By: Kevin Hirzel, Esq. and Amber Myers
Michigan is working to make alternative energy, such as solar, financially feasible for commercial and industrial property owners. Michigan’s Property Assessed Clean Energy (PACE) financing law, Mich. Comp. Laws § 460.931 (2010), and the Lean and Green Michigan Program allow counties, cities, and townships to form a PACE district wherein commercial and industrial property owners may use the PACE property tax mechanism and assessment to finance up to 100% of a solar project’s purchasing and installation costs, amortized over a period of time. Upon selling the property, the assessment runs with the land and the new owner obtains the energy savings as the new owner begins paying property taxes. PACE counties currently include: Eaton, Genesee, Grand Traverse, Huron, Ingham, Macomb, Saginaw, Washtenaw, and Wayne. PACE authorized cities include: Ann Arbor, Rochester Hills, Royal Oak, and Southfield. Additionally, a thirty percent federal tax credit is available for the purchase and installation of solar panels, with no monetary cap on the amount of credit. However, a minimum of one-half kilowatt system must be installed to obtain the federal income tax credit. Michigan also offers property owners of solar panels a buy-back tariff for solar panel installations that generate excess electricity. Between state and federal programming and the estimated 40% decrease in cost by 2017, solar power is an increasingly financially obtainable amenity and the use of solar panels will only continue to increase.
Michigan is 1 of only 10 states that does not currently have a statutory scheme regulating the installation and use of solar panels for residential purposes, such as in condominium and homeowner associations. Until such legislation is passed in Michigan, the installation and use of solar panels in Michigan is governed by an association’s declaration of restrictions, master deed, bylaws and/or rules and regulations. Accordingly, this article will discuss the steps that should be taken by a board of directors that is faced with a request to install a solar panel.
Solar Panels and the Governing Documents
As an initial matter, community association boards should review the declaration of restrictions, master deed, bylaws and rules to determine if they contain provisions that specifically deal with the installation of solar panels. Association’s that do not have any policies regarding the installation and use of solar panels should amend their governing documents as a community association will inevitably have to deal with this issue in the future. Having policies in place that specifically address the installation and use of solar panels can often avoid the association becoming involved in litigation, which is becoming more common in other states.
If the governing documents do not specifically address solar panels, most condominium documents permit a board to approve a common element modification, even though the grant of such permission is typically not required. Requests to install solar panels will often require the solar panels to be physically located on common elements, require a connection to a common element electrical system and/or alter the physical appearance of a condominium unit. Accordingly, the installation of a solar panel will most likely require the board of directors to enter into a modification agreement with a co-owner to permit the installation and use of solar panels. If the condominium documents permit the board to enter into a modification agreement, the Board should consult with the association’s legal counsel and have an attorney draft the modification agreement. The modification agreement should be recorded in the Register of Deeds and be kept as part of the association’s books and records.
Issues to be addressed in a Solar Panel Modification Agreement
While not an exhaustive list, common issues that should be addressed in solar panel modification agreements are as follows:
- Has the co-owner submitted design plans that are in accordance with manufacturer’s specifications?
- Has the co-owner obtained a building permit and/or complied with any other local ordinances?
- Is the co-owner solely responsible for the cost of installation, maintenance and repair of the solar panel?
- Who will be responsible for obtaining insurance coverage regarding the solar panel?
- Who will be responsible for any damage to person or property caused by the solar panel?
- Will the co-owner be required to indemnify and hold harmless the association if the solar panel causes damage?
- Is the solar panel removable or is it permanently affixed to the common elements?
- Will the co-owner be required to remove the solar panel if they move?
- Does the solar panel fit within the overall aesthetics of the community?
- Does the location of the solar panel pose any safety concerns?
Solar energy is becoming increasingly more common in Michigan. At least 40 states now have some form of legislation governing the installation and use of solar panels. Approximately 25 states have statutes that indicate that a community association may not prohibit solar panels all together. Accordingly, associations should be prepared to deal with co-owner requests and be proactive about implementing reasonable policies regarding solar panel use until such legislation comes to Michigan in order to avoid costly litigation.
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 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. He has been a Michigan Super Lawyer’s Rising Star in Real Estate Law from 2013-2018, an award given to only 2.5% of the attorneys in Michigan each year. Mr. Hirzel was named an Up & Coming Lawyer by Michigan Lawyer’s Weekly in 2015, an award given to only 30 attorneys in Michigan each year. He represents community associations, condominium associations, cooperatives, homeowners associations, property owners and property managers throughout Michigan. He may be reached at (248) 478-1800 or kevin@hirzellaw.com.
Amber Myers is a third year law student at Michigan State University College of Law. Her areas of concentration include business development and intellectual property. She also serves as Business Editor on the Michigan State University College of Law Journal of Animal and Natural Resource Law. Originally hailing from Midland, Michigan, Amber plans to practice in Michigan after graduation.