New HOA laws affect group homes, disputes

Editor’s note: Barbara Holland takes a break from her Q&A column format to address more new state laws affecting area homeowners associations.

Senate Bill 233 changes the sections of state law pertaining to deed restrictions and the community’s covenants, conditions and restrictions. A federal court case prompted the changes.

Previously, some restrictions required a certain distance between “group homes” and adjacent properties. The Legislature found these to be nonenforceable as they violate the 1988 Fair Housing Act Amendments.

These changes also will affect local governments’ ordinances relating to these homes. But how far this law extends is unclear. The federal case pertained to disabled residents, which under federal law, include alcoholics and recovering drug addicts. Restrictions are still valid for group homes whose occupants are active drug users or felons.

Assembly Bill 370, which became law Oct. 1, amended state law pertaining to arbitrations. The changes made applied to disputes within homeowner associations. It eliminates the state requirement to arbitrate matters before filing a civil action. Instead, the parties may first choose to participate in a voluntary program to resolve their disputes known as the Referee Program, or choose the mediation program, which is administered by the Nevada Real Estate Division.

If the mediation fails to produce an agreement, either party may file a civil action with the appropriate court or agree to arbitrate the dispute.

This was a highly controversial bill which, I must disclose, I testified against. Over the past 20 years, the alternative dispute resolution process, which consisted of mediation or arbitration, was successful, resolving homeowner association disputes and reducing District Court caseloads.

If you select the Referee Program, a hearing officer will rule in the case and issue an award. Monetary awards may not exceed $7,500 and may not include attorneys’ fees and costs. Claims involving multiple parties cannot participate in the Referee Program.

The referee will provide his or her decision to both parties and to the division within 30 days of the hearing or 30 days after receiving all documents from both parties. Either party has 60 days to take the matter to civil court. If the parties don’t act during this period, they have one year to obtain confirmation of the decision and award in the appropriate court.

Both parties must agree to participate in this program that will cost a $50 filing fee by each party. The referee may charge as much as $200 per hour not exceeding $1,000 per claim; each side pays half.

Obviously, if either party is using an attorney to participate in this hearing, it must bear the legal expenses.

Referee proceedings may be subsidized as much as $250 per side and no more than $500 per claim. The parties must submit a subsidy application (form 668) at the time of the filing a claim (form 520) or a response (form 521) with the division. Unit owners may receive a subsidy once a fiscal year for each unit owned. An association may receive one subsidy each year against the same unit owner for each unit owned by that unit owner.

Associations must be in good standing with the secretary of state and the office of the ombudsman to qualify for the subsidy (good standing would mean having filed all paperwork and fees).

If the parties don’t agree to using the Referee Program, they’ll have to mediate before initiating arbitration or a civil lawsuit. In the new law, the mediation must not exceed three hours or $500 in cost unless both parties agree to additional time costing no more than $200 per hour. These are artificial caps provided in the new law. The mediation must come within 60 days of the claim’s filing with the division.

I know the Nevada Real Estate Division is excited about the Referee Program; it sponsored the bill during the 2013 Legislature. With due respect to Gail Anderson, the division’s administrator, I am not sure the program will succeed for the more serious disputes. I do not foresee associations agreeing with the referee, because the awards don’t include attorney fees. Remember, this program will be similar to an arbitration; each side will present a case to the referee for decisions and awards.

With mediations, more serious matters will take more than three hours to resolve.

Hopefully, the division will find skilled, qualified mediators who will accept the new payment structure. Associations will likely have their legal counsel advise the board during mediation, which will add to the association’s legal costs as more serious disputes are resolved.

The program’s success will hinge on the time frame for resolving disputes. With the new program, if you do not choose the Referee program, you’ll have to mediate before arbitration or filing a civil complaint. This new step will lengthen dispute resolution.

As noted, once if mediation fails to produce an agreement, parties can arbitrate or file a civil complaint. Arbitrators may not charge more than $300 per hour. There is no time limit or maximum allowable billing for arbitration. Arbitrators may require a deposit from both parties. Both parties must agree to arbitrate. Arbitration may be binding or nonbinding.

This change in the law will increase our courts’ caseloads. We will probably see more filings directly by both parties to a court system which is already overloaded.

It will be important to analyze the new law’s results to see whether modifications will be necessary during the 2015 Legislature.

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to the Association Q&A, P.O. Box 7440, Las Vegas, Nev., 89125. Fax is 702-385-3759, email is support@hlrealty.com