Red Flags in Green Legislation: SB 558 and HB 5028 may ban Michigan HOA’s from regulating Solar Panels and other Energy Saving Improvements

Red Flags in Green Legislation: SB 558 and HB 5028 may ban Michigan HOA’s from regulating Solar Panels and other Energy Saving Improvements

            The Michigan legislature has recently introduced two bills that would limit the ability of condominium and homeowners associations to exercise architectural control authority within their communities related to energy-saving improvements. SB 558 was introduced on October 4, 2023, and it may prohibit certain Michigan community associations from banning solar panels, except in cases where the proposed installation was on a common element or common area. HB 5028 was introduced on September 20, 2023, and it may prohibit Michigan certain community associations from banning certain types of energy saving improvements, including clotheslines, electric vehicle charging stations, energy efficient appliances, energy efficient windows, heat pumps, insulation, rain barrels, reflective roofing, and solar water heaters, in addition to solar panels.

While there are many benefits to going green, SB 558 and HB 5028 mark a radical departure from current Michigan law, which presently permits a condominium or homeowners association to have architectural control over energy saving improvements.  Community associations have historically been fundamentally democratic organizations, where owners can vote on most amendments to the master deed, condominium bylaws, and other restrictive covenants.   SB 558 and HB 5028 would adopt a one-size fits all approach for community associations that eliminates self-governance, in the name of green energy, instead of permitting the owners to determine what restrictions should apply to their communities. Accordingly, this article will analyze potential issues associated with SB 558 and HB 5028, which need significant amendments before being voted on by the Michigan legislature.

Michigan SB 558 (2023)

            SB 558 may preclude a homeowners association from prohibiting the installation of solar panels.  SB 558 may also preclude a homeowners association from requiring approval to install panels.  However, SB 558 states that it would not apply to the installation of solar panels on a shared roof or common areas. SB 558 states in pertinent part:

Sec. 1. As used in this act:

(a) “Common area” means a portion of a building that is generally accessible to all occupants of a building. For purposes of this act, common area includes, but is not limited to, a hallway, a stairway, an elevator, a lobby, a laundry and recreational room, a playground, a community center, a garage, or a fitness room.

(b) “Local unit” means a county, township, city, or village.

(c) “Shared roof” means a roof that serves more than 1 home or unit, including, but not limited to, a contiguous roof that serves adjacent homes or units.

(d) “Solar energy” means radiant energy received from the sun at a wavelength that is suitable for heat transfer, photosynthetic use, or photovoltaic use.

(e) “Solar generator” means the combination of portable solar panels, battery, battery charger, and inverter into a single device to capture, store, and distribute solar energy.

Sec. 3. A provision in a homeowners’ association agreement that prohibits, or requires association approval for, a homeowner to install a solar generator is invalid and unenforceable.

Sec. 5. (1) A local unit must not require a homeowner to obtain the approval of a homeowners’ association to install a solar generator.

(2) This act does not apply to the installation of a solar generator in a common area or on a shared roof.

Michigan HB 5028 (2023)

HB 5028, which is known as the Homeowners’ Energy Policy Act, is even more far reaching than SB 558, as it would regulate numerous energy-saving improvements, in addition to solar panels.  HB 5028 would also apply the following energy-saving improvements or modifications:

• • A clothesline.
  • Air source heat pumps.
  • Ground source heat pumps.
  • Rain barrels.
  • Reflective roofing.
  • Energy efficient appliances.
  • Solar water heaters.
  • Electric vehicle supply equipment.
  • Energy efficient windows.
  • Energy efficient insulation materials.

HB 5028 would impose the following restrictions on homeowners associations:

Sec. 5. (1) Any of the following in a homeowners’ association agreement is invalid and unenforceable as contrary to public policy:

(a) A provision that prohibits, or requires association approval for, a member to replace, maintain, install, or operate an energy-saving improvement or modification.

(b) A provision that compels, or requires association approval for, a member to make auxiliary changes needed for the installation of an energy-saving improvement or modification.

