N.C. Supreme Court to rule on how much power HOAs have over solar

The Raleigh house before and following the installation of solar panels. That case has been brought to the attention North Carolina Supreme Court. Credit: Blue Raven Solar/ Courtesy

By Elizabeth Ouzts, Energy News Network

The future decision could have an impact on how thousands of developments regulate rooftop solar panels that are visible from street. At issue is the meaning of eight words in the state’s 2007 solar access law.

For years, North Carolina rooftop solar installers and homeowners associations have clashed over the exact meaning of a 2007 solar access law — with installers complaining that too many Tar Heels are blocked from going solar, and HOAs saying they have broad power to enforce aesthetic uniformity.

Now, the state Supreme Court is poised to rule who’s right. 

In Belmont v. Farwig, which the court heard argued last month, there’s no dispute that the law generally prevents solar-panel bans by HOAs created after 2007. The question is when communities of planned residents can use an exception that allows them veto panels placed on front of homes.

Raleigh homeowner Tom Farwig argues his HOA can’t use the exemption because his community’s rules don’t explicitly ban solar. The Belmont Community Association, on the other hand, says his street-facing solar panels fall under “improvements” it has the authority to reject, even if they’re not specified in their guidelines.

A trial court and a three-judge panel from the Court of Appeals have ruled in the association’s favor. The rooftop solar industry, clean energy advocates, and the state’s attorney general have all filed briefs siding with Farwig. 

“This is not just an issue limited to the homeowners in this case, and their HOA,” said Lauren Bowen, senior attorney with the Southern Environmental Law Center, acting in the case on behalf of the North Carolina Sustainable Energy Association. “This is a matter of bigger public importance, and it’s an issue that comes up across the state.” 

One quarter of all North Carolinians live in HOA communities. About 40% of homeowners also live in these communities. The court’s decision could provide new clarity in potentially thousands of these post-2007 developments. 

The ruling will have the most salience for homes that happen to face south, the best orientation for soaking up the sun’s rays. An HOA directive to move panels to the back of such a home is tantamount to rejection, since north-facing panels produce about half as much electricity and aren’t worth the cost. 

“If an HOA, completely subjectively, does not like the look of solar panels, these homeowners are essentially forever denied access to solar,” said Bryce Bruncati, director of residential sales for 8MSolar, a member of the Sustainable Energy Association. “The worst part is they would never have known this prior to purchasing their home. Often the covenants and architectural guidelines do not explicitly prohibit or even mention solar panels.”

Bruncati estimates his company alone has 30 to 40 would-be customers each year who are denied approval even though their HOA rules don’t reference solar. If the court ruled in Farwig’s favor, he said, “it would have an immense impact.” 

‘Mr. Farwig never would have sued’ 

While rooftop solar companies are replete with complaints about HOAs and their reading of the 2007 law, the installers didn’t orchestrate Belmont v. Farwig to test the statute and resolve their grievances.

In fact, the case was triggered by a mistake.

Farwig chose Utah-based Blue Raven Solar in 2017 to install his array. Like most installers, the company has an entire department devoted to working with HOAs — submitting applications and facilitating appeals. Since 2016, when the company began doing business in North Carolina, at least 500 would-be solar customers have fallen through because of HOA denials, the company testified in a friend-of-the-court brief.  

“We have a standard operating procedure to make sure we do not schedule a solar install until we have HOA approval,” said Josh Neves, vice president and general counsel at the company.

But in Farwig’s case, the procedure failed. Blue Raven installed panels on Farwig’s south-facing home in February 2018 without consulting Belmont. Five months later, the HOA asked Blue Raven to submit a request along with a petition from 22 Belmont community residents. The permit was denied, appealed, and denied again, with an architectural review committee acknowledging that its guidelines “do not specifically address solar panels” but still determined that the array would “be aesthetically unpleasing as viewed from the public street.”  

Belmont demanded removal of the panels. Farwig was soon fined $50 per day to keep the property from being foreclosed. Farwig was sued by the HOA and placed a lien against his property. Farwig countersued, arguing that the HOA had violated solar access law by refusing his application. 

“We thought we were clearly within the law because the HOA had nothing in its guidelines that would put [Farwig] on notice,” Neves said. 

Still, there’s little doubt that had Blue Raven adhered to its usual protocol — with Farwig’s application denied, and the solar array never erected — this case would not exist. “Mr. Farwig never would have sued,” Neves said. “Mr. Farwig is a very private individual.” 

Farwig declined to speak for this article. 

‘Putting developers…on notice’

A trial court rejected Belmont’s claim on Farwig’s home, and he has continued to pay the necessary fines to keep his home out of foreclosure, about $52,000 by the end of last year, Blue Raven estimates. 

Farwig will be reimbursed for the costs and attorney fees by the company, should Farwig be found guilty. “We feel personally responsible for not facilitating HOA approval,” Neves said.

The Court of Appeals decision makes a small mention of Blue Raven’s blunder, noting, “defendants installed the solar panels first and sought approval later.” 

But observers say the order of operations has little if any bearing on the Supreme Court case, and it didn’t surface during the arguments made in March.

Instead, Belmont v. Farwig has boiled down to “just a boring statutory interpretation case,” said James Galvin, the Charlotte attorney who represents Farwig. “Our position is that all of the words in the statute mean something.” 

Eight words are specifically at issue. A general provision of the 2007 solar access law invalidates a deed restriction or similar binding agreement that “would prohibit, or have the effect of prohibiting” solar panels. In a separate section, an exception allows a deed restriction that “would prohibit” solar panels visible from the street. 

