Proposed legislation such as Senate Bill 174 is designed to protect responsible homeowners who pay their HOA dues and abide by the rules, representatives of the Community Association Institute in Las Vegas said Thursday.
Homeowners associations came into vogue in the late 1950s and early 1960s in high-growth states such as California, Arizona and Florida as a way to transfer municipality costs to homeowners, said Paul Terry, attorney and president-elect of the Community Association Institute.
“Here’s the fundamental problem. The government pays for a good portion of its services by property taxes and it has priority on taxes,” Terry said. “It will always get paid 100 percent of those taxes plus interest. The problem is this municipal function is now transferred to an HOA. How does the HOA get the funding to satisfy that function? Either from the homeowner or from the property itself that benefits from those functions.”
Just as the county holds a property owner responsible in the form of tax liens, the HOA holds the owner responsible with assessment liens, he said. The association is limited to collection of nine months in assessments, whereas government liens are unlimited, the attorney noted.
“So the big rub with this legislation (SB 174) is if an HOA incurs collection costs to collect the lien, are those part of the nine months of superpriority liens, which are in front of bank liens?” Terry said.
The greed factor surfaces when investors don’t want to pay their fair share, he said.
Lawsuits against more than 500 homeowners associations in Las Vegas Valley are driven by investors looking to “flip” homes for a quick profit, Terry said. Many of the community association’s 1,000 members are the target of those lawsuits.
Judges in three separate District Court cases all concluded that collection costs and “reasonable” attorney fees for unpaid HOA assessments are included in superpriority liens, Terry said.
However, critics of SB 174 say the costs are much higher than the amount of delinquent assessments. Some assessments have gone from a couple hundred dollars to $5,000 and more with collection fees.
“There were some abuses, no doubt,” Terry said. “The (Commission for Common Interest Communities) conducted an investigation for the Legislature and produced regulations that specify what are reasonable costs and they put a cap on it at $1,950.”
If the liens aren’t paid, the HOA can file a notice of default and commence foreclosure proceedings, though less than 1 percent of homes go to foreclosure, said David Stone, president of Nevada Association Services, a collection firm for HOAs.
Terry said you have to look at how homeowners got to the point of foreclosure with assessment liens. They ignored multiple notices. No association sends assessments to collection until they’re 60 days delinquent, he said.
Pat Taylor, principal of Taylor Association Management and CAI president, said it’s the homeowner’s responsibility to provide a correct mailing address, respond to correspondence and talk to management.
“Step up to the plate with responsibility. Don’t blame people trying to enforce the rules,” she said.
Rutt Premsrirut, a real estate agent who represents investor clients, said Nevada should follow the lead of North Carolina. Lawmakers there unanimously approved a bill Wednesday that would limit the ability of homeowners associations to foreclose on property owners because of unpaid dues or assessments.
The measure would require dues or assessments to remain unpaid for 90 days before an association could begin foreclosure against a property owner. Among other provisions, the bill would also require the association’s executive board to vote to begin any foreclosure proceedings against an owner.
Lawmakers who spoke about the bill said they’ve received complaints from members of homeowners associations about foreclosure actions taken by the associations. They said they believed associations have become too powerful and that more protections need to be in place for members.
Contact reporter Hubble Smith at email@example.com or 702-383-0491.