…

Sec. 7. A provision in a homeowners’ association agreement that prohibits or has the effect of prohibiting the installation of a solar energy system is invalid and unenforceable as contrary to public policy.

            Similar SB 558, Section 5 of the Homeowner’s Energy Policy Act seems to prohibit an HOA approval requirement for certain energy saving devices.  By way of example, an HOA may not be able to require approval to install electric vehicle supply equipment.  However, HB 5028 requires approval for solar panels, as Section 11 of the proposed Act requires a homeowners association to approve or deny applications related to the installation of solar panels, and states as follows:

Sec. 11. (1) Beginning on the effective date of this act, a member who wants to install a solar energy system in the member’s home or unit shall submit a written application to the homeowners’ association. The written application required under this subsection must include all of the following information:

(a) The member’s name.

(b) The street address of the location where the solar energy system will be installed.

(c) The name and contact information of the person that will install the solar energy system.

(d) An image that shows the layout of the solar energy system on the member’s home or unit.

(e) A description of the solar energy system to be installed.

(2) Except as otherwise provided in this subsection and subsection (4), and in accordance with its policy, a homeowners’ association must approve or deny the member’s request to install a solar energy system within 30 days after receipt of the written application. If the written application is submitted before the homeowners’ association adopts the policy described under section 9(1), the homeowners’ association must approve or deny the member’s request to install the solar energy system within 120 days after receipt of the written application.

(3) If a homeowners’ association fails to adopt the policy within the time period specified under section 9(1) or approve or deny the member’s request to install the solar energy system within the time period specified under subsection (2), a member may proceed with the installation of the solar energy system. If the member proceeds with the installation of the solar energy system, the homeowners’ association shall not impose fines or otherwise penalize the member for complying with this act.

(4) A homeowners’ association may deny an application to install a solar energy system or require the removal of a solar energy system if 1 or more of the following apply:

(a) A court has found that the installation of the solar energy system violates a law.

(b) The installed solar energy system does not substantially conform with the member’s application to install the solar energy system as approved by the homeowners’ association.

(c) The homeowners’ association has determined that the solar energy system will be installed on the roof of a home or unit of the member requesting installation and 1 or more of the following apply:

(i) The solar energy system will extend above or beyond the roof of that home or unit by more than 6 inches.

(ii) The solar energy system does not conform to the slope of the roof and has a top edge that is not parallel to the roof line.

(iii) The solar energy system has a frame, support bracket, or visible conduit or wiring that is not silver, bronze, or black tone that are commonly available in the marketplace.

(d) The homeowners’ association has determined that both of the following apply:

(i) The solar energy system will be installed in a fenced yard or patio rather than on the roof of a home or unit.

(ii) The solar energy system will be taller than the fence line.

(5) A member may resubmit a written application to install a solar energy system that was submitted to and denied by the homeowners’ association before the effective date of this act. On receipt of the resubmitted written application, the homeowners’ association shall reevaluate the application under this act.

            HB 5028 would also create a new requirement that a homeowners association adopt a solar energy policy statement. The requirements for the solar energy policy statement would be as follows:

Sec. 9. (1) Within 90 days after the effective date of this act, each homeowners’ association in this state shall adopt a written solar energy policy statement. A policy adopted under this subsection must not conflict with an existing local, state, or federal law. All of the following apply to a policy adopted in accordance with this subsection:

(a) The policy must include the standards established under this act to be enforced by the homeowners’ association.

(b) The policy may not prohibit elements of the solar energy system from being installed on a roof face.

(c) The policy may not require that a specific technology be utilized for the installation of a solar energy system, including, but not limited to, solar shingles rather than traditional solar panels.

(d) Any standards enforced under the policy may not result in a reduction in the production of electricity by the solar energy system by more than 10% or increase the total cost of the installation of the solar energy system to the member by more than $1,000.00. As used in this subdivision, “production” means the estimated annual electrical production of the solar energy system.

