State law dictates control of HOA

Q: In January, 2006, we started to pay homeowners association dues. Currently, there are 495 occupied homes out of a projected 3,200 to 5,200 unit development. There are no homeowners on the board, as the number of units sold have not reached the required percentage set by NRS 116 regulations. The board is only comprised of the builder's employees. There seems to be many things which are not quite right. The 2007 budget was just approved at the end of July. After several months of requesting the financial reports, I finally obtained them after going in person to the management company.

Last September, the builder turned many of the expenses over to the association such as landscaping, maintenance and repairs, employee salaries, electricity and the leasing part of the clubhouse ($8,533.33 monthly), which includes the pool, workout room and recreational room. The other portion is a restaurant and bar with conference rooms belonging to the LLC. When asked the questions regarding the number of employees and hours and salaries, the property manager stated that it was against the law to provide that information. Please understand that I did not ask for names or any other private information.

I am concerned about the decisions the builder is making and yet the expenses have been turned over to the homeowners. Because the assessments do not cover these costs, the builder has subsidized $120,000 so far. What exactly are the consequences in the future? Can we be held responsible when the costs are turned over to the association? Is a builder required to be fiscally responsible? Do we have any rights? Is it possible that this is happening in part because the development is in Nye County and not in Clark County?

A: NRS 116.31032 pertains to the period of control of the association by the developer. It states that not later than 60 days after the conveyance of 25 percent of the units, at least one member of the board and not less than 25 percent of the members of the board must be elected by the unit owners. Not later than 60 days after conveyance of 50 percent, the board must have at least 33 1/3 percent of the members be unit owners. The developer's control terminates no later than 60 days after the conveyance of 75 percent of the units; five years after the developer has ceased to offer units for sale; or five years after the right to add new units was last exercised, whichever occurs earlier. As to the reader's concern, the developer would still be totally in control since the 25 percent conveyance has not been reached.

NRS 116.31038 pertains to the requirements that the developer must meet when transferring the control of the association to the homeowners. Within 30 days after the unit owners elect a majority of the members to the board, the developer is to deliver the original or certified copies of all of the governing documents; covenants, conditions and restrictions; bylaws; rules; minutes and records. The developer must provide a full accounting of the association's money and provide audited financial statements for each fiscal year and ancillary period from the date of inception of the association to the date when the developer's control ends. In addition, the developer is to provide a reserve study, just to list a few of the requirements.

NRS 116.4103 pertains to the public offering statement that must disclose specific information to the buyer from the developer selling the property. One of the items in the public offering is a current financial statement, with the projected monthly assessment and a description of any services or subsidies provided by the developer that are not reflected in the budget. In the reader's case, the developer has had to subsidize the association in order for the expenses to be paid.

NRS 116.31175 states that an owner has the right to review certain association records. The provisions of this law does not include the personnel records of the employees of the association, except for those records relating to the number of hours worked and salaries and benefits. The reader does have the right to obtain information on the hours, salaries and benefits of the employees.

As to the reader's concerns, the developer-controlled board has the same fiduciary responsibility as a homeowner-controlled board. The expenses of the association should have been presented in a budget to the homeowners in the public offering as well as being presented to the homeowners each year for their ratification or rejection. Unless the homeowner can point to some irregularity as to the state laws or association's governing documents, from the information presented in the reader's letter it would appear that the board is functioning within the guidelines of the law. The reader can request and can receive monthly financial reports from the management company, as well as copies of minutes.

The association can charge the reader for copying costs. If the reader wants to continue to monitor the activity of the board, the minutes and financial reports would be one way of keeping tabs on the association activity.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. She is a member of the Institute of Real Estate Management. Questions may be sent to Association Q. & A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759. Questions may be shortened and are subject to editing.