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HOAs not required to carry flood insurance

Q: Does our homeowners association have to furnish flood insurance for condo and town houses?

My condo was hit by a flash flood on Aug. 1, and we had 1.34 inches of rain in 38 minutes. I hired a remediation company.

I was informed our HOA fire and casualty company does not cover anything and my insurance does not cover either.

Is it true that our HOA company has no requirement to cover such a flood? My condo was hit by a flash flood in 2003 when it was being built. I have no drainage around three-quarters of my building.

I need your expertise.

A: Nevada Revised Statutes 116.3113 does not require associations to buy flood insurance. You can contact the Regional Flood Control District, which can tell you if your home is in a designated flood zone. Personal insurance can be bought through the national flood insurance program. If your association was in a designated flood zone, your association would need this insurance. Also, your mortgage company could also require it from you.

Q: Our HOA board violated our covenants, conditions and restrictions. I have a few questions with details as follow:

1. Our HOA board intentionally violated our CC&R governing document. Misused HOA funds (as we believed). The board should know our CC&Rs.

According to NRS 116 all board members must fully understand the CC&Rs and other HOA governing documents and should have with a signed copy in the HOA record file. Our HOA CC&Rs were recorded on Nov. 11, 1981, with the auto-renewed until 2031.

2. Our new board has three members with two vacancies since February. A new property manager started on Feb. 1.

3. In our HOA CC&R page 10, paragraph 5.7 “Improvements” clearly stated:

Provided that the associations shall not include in any assessment, annual or special, the cost of any new capital improvement, which exceeds $1,000 in cost to be expended in any one calendar year, unless 51 percent or more of both classes or members previously have approved said expenditure.

Our HOA has only one class of voting members. According what the property manager sent to me, the total cost for the gate contract is $47,643. That new gate is a new capital improvement item, which exceeds $1,000 in any one calendar year.

4. During the period between Feb. 1 and Aug. 12, none of the voting members has ever received any notice or letter, and/or voting ballot to be voted on the new “capital improvement” — the gate. All HOA homeowners were kept in the dark and had no clue about the gate in the parking lot. However, on July 27, all of a sudden workers started to install the metal posts for the gate in the HOA parking lot. The gate contract with the vendor was ratified during the May 23 board meeting.

Therefore, the board and/or the property manager has committed a serious violation, according to page 10, paragraph 5.7 “Improvements.”

Because all HOA homeowners were kept in the dark and had no clue about the gate installation, perhaps the board and/or the property manager intend to get around our CC&Rs. I believe they misused our HOA funds without the approval of HOA voting members.

Q: Doesn’t that fall into the definition of conspiring to commit “fraud?” That is a criminal offense. Can the HOA homeowners file a complaint to the Nevada state attorney general to investigate this?

A: Let me take these questions one at a time as you have them listed:

1. Per NRS 116.31034 (19) each member of the board, within 90 days after his or her appointment or election, is to certify in writing to the association, a form prescribed by the Nevada Real Estate Division, that the member has read and understands the governing documents of their association and NRS 116 chapter to the best of his or her ability. Unfortunately, this is one of the “good feeling” laws that legislators passed some years ago. Unless you tie in mandatory training to be eligible to be on the board, the average director would need educational assistance.

2. Not everyone wants to serve on an association board. If you cannot obtain additional members or have a quorum, your association could face receivership, a decision that could be made by the Nevada Real Estate Division/Commission.

3. Without reviewing your governing documents, it would appear the homeowners would need to approve this expenditure if the gate is an addition to the association’s amenities and not a replacement of an existing gate.

4. This would not really be a criminal offense but more likely a civil offense for failing to follow the governing documents for improvements. A complaint could be filed with the Nevada Real Estate Division. You would need to contact them.

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

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