(e) The policy must not include a provision that contradicts this act.

(f) The policy must include the following statements:

(i) That the approval of an adjacent home or unit owner is not required to approve a member’s application to install a solar energy system on the member’s home or unit.

(ii) That the homeowners’ association will not do any of the following:

(A) Inquire into a member’s energy usage.

(B) Impose conditions that impair the operation of a solar energy system.

(C) Impose conditions that negatively impact any component industry standard warranty.

(D) Require post installation reporting.

(E) Require a fee for submitting an application to install a solar energy system above that which it assesses for other applications related to a change to the property.

(iii) That the homeowners’ association will not deny a member’s application to install a solar energy system because of the identity of the entity that owns the solar energy system or financing method chosen by the member.

(g) The policy may impose reasonable conditions concerning the maintenance, repair, replacement, or removal of a damaged or inoperable solar energy system provided that the conditions are not more burdensome than the conditions imposed on nonsolar energy projects.

(2) A homeowners’ association shall do both of the following:

(a) Make a copy of the policy available to a member, on request.

(b) If the homeowners’ association maintains an internet website, post a copy of the policy on its website.

(3) Any provision in a policy that conflicts with this act is void and unenforceable.

            Like SB 558, HB 5028 would not apply to any “home or unit that has a shared roof, unless all members served by the shared roof agree to the installation of the solar energy system.”  Finally, HB 5028 would also create a cause of action against homeowners associations that violate the Act, as Section 15 of HB 5028 states as follows:

Sec. 15. If a homeowners’ association violates this act, a member may bring a civil action against the homeowners’ association for damages, reasonable attorney fees, and the costs of bringing the action.

Red Flags in Green Legislation

            While increasing energy efficiency is a laudable goal, SB 558 and HB 5028, as presently drafted, have numerous issues that could lead to litigation and increased cost of homeownership if not resolved.  Specifically, the following areas of concern should be addressed:

1. The legislation may create safety problems. During the architectural control process, many HOA’s will verify that a modification is being done according to the building code, in a proper location, by a licensed contractor, and that the installation of solar panels would not create an unsafe condition in the community.  As stated by the Department of Energy,

Design flaws, component defects, and faulty installation generally cause solar rooftop fires. As with all electrical systems, these problems can cause arcs between conductors or to the ground, as well as hot spots, which can ignite nearby flammable material.

Removing any type of architectural control authority may create safety hazards, as the HOA would be forced to accept solar panel installations with design flaws or faulty installation, that could cause a fire, and burn down other homes in the community.  Similar problems may arise if electric vehicle charging stations, or other types of energy saving devices, are installed without permitting the HOA to determine if the charging station is compatible with the association’s electrical system and other requirements of the condominium. Accordingly, any legislation must permit a community association to create reasonable regulations related to safety and permit a homeowners association to deny the installation of an improvement based on safety concerns.

2. The legislation may decrease property values. HOA architectural control is important in preserving the aesthetics of a community and property values. By way of example, SB 558 may permit an unlimited number of solar panels to be placed in an owner’s front yard.  In addition to safety concerns, many owners would not find it desirable to live next to a mini-solar farm in a residential neighborhood.  Similarly, permitting a disgruntled co-owner to recover attorney’s fees in litigation, for something as simple as an HOA forgetting to put an energy policy on its website, will likely encourage litigation.  This potential litigation may create additional expense to operate community associations or increase insurance costs for community associations that must defend this type of litigation, making homeownership more expensive, when these litigation expenses are passed on to owners.
3. The legislation may create insurance problems. If a homeowners association is not allowed to condition the approval of solar panels based on obtaining appropriate insurance, it may create significant liability issues for community associations and homeowners.  At the very least, the legislation should permit the HOA to require some form of insurance coverage for the owner, as well as verify that installation of solar panels, or other energy savings devices will not negatively impact a community association’s insurance coverage or cause a significant increase in premium.  By way of example, if a solar panel caused a home to burn down, and the homeowner did not have appropriate insurance to rebuild their home, it would leave an eyesore in the community.  Similarly, if an insurance carrier declined to renew coverage due to a claim related to solar panels, or if it determined that certain types of panels were unsafe, making it impossible for a community to obtain insurance, what remedy would the community association have to protect the greater good of the community?
4. The legislation may unconstitutionally interfere with vested contractual rights. The condominium bylaws and restrictive covenants of Michigan community associations have been interpreted as contracts by Michigan courts. The legislation may interfere with existing contractual rights of community associations, if it were ever interpreted to have retroactive application and void existing restrictive covenants, as a “statute may not be applied retroactively if it abrogates or impairs vested rights, creates new obligations, or attaches new disabilities concerning transactions or considerations occurring in the past.” Davis v State Employees’ Ret Bd, 272 Mich App 151, 158; 725 NW2d 56 (2006). Similarly, Section 17 of HB 5028 states as follows:

