxii] It also fails to account for the conservation considerations that may inform a property owner’s decision to choose a solar system instead of an “alternative systems of comparable cost and efficiency.”[xxiii]
Some states have done a better job of protecting solar interests from HOA restrictive covenants. California allows for “reasonable restrictions . . . that do not significantly increase the cost of the system or significantly decrease its efficiency…”[xxiv] It goes further to define “significantly” to be a cost of more than one thousand dollars over the original system cost or a ten percent decrease in efficiency.[xxv] It allows for alternative systems of comparable cost, efficiency, and energy conservation benefits.[xxvi] It also lays out a “policy of the state to promote and encourage the use of solar energy systems and to remove obstacles thereto.”[xxvii] Other states would benefit from mimicking California's statute to better protect homeowners’ interests.
As residential solar installations and community associations grow, states should renew their focus on mitigating the impact of restrictive covenants on solar. Ohio has been paying attention—passing their own statute in June of 2022.[xxviii] States that have already passed such legislation should look to amending their statutes to better protect homeowners and limit architectural review boards’ aesthetic command over homeowners’ property.
[i] The Community Association Fact Book 2021, Found. for Cmty. Ass’n Rsch. 11 (2021), https://foundation.caionline.org/wp-content/uploads/2022/10/FB_Narrative_2021.pdf [https://perma.cc/7ZTA-NW6K].
[ii] Statistical Review 2012, Found. For Cmty. Ass’n Rsch. 4 (2012), https://foundation.caionline.org/wp-content/uploads/2017/07/2012_statistical_review.pdf [https://perma.cc/3M74-FCW2].
[iii] 2021-2022 U.S. National and State Statistical Review, Found. For Cmty. Ass’n Rsch. 3 (2021), https://foundation.caionline.org/wp-content/uploads/2022/09/2021-2CAIStatsReviewWeb.pdf [https://perma.cc/J6W4-Y5H7].
[iv] Solar Market Insight Report 2021 Q2, Solar Energy Indus. Ass’n, https://www.seia.org/research-resources/solar-market-insight-report-2021-q2#:~:text=In%20the%20first%20quarter%20of%202021%2C%20the%20U.S.,a%20slowdown%20in%20installations%20after%20the%20year-end%20push. (last visited Dec. 29, 2022) [https://perma.cc/LXU8-5ULJ].
[v] U.S. Solar Market Insight, Solar Energy Indus. Ass’n, https://www.seia.org/us-solar-market-insight (last updated Dec. 13, 2022) [https://perma.cc/UK3G-8SLN].
[vi] See Belmont Ass’n, v. Farwig, 873 S.E.2d 486, 487 (N.C. 2022); See Lake at Twelve Oaks Home Ass’n v. Hausman, 488 S.W.3d 190, 193 (Mo. Ct. App. 2016).
[vii] See, e.g., Id.
[viii] See, e.g., Garden Lakes Cmty Ass’n v. Madigan, 62 P.3d 983, 984 (Ariz. Ct. App. 2003).
[ix] See, e.g., Farwig, 837 S.E.2d at 487.
[x] Solar Rights and Easements, Cmty. Ass’ns Inst., https://www.caionline.org/Advocacy/Priorities/SolarRestrictions/Pages/default.aspx (last visited Nov. 4, 2022). [https://perma.cc/3ETF-8H8T].
[xi] Kristina Caffrey, The House of the Rising Sun: Homeowners’ Associations, Restrictive Covenants, Solar Panels, and the Contract Clause, 50 Nat. Resources J. 721, 737 (2010).
[xii] Farwig, 837 S.E.2d at 487.
[xiii] F Id at 488.
[xiv] Id. at 489.
[xv] Id.
[xvi] Id. at 489-90.
[xvii] Id. at 490.
[xviii]Farwig, 837 S.E.2d at 490.
[xix] Id. at 491-96.
[xx] Caffrey, supra note x, at 739.
[xxi] Ind. Code Ann. § 36-7-2-8(c)(1)–(2) (West 1981).
[xxii] Id.
[xxiii] Id.
[xxiv] Cal. Civ. Code § 714(b) (West 2015).
[xxv] Cal. Civ. Code § 714(d)(1)(A)–(B) (West 2015).
[xxvi] Cal. Civ. Code § 714(b) (West 2015).
[xxvii] Id.
[xxviii] Lauren M. Zidones, Ohio S.B. 61 Adds Protections for Solar Panels on Condominium and Planned Community Homes, The Nat’l L. Rev. (Aug. 18, 2022), https://www.natlawreview.com/article/ohio-sb-61-adds-protections-solar-panels-condominium-and-planned-community-homes [https://perma.cc/4ADY-PTZR].