Emerging Issues Between the Davis-Stirling Common Interest Development Act and the Solar Rights Act
With the growing installation of solar photovoltaic systems in California, more homeowner’s associations (HOAs) are using a specific provision of the Davis-Stirling Common Interest Development Act (DSA) (Civil Code Section 4000 et seq.) to regulate the installation of rooftop solar on common area roofs of multi-family common interest developments (apartment, condo complexes, etc.). The DSA defines the form of organization and ownership interest in community apartment projects, condominium projects, planned developments, and stock cooperatives. A specific provision of the DSA governs the restrictions on ownership and transfers of exclusive use of any portion of a common area to a member for the installation of a rooftop solar photovoltaic (PV) or solar thermal system.
This post will explain the relevant provisions of the DSA and Solar Rights Act (SRA) to frame this residential real estate issue. It will focus on use of statutory ownership rights and transfer of interest between the board of the association that oversees uses in common areas and an individual separate property owner that seeks to install a rooftop solar PV or solar thermal energy system on a common area rooftop. The discussion is limited to built or future residential common interest developments, as defined by Civil Code Section 4100, and excludes both the Subdivided Lands Act (Business and Professions Code Section 11000 et seq.) and Commercial and Industrial Common Interest Development Act (Civil Code Section 6500-6876).
The DSA addresses the following common interest development requirements:
- governing documents
- ownership rights and transfer of interest
- property use and maintenance
- association governance
- assessments and assessment collection
- insurance and liability
- dispute resolution and enforcement
- construction defect litigation
In common interest developments, ownership rights are divided between separate property interest, such as the internal space of a condo, and common area ownership, such as a common hallway, stairwell, or roof. Miller and Starr California Real Estate 4th Section 28:3 describe a common interest developments as “… any real property development that consists of (1) ‘separate interest,’ which are separately owned lots, airspace units, or rights of occupancy, and (2) one or more additional lots or spaces owned in common with the owners of the separately owned lots, or mutual, common, or reciprocal interests in, or restrictions upon, all or a portion of the separately owned lots.” Under California Civil Code Section 4185 , “separate interest” is defined as follows:
(1) In a community apartment project, “separate interest” means the exclusive right to occupy an apartment, as specified in Section 4105.
(2) In a condominium project, “separate interest” means a separately owned unit, as specified in Section 4125.
(3) In a planned development, “separate interest” means a separately owned lot, parcel, area, or space.
(4) In a stock cooperative, “separate interest” means the exclusive right to occupy a portion of the real property, as specified in Section 4190.
(b) Unless the declaration or condominium plan, if any exists, otherwise provides, if walls, floors, or ceilings are designated as boundaries of a separate interest, the interior surfaces of the perimeter walls, floors, ceilings, windows, doors, and outlets located within the separate interest are part of the separate interest and any other portions of the walls, floors, or ceilings are part of the common area.
(c) The estate in a separate interest may be a fee, a life estate, an estate for years, or any combination of the foregoing.
California Civil Code Section Section 4095 defines “common area” in the following way:
(a) “Common area” means the entire common interest development except the separate interests therein. The estate in the common area may be a fee, a life estate, an estate for years, or any combination of the foregoing.
(b) Notwithstanding subdivision (a), in a planned development described in subdivision (b) of Section 4175, the common area may consist of mutual or reciprocal easement rights appurtenant to the separate interests.
Currently, there are actions by HOA boards to amend their governing documents to exercise the authority and control granted to common interest developments under Civil Code Section 4600 regarding the transfer of interest in any portion of the common area to a member seeking exclusive use for rooftop solar PV. Under California Civil Code Section 4600, an affirmative vote of members owning at least 67 percent (or other percentage specified by the governing documents) of the separate interest in the common interest development must be cast to grant exclusive use of any portion of the common area to a member.
