Complaint alleged excessive charges, racketeering in HOA case

By TONY ILLIA

LAS VEGAS BUSINESS PRESS

A recent court ruling has valley homeowner associations breathing easier, but an attorney for investors on Friday promised the fight will go on.

Clark County District Court Judge Kathleen Delaney dismissed complaints against hundreds of local homeowner associations filed by nine disgruntled investment entities in late January. District Court Judge Jennifer Togliati dismissed a similar investor lawsuit in May against association collection agencies.

The defendants, which include such prominent neighborhoods as Aliante and Seven Hills, Silverado Ranch and Panorama Towers, were accused of excessive lien amounts and slander, racketeering and unjust enrichment. Associations, in short, are charging more than legally permissible under state law with accumulative fines, interest and assessments, the lawsuit says.

State secretary records identify the individuals associated with the investment entities as Ryan Welch, Sara Ferradino, Mickey Fouts, Greg Bohannon, John Gubler, Patrick and Phillip Ziade, and Andy Chu. Defendants consisted of Nevada Association Services, RMI Management, Homeowner Association Services and others.

“The court saw these as real estate speculators who are reaping thousands in profits by buying and flipping distressed homes,” Las Vegas-based Nevada Association Services President David Stone said of the Aug. 11 ruling. “Justice prevailed in this case.”

But James Adams, principal of Adams Law Group Ltd. in Las Vegas and attorney for the plaintiffs, said Friday: “The homeowners associations can collect for past due fines, fees, assessments and other charges against the original homeowner with no limit. When the first mortgage holder forecloses, all junior lien holders typically get extinguished, except a portion of the association liens. Homeowner associations can collect nine times their monthly dues assessment. The investor or bank is consequently being forced to pay that excess amount. That is the subject of the litigation. … (Investors) are being asked to pay thousands and thousands of dollars; it’s not about who is greedy and who is benefiting or not, but about demanding more money than they are legally entitled.”

Associations have become more aggressive in pursuing delinquent fees from foreclosed and distressed homes in disrepair, market observers say.

Las Vegas had the nation’s highest metropolitan foreclosure rate during the first half of 2010, Irvine, Calif.-based RealtyTrac.com reported. One in 15 valley homes received a foreclosure notice through June, which is more than five times the national average. Associations struggle to collect unpaid dues from vacant and bank-seized homes, market observers say.

“There are a lot of unhappy and frustrated homeowners,” Las Vegas-based RMI Management President Kevin Wallace said. “We have also seen a lot of dead or dying landscaping, and pools going green. It’s very common.”

Laws went into effect in October that give associations more power to fight disrepair at neglected residences. Assembly Bill 361, for instance, empowers associations to upgrade poorly kept residences that create blight and depress surrounding property values. Homes that don’t meet neighborhood standards are subject to association improvements; homebuyers must reimburse expenses before gaining title.

Assembly Bill 204, meanwhile, extends associations’ superpriority lien ability, letting the groups collect nine months of unpaid dues, up from six months. Homebuyers must pay association dues before gaining ownership title.

“Homeowners associations are a touchy topic, with arguments to be made for both sides,” Las Vegas-based Home Builders Research Inc. President Dennis Smith said. “From a typical homeowner perspective, there is no way they should be able to walk away from liens and association assessments on distressed properties. Conversely, there is a need for investors in today’s market. But they are also going to make a profit by flipping or renting homes.”

Contact reporter Tony Illia at tonyillia@aol.com or 702-303-5699.

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