Homeowner Associations enforce numerous
architectural restrictions governing the construction and
appearance of homeowners' properties including satellite
dishes, energy devices, basketball hoops, children's play
equipment and landscaping, to name a few. Arizona statutes
have provided little help in interpreting whether a
Homeowner's Association's guidelines are enforceable. However,
a recent Court of Appeals Division One case, Garden Lakes
Community Association v. Madigan, 393 Ariz. Adv. Rep.
(2003), sheds some light on this issue. The court held that
the Homeowner's Association's architectural restrictions
governing the construction and appearance of solar energy
devices on homes within the subdivision was unenforceable
under A.R.S. § 33-439(A) because the restrictions "effectively
prohibited" the homeowners from installing or using solar
energy devices.
I. CASE FACTS
William and Joan Madigan and Henry and LaVonne Speak owned
homes in the Garden Lakes subdivision. The Madigans' and the
Speaks' properties were governed by the Declaration of
Covenants, Conditions, Restrictions and Easements for Garden
Lakes ("CC&Rs"). The Association established an architectural
review committee which issued guidelines regarding the
construction and appearance of solar panels and equipment as
follows:
"1. All solar energy devices Visible from Neighboring Property
or public view must be approved by the Architectural Review
Committee prior to installation.
2. Panels must be an integrated part of the roof design and
mounted directly to the roof plane. Solar units must not break
the roof ridgeline, must not be visible from public view and
must be screened from neighboring property in a manner
approved by the Board of Directors or its designee(s). Roof
mounted hot water storage systems must not be Visible from
Neighboring Property. Tracker-type systems will be allowed on
when not Visible from Neighboring Property.
3. The criteria for screening set forth in Section III(M)
"Machinery and Equipment", shall apply to solar panels and
equipment preserved."
The Madigans and Speaks installed solar energy devices on the
roofs of their respective homes without the Association's or
the architectural committee's approval. The solar energy
devices included solar panels to collect and transfer heat to
their swimming pools. The Association sued the Madigans and
the Speaks in separate actions for breach of the CC&Rs for
failing to comply with the guidelines set forth in the CC&Rs
and sought permanent injunctions compelling the removal of the
energy devices, monetary penalties and attorneys' fees and
costs. The Madigans and Speaks defended on the basis of A.R.S.
§ 33-439(A) arguing that the CC&Rs were void and
unenforceable. A.R.S. § 33-439(A) states:
"Any covenant, restriction or condition contained in any deed,
contract, security agreement or other instrument affecting the
transfer or sale of, or any interest in, real property which
effectively prohibits the installation or use of a solar
energy device as defined in A.R.S. §44-1761 is void and
unenforceable." (Emphasis added.)
During the trial, the court granted judgment as a matter of
law in favor of the Madigans. The Speaks case went to a jury
and after post-trial briefing, the court entered judgment in
favor of the Speaks.
II. LEGAL ARGUMENTS
Burden of Proof. The Association argued that the Speaks had
the burden of proving that the CC&Rs "inevitably precluded"
the installation of their solar heating unit and that they
failed to meet that burden of proof. The Speaks, relying on
A.R.S. § 33-439, argued that the evidence showed that the
Association's requirements for installation of the solar
heating device either could not be met or added so much cost
to the installation that any homeowner would forego solar
energy and opt instead for a gas or electric pool heater.
The Court of Appeals ruled that the burden of proof was on the
homeowners to prove that the CC&Rs and guidelines effectively
prohibited them from installing and using a solar energy
device, but also held that the homeowners had met their
burden.
Statute Interpretation. The Court of Appeals stated that their
goal in interpreting statutes is to fulfill the intent and
purpose of the legislature. With respect to A.R.S. § 33-439,
the Court of Appeals stated that the legislative history does
not reveal the precise meaning and application of the crucial
phrase "effectively prohibits." The Court of Appeals went on
to state that while it might be desirable to have a bright
line rule or formula to determine precisely whether an
Association's restriction effectively prohibits installation
or use of solar energy devices, the legislature has not chosen
to provide guidance beyond the phrase "effectively prohibits"
and has instead adopted a practical, flexible standard that
permits the many variations and restrictions and effects to be
considered on a case-by-case basis.