If any provision of this act or its application to any person or circumstances is held invalid, the invalidity does not affect other provisions or applications of this act that can be given effect without the invalid provision or application, and, to this end, the provisions of this act are severable.

Accordingly, to the extent that either bill is not clarified to indicate that it does not modify existing condominium documents and restrictive covenants, it may lead to litigation over the constitutionality and enforceability of the Acts.

5. The legislation may conflict with the Michigan Condominium Act. MCL 559.147(1) of the Michigan Condominium Act states that:

Subject to the prohibitions and restrictions in the condominium documents, a co-owner may make improvements or alterations within a condominium unit that do not impair the structural integrity of a structure or otherwise lessen the support of a portion of the condominium project. Except as provided in section 47a, a co-owner shall not do anything which would change the exterior appearance of a condominium unit or of any other portion of the condominium project except to the extent and subject to the conditions as the condominium documents may specify.

As presently drafted, the proposed legislation may permit a co-owner to install a solar panel on a balcony in a high-rise condominium, that is either part of a unit or a limited common element.  If the solar panel installation impaired the structural integrity of the building, i.e., it was too heavy for the balcony, or it changed the exterior appearance of the condominium, would MCL 559.147 still control?  Similarly, if a co-owner wanted to install five rain barrels on their balcony, could they do so without approval from the condominium association? Accordingly, the legislation should be clarified to indicate that the Michigan Condominium Act would control, in the event of any potential conflicts to avoid potential future litigation.

6. The legislation does not clearly define the term “homeowners association.” Neither bill would not apply to traditional attached condominium units with shared roofs or permit the installation of solar panels in common areas.  However, SB 558 does not define what constitutes a “homeowners association.”  HB 5028 defines a homeowners association as “an incorporated organization of the owners or lessees of residential dwelling units.” This definition may not include all community associations, as Michigan law recognizes unincorporated community associations.  Moreover, not all condominium associations are required to be incorporated, even though most of them are incorporated entities. MCL 559.103(4); Mich Admin R. 559.501(4).  Accordingly, without a clear definition of what types of associations the bills would apply to, it would create confusion in its application.

Kevin Hirzel is the Managing Member of Hirzel Law, PLC and concentrates his practice on commercial litigation, community association law, condominium law, Fair Housing Act compliance, homeowners association law and real estate law. Mr. Hirzel is a fellow in the College of Community Association Lawyers, a prestigious designation given to less than 175 attorneys in the country. Mr. Hirzel has been recognized as a Michigan Super Lawyer’s Rising Star in Real Estate Law by Super Lawyers Magazine, a Leading Lawyer in Condominium & HOA law by Leading Lawyers Magazine, and as a Best Lawyer in Real Estate Law by U.S News and World Report’s Best Lawyers Publication. Hirzel Law, PLC represents community associations, condominium associations, cooperatives, and homeowners associations, in Michigan and Illinois. He may be reached at (248) 478-1800 or kevin@hirzellaw.com.