California Civil Code Section 4600 states that it does not apply in a number of circumstances including specified reasons for a grant of exclusive use. Section 4600 (b)(3)(J) provides the relevant language that relates to the SRA. This subsection states that California Civil Code Section 4600 does not apply to any grant of exclusive use that is required “[t]o comply with governing law.” The SRA, under Civil Code 714 (a), specifies that:
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.
Of importance is the language “effectively prohibits or restricts” under Civil Code 714. The California Legislature did not draft the SRA or DSA with the intent of creating conflict. The SRA is intended to prevent prohibitions and restrictions and remove obstacles to rooftop solar. The DSA is intended to regulate the various property rights and interest that compose common interest developments. Both of these statutes should work in tandem, without conflict. HOA governing documents, including bylaws, operating rules, articles of incorporation, or articles of association, that an HOA board amends to include California Civil Code Section 4600 provision are also written to avoid conflicts between the SRA and DSA.
However, it may be possible for a community interest development that requires a 67% affirmative vote to transfer exclusive use in a common area to separate property owner pursuant to California Civil Code 4600 to effectively prohibit or restrict rooftop solar if no separate property applicants are approved or if they are effectively restricted. While the SRA does allow reasonable restrictions under subsection(b) and (d)(1)-(2), a reasonable restrictions is not defined in terms of the transfer of an ownership interest but instead upon increasing cost and decreasing efficiency. Actions that effectively prohibit or restrict the installation of rooftop solar violate the SRA and, by violating the SRA, violate the DSA under California Civil Code Section 4600(b)(3)(J).
Both the SRA and DSA provide civil litigation causes of relief for violations. California Civil Code Section 4605 of the DSA provides a member of an association with a right to declaratory or equitable relief for a violation of Section 4600 by an association. Section 4605 complaints must be brought within 1 year of the date the action accrues and entitles a prevailing member to reasonable attorney’s fees and court costs as well as authorizes a court to impose a civil penalty of $500 for each violation, subject to specified limitations. Prevailing associations do not recover any costs unless the court finds the members case frivolous, unreasonable, or without foundation. California Civil Code Section 714(f) provides a cause of action to the applicant or member for willful violation of the SRA. This potentially subjects the association to liability for actual damages as well as a civil penalty, not to exceed $1,000. The SRA allows the prevailing party, whether the member or association, to be awarded attorney’s fees.
Several options exist to avoid conflicts between the DSA and SRA. For existing common interest developments, it would be possible to amend Section 4600 to include an exemption for rooftop solar. This could be done by either expressly making rooftop solar exempt or by basing the exemption on the use of a license to use a common area for rooftop solar similar to the existing exemption for electric vehicle chargers under Section 4600 (b)(3)(H)-(I) of the DSA where an association grants a license to a common area under California Civil Code Section 4745. The use of a license would also require amending Section 714 of the SRA to allow for the submission, review, and granting of a license for a rooftop solar system on a common area roof using similar language as found under California Civil Code Section 4745(f) regarding electric vehicle charger installation in common interest developments. Either of these options would maintain the power of an associations to impose reasonable provisions on an applicant for rooftop solar under California Civil Code Section 714.1, including maintenance, repair, or replacement of roofs or other building components.
For new common interest developments, it is possible to create solar ready developments that include a recorded declaration pursuant to California Civil Code Section 4250 that grants an exclusive use common area, as defined by California Civil Code Section 4145, to each separate interest to install rooftop solar. Rooftop solar applicants and applicable associations would still be subject to Sections 714 and 714.1 of the SRA.
Additionally, new common interest developments could also exempt rooftop solar from Section 4600 through the grant of exclusive use to separate interests for rooftop solar under California Code Section 4600(b)(2). This would require that the exclusive use be included in the detailed plan of a phased development submitted to the Real Estate Commission and that the grants substantially conform to the detailed plan of a phased development. This would make the development solar ready and maintain the review process and other requirements under Sections 714 and 714.1.
This is a repost of an article dated January 12, 2017 on Epic Energy Blog, authored by Joe Kaatz.