By Jillian M. Wright, Esq.
On October 15, 2017, California Governor Brown signed Assembly Bill No. 634 into law, which revised Civil Code §§ 714.1 and 4600 and created Civil Code §4746. With AB 634 being signed into law, community interest developments are now required to allow owners to install solar energy systems1 on certain common areas as of January 1, 2018. However, the new law allows associations to impose reasonable requirements to guide solar energy system installation and protect the association from liability. With the increasing prevalence of homeowners wanting to install solar energy systems, associations should be aware of the new law’s implications and how best to craft compliant guidelines and regulations. Below, we summarize the new law’s provisions and how to remain compliant with the new law in a manner that best protects the interests of the association.
1. An association may not establish a general policy prohibiting the installation or use of a rooftop solar energy system for household purposes on the roof of the building in which the owner resides, or a garage or carport adjacent to the building that has been assigned to the owner for exclusive use. (Cal. Civ. Code §714.1(b)(1).)
This means an owner cannot place solar panels or equipment on whatever common area he or she chooses, but rather is limited to the buildings or structures in which he or she owns. Also note, if a carport is adjacent to the building but is not assigned, the association is not required to allow an owner to place solar energy equipment on that carport. Additionally, we note that this provision provides for the “installation or use” of solar energy systems, meaning the owner is not required to own the equipment and may lease it (which is a popular option).
2. The new law prohibits an association from requiring approval by a vote of members owning separate interests in the common interest development to allow this exclusive use of the common area by an owner. (Cal. Civ. Code §714.1(b)(2) and Cal. Civ. Code §4600(3)(J).)
Prior to the new law, an association was required to seek membership approval to grant exclusive use to common area for the installation of solar energy systems, which is a huge undertaking for most associations. With the passage of the new law, this burden is removed.
3. When reviewing a request to install a solar energy system on a multifamily common area roof shared by more than one homeowner, the association must require an applicant to notify each owner of a unit in the building on which the installation will be located of the application. (Cal. Civ. Code §4746(a)(1).)
We suggest any association with common area roofs create solar energy system guidelines and include this requirement to notify all owners in the same building. We recommend those associations require the requesting owner to provide the association with signatures from the notified owners or certified mail receipts showing the notification was sent. That way, if a neighboring owner challenges their neighbor’s solar installation, the association has proof that it complied with this requirement.
4. The association must also require the requesting owner and each successive owner of that unit to maintain a homeowner liability coverage policy and provide the certificate of insurance within fourteen days of approval and annually thereafter. (Cal. Civ. Code §4746(a)(2).)
Unfortunately, the California Legislature did not clarify what an association can or should do if an owner does not comply with this requirement. We believe the Legislature would not force an association to permit the solar energy system to be installed if there is no proof that it is insured, so we think revocation of approval is appropriate in that instance. We also believe the Legislature intended to permit an association to require that a solar energy system be removed if an owner cannot provide proof that it is insured. However, if the system is already installed and the owner does not provide proof of insurance coverage, must the association undertake efforts to see that the solar energy system is removed, even if it means the association will incur significant legal costs? Will the association be liable if it does not follow up annually to ensure that proof is received? Unfortunately, there are no answers to these questions at the moment. If this new law applies to your association, we suggest calendaring a follow up with the applicable owners each year for this request to avoid liability.
5. When reviewing a request to install a solar energy system on common area, the association may impose additional reasonable requirements, including a requirement to submit a solar site survey showing the placement of the solar energy system. If the association requires this solar survey, it must “include a determination of an equitable allocation of the usable solar roof area among all owners sharing the same roof, garage, or carport.”(Cal. Civ. Code §4746(b)(1).)
This means the association can impose guidelines and restrictions regarding aesthetic standards, so long as the restrictions do not “significantly increase the cost of the system or significantly decrease its efficiency or specific performance…” as described in Civil Code §714 (see discussion below). For example, an association can provide that the preferred location for all solar energy systems is one that results in the least visual impact to owners of the association and, if possible, that the system equipment not be visible from street view. However, if in this example, the only feasible location for solar panels to be placed is on a roof which directly faces the street and any other location would significantly decrease the system’s efficiency, the association cannot prohibit an owner from placing the solar panels on the roof that faces the street.
Additionally, this provision provides that an association “may” require that an owner provide a solar site survey showing the usable area of the rooftop and the proposed placement of the solar energy system.2 We recommend every association with common area roofs require this with their solar guidelines. Alternatively, the association, in its sole discretion, may perform its own solar site survey.
As for the “equitable allocation,” we interpret this provision to mean the association may require the owner to then abide by the equitable allocation as called for in the survey by using only the owner’s share of the rooftop so the remainder will be available for other owners of units in the building. This will greatly affect whether owners in mid-rise and high-rise buildings seek out solar energy systems; it may not be cost effective to install a solar energy system if an owner in such a building is required to abide by the equitable allocation determination given so many people are sharing a common roof.
The phrasing of Civil Code §4746(b)(1) seems to indicate that the requesting owner may choose where the solar energy system shall be placed, so long as the owner lives in the building on which it will be placed, has complied with the association’s reasonable regulations (if the association has adopted any), has performed the site survey (if the association requires that), and is not exceeding his or her equitable allocation of the roof. This means, for example, even if there are multiple units within a building, the requesting owner is not required to place the solar energy system directly over his or her unit, but can place the panel anywhere on the building’s roof, the garage, or adjacent, assigned carport.
6. The association may also require the owner and each successive owner to be responsible for costs of any damage to the common area, exclusive use common area or unit; costs for the solar energy system; and disclosures to prospective buyers. (Cal. Civ. Code §4746(b)(2).)
We highly recommend each association require a requesting owner to take on these responsibilities within the solar energy system guidelines and require the owner to sign a license, maintenance, and indemnity agreement stating the same. This agreement can then be recorded on title so all prospective buyers are put on constructive notice of the agreement. This agreement should also include language which clarifies that the owner may be required to remove the solar energy system, at his or her own cost, to allow for common area maintenance or repair and that the owner is responsible to replace the system at his or her own cost.
7. The association must still abide by Civil Code §714.
This new law specifically requires associations to allow owners to place solar panels on common area roofs. However, though AB 634 altered Civil Code §§714.1 and 4600 and created Civil Code §4746, an association is still required to abide by Civil Code §714 as well when crafting its solar energy system guidelines.
California Civil Code section 714(a) 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 system3 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.”4
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).)
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. “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.” 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.
In summary, though associations are required to permit owners to install solar energy systems on common area now, it need not be at the association’s expense. An association can adopt reasonable restrictions on the placement and maintenance of the systems and require the owner to take on the liability involved with any damage caused by the system, as described above. We suggest an association consult with its legal counsel to ensure compliance with the new law when creating solar energy system restrictions and guidelines.
1 For purposes of these Guidelines, the term “solar energy system” refers to both solar domestic water heating systems and/or photovoltaic systems, as applicable to an Owner’s request.
2 The cost to perform this survey shall not be deemed as part of the cost of the system as used in Civil Code §714. See discussion below.
3 A “photovoltaic system” is one that generates electricity.
4 California Civil Code section 714(b)