The Court of Appeals rejected the Association's argument that
"effectively prohibits" must be interpreted as meaning that
any restrictions on solar energy devices must "inevitably
preclude" them before the restrictions should be deemed
unenforceable. The Court of Appeals stated instead that to
determine whether a deed restriction effectively prohibits the
installation or use of solar energy devices, that there were
numerous factors that were relevant which the court cited
including, but not limited to: the content and language of the
restrictions or guidelines; the conduct of the Association in
interpreting and applying the restrictions, whether the
architectural requirements are too restrictive to allow solar
energy devices as a practical matter; whether feasible
alternatives are available and whether any alternative design
would be comparable in cost and performance. The Court stated
that it was their intention to provide general guidance to
parties and trial courts regarding restrictions effecting
solar energy devices.
Alternative Designs. The Court of Appeals discussed in detail
the testimony at trial that focused on two alternative designs
that the Association argued were feasible and would comply
with the guidelines.
The first alternative was a patio cover large enough to hold
the Speaks' solar panels. The Speaks' expert testified that
the size would be extensive; cover part of the pool and the
cost would be nearly $5,000.00. There was also evidence
introduced that the City of Avondale would not allow patios to
encroach into pool set back areas.
The other solution suggested by the Association was an
aesthetic screen. The court noted that the screen would cause
some shading on the solar panels part of the year thereby
decreasing solar efficiency.
The Association argued that the trial court should not have
considered the increased cost to the Speaks for these
alternative solutions. According to the Association, extra
installation requirements might be deemed to be within the
reach of a wealthy homeowner while the same requirement might
be deemed to effectively prohibit a less affluent homeowner
from installing the solar devices. The Court of Appeals held
that the costs necessary to comply with the aesthetic and
architectural restrictions is not dispositive but is a factor
to be considered. The Court held that the focus should be on
the motivation of the average homeowner within the Association
to install a solar energy device given the financial burden
and potential loss of solar efficiency imposed by the
restrictions. To that end, there was testimony presented that
most people would not buy a solar system that cost more than
$4,500.00. The Court of Appeals held that there was evidence
sufficient to support the finding that the alternatives
suggested by the Association were not viable options.
Comparing Other Association Restriction Cases. The Association
also argued that the Court of Appeals should follow the
results in other Association restriction cases regarding
enforcement of restrictions on animals and stored vehicles
where the courts have upheld the Association's restrictions as
reasonable and enforceable. The Court of Appeals noted that
those cases were readily distinguishable because no state law
established a public policy preference for allowing homeowners
to keep animals or store old vehicles and contrasted that with
the case here where there is a specific statute, A.R.S. §
33-439(A), that nullifies the enforcement of restrictions that
effectively prohibit the installation and use of solar energy
devices. The Court of Appeals went on the state that A.R.S. §
33-439(A) does not eliminate the power of an Association to
impose aesthetic and architectural restrictions on the
installation and use of solar energy devices, but solar energy
devices may not be explicitly prohibited or "effectively
prohibited" by the Association's CC&Rs or the Association's
interpretation and application of their restrictions and
guidelines set forth in their CC&Rs.
In sum, the court held that in this case, the Association's
restrictions in effect would prohibit the installation of the
solar energy devices in violation of A.R.S. § 33-439(A) and
therefore, the restrictions were unenforceable.
III. CONCLUSION
What does this mean for an association trying to restrict
solar energy devices? Associations needs to remember that
Arizona law has prescribed limitations on the restrictions an
Association can enforce with respect to solar energy devices
when establishing, interpreting and applying their guidelines.
As this case demonstrates, while an Association can set
guidelines, these guidelines have to be reasonable for a
homeowner and not diminish their ability to use their solar
energy device. This includes taking into account the costs
that the homeowner would have to expend for any alternative
suggested by the Association.
This case provides a guideline that courts will look to
regarding the validity of an Associations' restrictions.
Implicit in the Court of Appeals' decision is that regulations
and restrictions by an Association regarding matters that are
not addressed in statutes, such as pets, parking, vehicles and
similar restrictions would not meet such as stringent test
from the court.
