The recent Tesoro del Valle Master Homeowners Association v. Griffin case provides a good example of power of a well-functioning HOA/ Architectural Control Committee to deny a homeowner’s construction project, and to its right and power to go to court for injunctive relief for removal of a project that it did not approve.   The case involved a 1,100 home HOA planned development community in Santa Clarita.  The homeowner installed solar panels despite that the HOA’s Architectural Control Committee denied the project.  The HOA filed a lawsuit.  The case was decided by jury trial and the HOA won.  As part of the judgment, the homeowners were ordered to remove the solar panels and to return the landscaping to its original condition within 60 days of entry of judgment.  The HOA was also awarded its attorney’s fees.

This case provides an important reminder of the power of CC&Rs and HOAs, and the risk a property owner takes doing construction or remodeling in defiance of a HOA’s decision denying such application.

The court’s starting point was the general principal of the power of CC&Rs and authority of HOAs.  As the court stated:  “The purpose of the CC&R’s is to enhance and protect the value, desirability and attractiveness of the Tesoro community, as well as to give the Tesoro Board of Directors (Tesoro Board) the authority to maintain community standards.”

One of the main issue in the case was whether a specific California statute that prohibits homeowners associations from imposing covenants, conditions or restrictions that effectively prohibit the installation of a solar energy system, the California Solar Rights Act (Civil Code §714).  However, the statute further provides: “This section does not apply to provisions that impose reasonable restrictions on solar energy systems. … reasonable restrictions on a solar energy system are those restrictions that do not significantly increase the cost of the system or significantly decrease its efficiency or specified performance, or that allow for an alternative system of comparable cost, efficiency, and energy conservation benefits.”  (§ 714, subd. (b).)   (“Section 714 defines “significantly” as “an amount exceeding 20 percent of the cost of the system or decreasing the efficiency of the solar energy system by an amount exceeding 20 percent, as originally specified and proposed” for a solar water or swimming pool heating system, and as “an amount not to exceed two thousand dollars ($2,000) over the system cost as originally specified and proposed, or a decrease in system efficiency of an amount exceeding 20 percent as originally specified and proposed” for a photovoltaic system. (§ 714, subds. (d)(1)(A) & (B).)”)

The jury found for the HOA on the question of whether the CC&R’s and Design Guidelines imposed “reasonable” restrictions.

On appeal, the homeowner argued, among other things, that the question of whether the CC&R’s and Design Guidelines imposed “reasonable” restrictions was a question of law that should not have been submitted to the jury.  The court rejected that argument because of the “well settled rule ‘that the theory upon which a case is tried must be adhered to on appeal.’”  Furthermore, consistently throughout the proceedings below, the homeowner maintained that the question of the HOA’s compliance with section 714 was a question of fact.  The court stated: “Appellants are bound by their decision to submit to the jury the question of  Tesoro’s compliance with section 714.”

The court of appeal further affirmed the trial court because it found that “substantial evidence” supported the jury’s finding that the CC&R’s imposed reasonable restrictions.  The court specifically discussed the testimony of the HOA’s expert witness

The same result is required here. The CC&R’s provide that the approval or disapproval of applications for improvements “shall be in the sole and absolute discretion of the [ACC] and may be based upon such aesthetic considerations as the [ACC] determines to be appropriate.” The Design Guidelines temper this discretion with respect to the installation of solar energy systems. They specifically mirror section 714 and provide that the ACC may impose reasonable restrictions “that do not significantly increase the cost of the system or significantly decrease its efficiency or specified performance, or which allow for an alternative system of comparable costs, efficiency, and energy conservation . . . .” As in Palos Verdes Homes, supra, 182 Cal.App.3d at page 328, an expert testified about a comparable alternative system to appellants’ installation of 22 panels on their slope. Bergen explained that the installation of 16 to 20 panels in an area above the casita would yield the same performance efficiency but have a 14 percent reduction in output. He further testified that the proposed system would be less expensive to install than the slope panels. Bergen’s testimony established that the CC&R’s and Design Guidelines allowed for an alternative solar energy system of comparable costs and efficiency that did not significantly increase the cost or decrease the efficiency of the system sought by appellants. Substantial evidence supported the jury’s conclusion that CC&R’s imposed reasonable restrictions that were in compliance with section 714. 

The homeowner objected to the HOA’s use of an expert regarding the alternative system based on the argument that the HOA had the burden to propose a comparable alternative system at the time it denied appellants’ application.  The court rejected that argument because “nothing in the language of [Civil Code] section 714 imposes such a burden on a homeowners association. The statute requires only that the denial of a solar energy system application be in writing and in a timely manner. (§ 714, subd. (e)(2).) Nor do the CC&R’s or Design Guidelines require that the ACC redesign a solar energy system that fails to garner approval. Instead, the burden is on the homeowner to submit an application that is complete and sufficient to generate approval.”

One final note, the court rejected the homeowner’s argument that the HOA had waived its right to object by not timely responding to the application.  The CC&Rs provided ““all approvals given pursuant to this Article shall be in writing; and any request for approval which has not been approved or disapproved, in writing, within forty-five (45) days from the date of receipt of all documentation required to be submitted by the Committee shall be deemed approved . . . .”   The homeowner argued that the denial was untimely because although the denial letter was dated within the 45 day period, it was misaddressed and the homeowner did not receive it until 46 days after the date of his application.  The court cited section 16.11 of the CC&R’s, which provides in relevant part: “Any notice permitted or required by this Declaration shall be considered received … forty-eight (48) hours after the notice is deposited in the United States mail, first-class, registered or certified mail, postage prepaid and addressed to the recipient at the address which the recipient has provided to the Association . . . .”

In summary, a property owner subject to CC&Rs and HOAs approval of any construction or remodeling projects needs to carefully present any such potentially controversial projects to the HOA and has substantial risks in proceeding with a project that has been denied. In this case, the cost to install the solar panels was $97,000.  Hopefully the homeowner got the contract to share in the risk in installing the defiant project.