Epsten, APC

By Jillian M. Wright, Esq.

More and more homeowners are turning to solar panels and solar energy systems (collectively, “solar energy systems”) as a way to save on energy costs. The State of California, ever at the forefront of conservation and renewable energy, has incentives and statutes which are meant to encourage “going green.”  One such statute provides that common interest developments (or “associations”) may regulate the placement of solar energy system equipment, but must do so within strict parameters. With the increasing prevalence of homeowners wanting to install solar energy systems, associations should be aware of the parameters discussed below.

Impact of California Law: Civil Code Sections 714 & 714.1 and the Tesoro Case

In September 2014, the California legislature passed AB 2188 altering the definition of what constitutes a “reasonable restriction” on solar energy systems.  In sum, conditions listed in an association’s governing documents are valid and enforceable only to the extent the conditions do not conflict with the provisions in California Civil Code sections 714 and 714.1.  These statutes override conflicting covenants in an association’s governing documents and limit the scope of authorized regulation by an association.  California Civil Code section 714(a) states:

Any covenant, restriction, or condition contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of, or any interest in, real property, and any provision of a governing document, as defined in Section 4150 or 6552, that effectively prohibits or restricts the installation or use of a solar energy system is void and unenforceable.

In no uncertain terms, this section prohibits any declaration and other governing document provision(s) from prohibiting or restricting the installation of solar energy systems outright.  Civil Code section 714(b) states that it is the public policy of the State of California to promote and encourage the use of solar energy systems.  As such, any restrictions on the installation of these systems are declared invalid if the restrictions “significantly” increase the cost of the system or “significantly” decrease the efficiency of the system.  A “significant increase” in the cost of a solar domestic water heating system or solar swimming pool heating system that complies with state and federal law is one that increases the cost more than 10% over the cost of the system, but in no case more than $1,000.  A “significant increase” in the cost of a photovoltaic system[1] that complies with state and federal law is a cost increase of more than $1,000.  A “significant decrease” in the efficiency of the system is one that decreases the efficiency by more than 10% over the efficiency of the owner’s originally proposed system.  Restrictions on system placement are generally valid if they allow for an “alternative system of comparable cost, efficiency, and energy conservation benefits.”[2]

The penalty for willful non-compliance with Civil Code section 714 is $1,000, plus the amount of any actual damages suffered by the owner. (Civ. Code § 714(f).)  Attorney’s fees are also recoverable by the prevailing party. (Civ. Code § 714(g).)

An association may require an owner to apply for and obtain prior architectural approval for a solar energy system pursuant to Tesoro Del Valle Master Homeowners Assn. v. Griffin (2011) 200 Cal.App.4th 619.[3]  In Tesoro, the court upheld a restriction requiring prior approval of a solar energy system to allow the association the opportunity to determine if a more aesthetically pleasing option for the solar energy system was available that fell within the parameters afforded under Civil Code section 714.  In that case, the owner actually installed the solar energy system without prior approval from the association.  The association sued the owner, and the owner argued approval was not necessary because he was entitled to install the system under Civil Code section 714.  The court upheld the prior approval restriction because the association presented an alternative that would have been more aesthetically pleasing and was still within the cost and efficiency parameters.  The court further held the association did not have a burden to propose a comparable alternative system. It held that once the owner’s application was denied, the owner had the burden to reapply for approval with a comparable system which addressed the association’s aesthetic concerns.

The statute also mandates that review of an application cannot be “willfully avoided or delayed.”  An application is to be reviewed and approved in writing in the same manner as an application for any other architectural application.[4]  “If an application is not denied in writing within 45 days from the date of the association’s receipt of the application, the application shall be deemed approved, unless that delay is the result of a reasonable request for additional information.”[5]  However, if an association’s governing documents include a shorter response time frame, we suggest the association provide its written decision on a proposed solar energy system application within the time frame stated in the governing documents to avoid any potential risk of the application being “deemed approved” by a court.

Summary
An association can require that solar panels generating home electricity (i.e., photovoltaic panels) and solar panels heating pools/spas be placed in an area of an owner’s separate interest property that is more aesthetically pleasing from the street view, if the association can demonstrate that the association’s preferred location does not “significantly increase the cost” or “significantly decrease the efficiency” of the system.  Keep in mind, the burden of proving that the association’s preferred location does not violate these standards rests with the association, not the homeowner.  Thus, if an association requests a different location over the location preferred by the homeowner, the association must be prepared to show that the association’s proposed alternative location does not violate the standards set forth in Civil Code section 714.  However, as volunteer board or committee members are not typically in the business of designing solar energy systems, it is ultimately up to the owner to propose a comparable system which addresses the association’s aesthetic concerns.

[1]   A “photovoltaic system” is one that generates electricity.
[2]   California Civil Code section 714(b)
[3]   Tesoro was decided before AB 2188 was signed in 2014.  AB 2188 reduced the maximum allowable parameters of §714 from 20% cost and efficiency to 10%.
[4]   California Civil Code section 714(e)(1)
[5]   California Civil Code section 714(e)(2)(B)