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California Court Upholds Solar Energy Restrictions of Homeowners Association

Monday, January 2nd, 2012

The Covenants, Conditions and Restrictions (CC&R) in the master declaration for the Tesoro del Valle homeowners association (Tesoro) recorded in 2003 provided that homeowners must obtain approval from the Architectural Control Committee (ACC) before making any improvements. Tesoro later approved Design Guidelines that included architectural standards for solar energy systems.

In 2005, defendant purchase their home. Two years later, they submitted a proposal for a solar energy system. Their contractor was told by the property manager that the application would not likely be approved because it contemplated installation outside the perimeter wall of the home. The property manager also indicated that the application lacked a number of details required by the Design Guidelines. While the application was pending, defendants signed an agreement with their contractor to install 36 solar panels on their roof and 22 panels on the slope area outside the perimeter but did not amend their application.

The ACC denied the application within the mandated 45-day review period but did not receive the rejection until after the review period expired. Defendant informed Tesoro that the notice was untimely and that they intended to proceed with construction in January 2008. Despite receiving a letter from Tesoro’s attorney, defendants commenced construction, including removing landscaping and pouring concrete foundations for pylons. After further discussions, defendant agreed to temporary halt construction and submit an amended application. However, the ACC rejected the application and ordered the defendants to restore the slope outside its perimeter wall. Tesoro subsequently a filed a lawsuit, seeking declaratory and injunctive relief.

The defendants argued the CCRs violated section 714 of the California Civil Code prohibiting homeowners associations from imposing CCR that effectively prohibit installation of solar energy systems. The trial court noted that this section did not apply to provisions that impose “reasonable” restrictions on solar systems. Reasonable restrictions, in turn, were defined as restrictions that do not “significantly” increase the cost of the system or significantly decrease its efficiency or performance. The statute defined “significantly” as an amount exceeding 20% of the cost or efficiency.

Following a 10-day trial, a jury found Tesoro’s CCRs imposed reasonable restrictions and the appeals court affirmed. The appeals court said that recorded use restrictions are accorded a presumption of validity unless they are arbitrarily enforced or impose a burden on the use of the affected land that far outweighs any benefit. The court noted that the testimony showed the guidelines did not prohibit all solar units and that Design Guidelines specficially mirrored section 714. Moreover, the court found that there was testimony that an alternative design involving of installing additional panels above the home would have yielded the same performance efficiency and while it would have a 14% reduction in output, the alternative design was less costly than the proposed system on the slope. As a result, the court ruled there was substantial evidence to support the jury’s conclusion that the CCRs imposed reasonable restrictions. The court also held that  that consideration of aesthetic impacts were reasonable and met the requirements of section 714.  Tesoro Del Valle Master Homeowners Association v Martin Griffin, 2011 Cal. App. LEXIS 1368 (Ct. App-2d App Dist. 10/3/11).