HOA should disclose NRED settlement agreement

Q: I am writing to seek your opinion on a transparency issue arising under Nevada Revised Statutes 116.31088(4) regarding homeowners association board disclosure obligations following regulatory settlements.

Our HOA board recently concluded a settlement agreement with the Nevada Real Estate Division, resulting in penalties of $3,089.60 imposed on the association and several thousands of dollars in legal fees to our HOA attorney. The settlement resolved what appears to have been procedural compliance violations identified by NRED.

NRS 116.31088(4) explicitly states: “If any civil action in which the association is a party is settled, the executive board shall disclose the terms and conditions of the settlement at the next regularly scheduled meeting of the executive board after the settlement has been reached.”

My questions concern the scope and implementation of this transparency requirement:

1.) Does a regulatory settlement with NRED constitute a “civil action” under this statute, thereby, triggering the mandatory disclosure provisions?

2.) What constitutes adequate disclosure of “terms and conditions”? Must this include all financial details, underlying violations and related legal costs incurred by the association?

3.) Given that the statute prohibits settlement terms “that would prevent the executive board from complying with the provisions of this subsection,” what remedies are available to homeowners if the board fails to provide complete disclosure?

4.) Should disclosure include not only the settlement amount but also legal fees expended in defending the association during the regulatory proceeding? The board did not mention or inform homeowners of any of this NRED activity at our May 20 meeting or our July 24 meeting, and homeowners seek to understand their rights regarding transparency and accountability in this matter. Our board has had “total silence” on this subject, even when they were asked to include this topic as an agenda item in our meetings. Your perspective on the practical application of NRS 116.31088(4) in regulatory settlement contexts would be invaluable.

Thank you for your time and expertise in addressing these governance transparency issues.

A: A regulatory settlement can be considered a type of civil action, though it is not always a direct lawsuit. Regulatory settlements are agreements between a regulatory body and an entity, your association, to resolve a dispute, after an investigation or enforcement action. While they may not always involve a formal court filing, they often have legal force and can be enforced by a court.

Regulatory settlements can take various forms including a consent decree, which is a court-ordered agreement that resolves a dispute and is enforceable by the court. Consent orders are administrative agreements that may not be filed in court but are still enforceable.

Much of the information and details you are seeking most likely is public information and can be obtained directly from NRED.

Under NRS 116.31083, board meetings, section 7 and 7f require the board to review, at a minimum at least once a quarter, not less than once every 100 days, the current status of any civil action or claim submitted to arbitration or mediation in which the association is a party.

Since the association’s case with NRED is probably public information, your association should have reported it to its members.

Barbara Holland, CPM, CMCA, AMS, is an author, educator and expert witness on real estate issues pertaining to management and brokerage. Questions may be sent to holland744o@gmail.com.