Farwig and those who sided with him believe that HOA rules that ban sunlight are limited to two types: those that prohibit solar explicitly and those that prohibit it effectively. “What does the second category mean,” Galvin asked the court during oral arguments, “if the first category isn’t talking about express prohibitions?”  

The legislature intentionally left “or have the effect of prohibiting” out of the exception provision, Galvin said, so HOAs can only ban front-facing panels if they do so specifically.  

“This statute is putting developers and associations on notice: ‘If you want to try to ban this very important access, you have to put it in your declarations,’” Galvin said to the justices. “It’s also putting potential purchasers on notice, that [they’re] moving into a community that’s trying to prevent this pretty essential right, according to the legislature.”

The law is also meant to give homeowners power once they’ve bought into a community, Democratic Attorney General Josh Stein said in a friend-of-the-court brief filed on behalf of the state.

“The General Assembly designed the home-solar law to give homeowners a say. If an HOA wants to amend its declaration of covenants to expressly prohibit solar panels on specific property locations, it may do so,” the brief says. But since two-thirds of homeowners must vote for such a change, the exception “ensures that HOAs impose restrictions on home solar only when such policies reflect the will of the community.”

The Court of Appeals’ ruling in favor of Belmont, the brief continues, “allows an HOA to bypass this democratic process and unilaterally bar solar panels based on general aesthetic concerns, without any community input or support.”

Conversely, in communities still in their “development periods” and largely controlled by their developers, it would be extremely difficult, if not impossible, for homeowners to use the democratic process to change the rules in favor of solar.

Belmont’s declarations, for example, do allow amendments with a two-thirds vote. Developer Buffaloe Partners receives a total of 1600 votes during the development period. Each homeowner is eligible for one vote. Only one vote per lot or property is allowed. 

The HOA board and its architectural committee are not accountable to homeowners during the development period. In Belmont’s case, Buffaloe Partners has the power to “appoint, remove and replace all directors.” Buffaloe can also serve as the architecture committee itself or appoint it directly.

After developers give up control, homeowners can elect new board member who could appoint solar-friendly architecture committees, as Brian Edlin, Belmont attorney, suggested to the court last month.

But it’s not clear if that’s happened yet in Belmont. The community’s 2011 declarations say the development period will last until at least 2037.  Though Buffaloe could relinquish control voluntarily at any time, a document filed with Wake County in August of last year asserts, “the development period has not terminated.” 

‘A distinction without a difference’

Edlin declined to speak on the record for this article and didn’t respond to a later question over email about who now controls Belmont. But he argued in court that common law gives HOA architectural review boards broad authority, and that homeowners in planned communities know what they’re signing up for.  

“There can be no doubt that these covenants contain restrictions or other binding agreements that require approval of modifications,” Edlin told the court. “People buy into this community with the expectation that there is some control about what can and can’t be built.” 

The variance between “would prohibit” and “would have the effect of prohibiting,” Edlin argued, is a “distinction without a difference.” The second phrase, “is a redundancy,” he told the court. “It’s superfluous.” 

Justices Robin Hudson (both Democrats) and Anita Earls (Democrats) pressed Edlin about this point. “Are you saying that a provision that expressly prohibits solar panels is the same as one that doesn’t expressly prohibit, but has the effect of prohibiting?” Hudson asked. 

Earls homed in on the notion that the law could include “superfluous” words. “How does that square with our canon of statutory construction,” Earls asked, “that we shouldn’t assume that the General Assembly put something in a statute that it didn’t mean to have some important meaning?” 

Edlin’s response to both questions was similar. “If you chose to believe that ‘would [prohibit]’ and ‘have the effect of prohibiting’ have materially different meanings,” he told Earls, “then it creates an ambiguity, and where that leads you to is legislative intent and to the title of the bill and … the first version of the bill.”

The majority of the Court of Appeals panel endorsed this view. Since an earlier version of the bill contained no exception for front-facing solar panels, the judges reasoned, the exemption should be read expansively. Additionally, the bill’s final title contains a long clause which could mean that no explicit bans on solar are permitted. 

Hudson and Earls were not convinced that the law was so vague that it required them to look beyond its text. “It’s clear on its face that ‘would prohibit’ and ‘would have the effect of prohibiting’ are two different categories,” Earls said to Edlin at one point. “How does that create an ambiguity?”

As for the legislature’s aims, Earls also pointed to a section in the final bill explicitly stating, “the intent of the General Assembly,” is to promote solar energy and prohibit deed restrictions and the like that “could have the ultimate effect of driving the costs of owning and maintaining a residence beyond the financial means of most owners.”

“You talked a lot about the title,” Earls told Edlin. “Shouldn’t we give weight to subsection A? Isn’t that the most clear, express indication of what the intent is?” 

Legislation still pending 

It could take months to make a decision. While Democrats hold a 4-3 majority on the court, partisanship probably doesn’t predict results. Republicans in the state increasingly support renewable energy, and the case is as much — or more — about property rights, a principle traditionally embraced by conservatives.

Farwig’s victory could affect all HOAs in the future, and the approximately 2,000 HOAs that have been formed since 2007, however, solar companies and clean-energy advocates believe the law should be improved.  

Legislation that easily cleared the GOP-led state House last year would do just that, removing the exception about front-facing panels altogether and clarifying that HOAs can dictate their placement so long as they don’t cause more than a 10% drop in productivity.  

Edlin referenced the measure, House Bill 842, last month. “This is a matter for the legislature, not for the Supreme Court,” he said. If would-be solar owners want to narrow the exemption in the law, he said, “they can go to the legislature and they can pass a new law that deletes” it.

The statewide association of HOAs, which filed a friend-of-the-court brief in favor of Belmont, opposes the bill. It is still lodged in the state Senate.