To Nullify Contractual Agreements

The beginning of the headline was intriguing: “New law protects Hoosier property rights…” The second clause of the headline—”…makes it harder for HOAs to say no to solar”—set the stage for a grand disappointment. The law does not protect property rights. What the law does do is nullify contractual agreements between neighbors.

Homeowner associations (HOAs) are the typical mechanism for enforcing deed restrictions (also called covenants). Deed restrictions are contractual agreements between neighbors that limit how they can use their property. Many HOAs deny applications to install solar panels, usually for aesthetic reasons. But the reasons are irrelevant, so long as the HOA abides by the deed restrictions. If the homeowners have authorized the HOA to enforce the covenants, then they are bound by the decisions of the HOA.

Most deed restrictions allow for amendments and changes, subject to the approval of a certain percentage of property owners (75 percent is common). But a number of Indiana homeowners didn’t want to do the work of changing their deed restrictions. They decided that it would be easier to lobby the state legislature to nullify their contractual agreements. And that is what new law does. It overrides deed restrictions and forces HOAs to approve applications for installing solar panels.

The claim that this law protects property rights ignores the nature of contractual agreements. When parties enter into a contract, they agree to certain responsibilities and obligations. In regard to deed restrictions, this means voluntarily restricting one’s use of his property. This is an exercise of one’s property rights. The right to property includes the freedom to use one’s property as one chooses. Voluntarily agreeing to place limits the use of one’s property is an exercise of this freedom.

Some homeowners agreed to restrict the use of their property and later found those restrictions too burdensome. In such a situation, the proper solution is to amend the covenants, not nullify the contractual agreement.