HOA fee issue fades away in final hour

CARSON CITY -- After four months of lobbying, hearings, amendments, wrangling, horse trading and fiery floor debates, the biggest homeowners association bill of the Nevada legislative session got "postponed to a later agenda" with minutes left before the final gavel fell.

When clock struck 1 a.m. Tuesday -- the constitutional deadline for ending the session -- the agenda never came.

The delay was a humane way to kill the bill governing collection costs -- a holy grail wrangled between collection agencies and investors who both stand to gain in Nevada's dismal real estate market -- before a vote would have divided Democrats in the session's final critical moments.

"It would have helped associations tremendously. It would have lowered the cost of collection for investors. It had good things in it for all the parties," eulogized Kevin Wallace, president and CEO of RMI Management LLC, Nevada's largest property management company. His group manages 90,000 properties and 280 homeowners associations, and owns a collection agency that serves most of those associations.

Opponents of the bill were jubilant.

"This really was the collection industry bill to keep themselves alive and raking in millions of dollars on the backs of people who have been foreclosed," said James Adams, a lawyer representing investors who want to rein in collection fees that end up in liens.

Sen. Michael Roberson, R-Las Vegas, called the measure "probably the worst bill I saw all session."

He said the bill was harmful to consumers and homeowners.

"The only thing this bill was good for was attorneys, collection agencies and association management companies," Roberson said.

Homeowners associations -- where residents pay monthly dues to maintain common amenities such as pools and landscaping -- were lightning rods during the legislative session, evidenced by the 20 bills introduced on the topic. But the recent foreclosure crisis added fuel to the fire in homeowners associations, which are especially widespread in Las Vegas' relatively new neighborhoods. As more and more homes were repossessed, associations were unable to collect dues to maintain landscaping and common buildings, and collection agencies stepped in to help.

Homeowners who fell behind on their monthly dues often found an obligation of a few hundred dollars balloon into thousands because of collection fees. The agencies charged hundreds of dollars for tasks such as sending a notice of default.

Unpaid homeowners association dues land in a super-priority lien that must be paid off first when a foreclosed home is sold. The bill would have added collection fees and "reasonable attorney's fees" to the lien, codifying something that is common practice but is actively being challenged in court.

Anyone who buys the home must pay the lien, but investors who buy multiple foreclosures and "flip" the homes are disproportionately affected by the extra costs.

"This is a dangerous bill for Nevadans with big benefits for collection agencies and without a commensurate benefit for HOAs," Chris Ferrari, lobbyist for Concerned Homeowners Association Members Political Action Committee, testified at a hearing Sunday.

Bill sponsor Allison Copening, D-Las Vegas, had acknowledged that collection agencies have abused consumers with exorbitant fees, and said one of her goals was reining in those abuses with a $3,300 cap in the bill.

But she said HOAs still need the teeth to collect delinquent dues so other, responsible homeowners in the association don't have to shoulder the costs of their neighbors.

As legislators head home from the session and the bill lies in a legislative graveyard, a morass of expensive lawsuits on the topic is still alive.

Both sides say they have court rulings on their side. Investors cite a recent one in Las Vegas' 8th Judicial District Court that ruled a super-priority lien can be no bigger than the cost of nine months of HOA dues.

But it will take a Supreme Court ruling to end the raging battle. Bill supporters say they don't know what will come first: A high court decision, or the 2013 legislative session -- perhaps with another 20 bills on the topic.

"It would have gone a long way to putting it to rest," Wallace said of the hard-fought bill that's now dead. "It will be much more difficult to put it to rest."

Review-Journal writer John G. Edwards contributed to this report.