Convert Your HOA to Solar Power with These Four Steps

Solar panel installation

Growing Demand for Solar Power

Many HOAs fail to incorporate environmentally-conscious development practices into the management of their HOAs. Conserving energy is just the beginning of the myriad benefits associated with emerging green alternatives. Optimizing your HOA for solar energy is one of the best ways to conserve energy, leading to:

  • Dramatic cost savings
  • Increased health
  • Minimal environmental impact.

With overwhelming evidence that carbon emissions are a major contributor to global warming, people are now looking at home improvement to decrease their amount of carbon emissions, and your homeowners association can too.

Switching to Solar: Is It Right for You?

HOAs face many options and obstacles when considering whether or not it makes sense to go switch to solar. Developments vary by type (such as condominiums and planned developments), size, shape, zoning, and other factors that determine how conducive the buildings may be for alternative energy.

Evaluate Your Electricity Output

With regard to electrical metering, buildings may be set up one of two ways:

  1. Each unit is separately metered for electricity and/or hot water
  2. There is either one meter for the entire complex (usually divided between the common areas and the building units)

It's easier to convert to solar energy if the building falls into the latter category--one meter tracking the entire buildings energy usage. However, HOAs should be aware that any individual owner of a unit wanting to go solar has the legal right to do so (See Civil Code 714 for more information). 

Big Investment, Bigger Return

Converting to solar can save thousands of dollars annually but requires a significant initial cash outlay. Solar power is a big expenditure that brings big benefits; you’re not just reducing your carbon footprint, you’re also ultimately increasing the property’s value and the value of individual units and reducing the property’s energy bills forever. A solar energy system also extends the life of the roof by protecting it from harmful ultraviolet rays and inclement weather.

We recommend that you install your HOA's solar panels and system in conjunction with a new roof (since both have an average useful life of approximately 25-30 years). If you don't, the roof may need to be replaced after the system has been installed, costing anywhere between $20,000 to $50,000 to dismantle and re-install the solar panels and coming straight from HOA's maintenance budget.

Now that you have decided whether or not solar panels are best for your HOA, we'll walk you through the steps of converting to solar energy.

Select a Solar Company

It seems that every construction company, window installer and roofer now claims expertise in solar energy system installation. Sure, they might have some transferable skills to offer, but they are probably not as experienced as you will want – and need.

Experience - The company you select will ideally have experience in the specific installation and ongoing maintenance of solar energy systems. Many companies that focus solely on solar installations have been around for a number of years, and they will have the experience your HOA needs. If you need help finding companies that specialize in HOA solar panels and system installation, try our Professional Directory.  

Resource Availability - Your HOA needs to consider the amount of access to the company has to significant resources. Solar companies can be backed by major corporations which allows them to offer better financial options than the smaller companies. With larger, better-established solar companies your HOA won't have to wait months for a government rebate to come through. These companies offer project bids with rebates and incentives included, taking the fees out of their own resources.

  • Keep in mind that HOAs are usually organized as nonprofit mutual benefit corporations. Therefore, associations are not eligible for the vast amount of incentives aimed at for-profit commercial properties and single-family homes, so make sure to find out which tax credits your HOA qulaifies for

At first glance, the project bids may make the whole proposal seem unaffordable. You want to work with a solar company that has or is eager to gain experience working with HOAs. As the solar industry grows, many companies are focused on the low-hanging fruit (for-profit commercial properties and single-family homes) and do not devote the necessary attention to ensure your HOA maintenance project is a success.

Do your research, interview companies that have worked in your area previously and select one that is eager to work with a homeowner association.

Conduct the Assessment

This is the easiest step in the process. In order to conduct an assessment, just follow the assessment checklist:

Assessment Checklist
Set up a time for the solar specialist to come out for a site visit
Answer questions about your HOA's current energy usage
Provide electricity bills for the specialist to examine
Allow the specialist to photograph the property
Discuss the usable space for solar panels as determined by the specialist

After completing the assessment, the solar energy company will prepare one or more project bids for your review.

Review the Project Bids

Typically, within a week of the assessment, your specialist will provide you with project bids that outline the proposed system, which will include the

  • Amount of energy to be off-set
  • System specifications
  • Financial analysis

Carefully review the proposal to understand the projected results of the system for your HOA. In some cases, you will receive more than one bid since several factors can significantly affect the recommendation.

Example: If the proposed system is to be owned by a for-profit entity, after rebates and incentives, the cost of the system may be as little as 20% of the cost of that same system for a nonprofit entity.

A homeowners association of mixed-use condominiums may want to approach the owners of the commercial units in the building and offer them the title to the solar energy system on behalf of the HOA. This way, the HOA's non-profit status won't be compromised, but the building would be able to take advantage of the rebates and incentives available to for-profit entities.

Remember, residential-only homeowner associations can have the owners separately form a for-profit entity that could take the title of the HOA's solar panel system. The resident-owned company then leases the solar power system back to the HOA, which allows the HOA to obtain the financial benefits afforded to for-profit entities.

Arrange Financing and Installation

Your solar company should help you determine the best financial option as part of their comprehensive project management services. The solar company will manage the process from proposal through installation and maintenance, including assistance securing financing. Their management of the project means they handle:

  • Government applications 
  • Scheduling inspections
  • Coordinating installers

If your HOA doesn’t have significant funds on-hand that can be tapped up front to pay to switch your development to solar energy, you'll have to look at a few options for financing. Namely, the association can pay for the solar energy system by levying a special assessment, tapping into the association’s reserve account, taking out a loan from the bank, or signing off on a solar power purchase agreement. 

If you want to know more about financing options, check out the finer details of planning and paying for major projects in your HOA.

Special assessments

Special assessments can be levied against all owners in the association under certain conditions.

If... Then...
The total amount of the special assessment needed to pay for the solar energy system is more than 5% of that year’s budgeted gross expenses The special assessment needs to be voted on and approved by all owners
The owners need to vote and approve the special assessment The vote needs to be conducted by secret ballot and the requisite number of owners needs to approve the special assessment before it can be levied
The total amount of the special assessment needed to pay for the solar energy system is 5% or less than that year’s budgeted gross expenses No vote is required and the association can simply levy the special assessment

Reserves

Reserves are intended for deferred maintenance or replacement of major components of the HOA development (as stated by the California Civil Code Section 5510) and are largely defined by your HOA's board of directors.  Major components are generally identified in the HOA’s reserve study. Items typically included are the...

  • Roof 
  • Sanitary sewer system
  • Potable water system
  • Electrical system. 

If your HOA determines that a major component in need of repair or replacement is the building’s electrical system or hot water system, your HOA may use reserve monies to pay for the installation of a solar energy system. 

While both special assessments and reserves are good choices for some HOAs, others may find themselves in need of outside assitance. Some HOAs may find levying a special assessment or tapping into reserves disagreeable (especially if they perceive it as imposing a substantial financial hardship). Collecting the special assessment may require significant time, and present administrative challenges and costs. You risk not being able to generate the full funds needed if even a few property owners refuse to pay. And if the existing electrical system or hot water system is in critical need of replacement, deferring the installation of the solar energy system could have serious implications, and the quality of the life in the building could be jeopardized until the situation is resolved.

This is where banks and the solar power purchase agreement come in handy.

Bank Loan

Taking out a loan to pay for your HOA's solar panels and system is a viable solution.  Most banks serving homeowner associations provide loans at reasonable rates. Your solar company may also have relationships with emerging lending institutions established to promote alternative energy. One of the main benefits of bank loans is that a loan makes funds immediately available, allowing you to switch to solar with quick installation.

And the money needed to repay the loan is spread over time, allocated among the owners, and included as part of the regular monthly assessment. As long as the increased regular monthly assessment is 20% or less of the regular monthly assessment from the previous fiscal year, your HOA can simply provide owners with notice and explanation of the increase, and then levy the new regular monthly assessment amount.

You may be wondering, Do members have to vote to obtain a bank loan?

A vote by the property owners is only necessary if the increased regular monthly assessment is more than 20% of the regular assessment was in the previous fiscal year. While regular assessments would increase to pay the loan, the increase is more manageable for homeowners than if the solar energy system purchase required a lump sum special assessment.

Solar Power Purchase Agreement

Depending upon the size of the proposed solar energy system, a solar power purchase agreement (SPPA) may be your best option and should be discussed with your solar company.

Infographic from the EPA on SPPAs

A SPPA is a private agreement between a solar energy company and a homeowners association. The system is installed on HOA property but is owned by the solar company. All electricity generated by the system is sold by the solar energy company to the HOA at a pre-determined per kilowatt rate, which generally increases by a set percentage amount each year.

Benefits of the SPPA system:

  • Overall cost of electricity is generally less than that of your local utility company
  • Increases resale value for property owners  
  • Decreases environmental impact

A SPPA is generally a long-term agreement (20 years or more) which, at the end of its term, allows an association to purchase the system outright.

However, while the roofing or common area of your HOA development may be enough to cover 80% of your HOA's energy consumption, the solar energy companies will want more. The assessment will determine the size of system needed to off-set total energy usage and the largest possible system that can be accommodated on your development (since they are trying to make money off this deal).

Conclusion

Converting to solar power can help your HOA in three ways: keeps the development competitive in a growing market, increases reserve funds by decreasing energy bills, and minimizes your housing's impact on the environment. While it may seem rough getting started, switching your HOA to solar can ultmiately be a great decision for both your bank account and your planet. 


Information provided by Lise K. Ström, an attorney specializing in green development for HOAs,  and Meghan Connolly Haupt, a sustainability consultant. Photo courtesy of worradmu at FreeDigitalPhotos.net.  Image created by U.S Environmental Protection Agency.