Collecting and paying debts concern homeowners in HOAs

Q: When an account is charged to bad debt expense, are the owners entitled to know the name, unit number and amount of the debtor? If not, then how may the owners learn if the board of directors is performing its fiduciary duty to try to collect assessments?

A: Because of the privacy laws, the homeowners' association would not be able to reveal this information.

The generic information can state about the number of courtesy letters and final letters sent as well liens, notice of sale and bankruptcies. For each category, the management company could state what is the total balance. Also, many of the collection companies send a summary by month, month-to-date, amount sent to collections, how much was received and other information.

What is important to remember if the association started foreclosure in January and then the bank filed foreclosure of the property in May, (the lending institution's debt is the primary debt), the association's foreclosure process would come to a halt until either the homeowner became current with the bank or the bank completes the foreclosure. A particular home could be in foreclosure for more than one year because the bank would have to follow the same time line as the association. So if the bank began its foreclosure after the association had filed, the foreclosure process would continue into the new year.

Q: Does NRS 116 address how many assessments a homeowner would have to be delinquent on before the HOA could legally take that homeowner to a collection agency? I was one payment in arrears and was taken to a collection agency and a lien was recorded. I could not find anything in NRS116 or in my covenants, conditions and restrictions or my bylaws.

A: During this past legislation, AB350 amended NRS 116.3115 by stating that any past assessment that is more than 60 days or more past due bears interest at a rate equal to the prime rate at the largest bank in Nevada ascertained by the Commissioner of Financial Institutions on Jan. 1 or July 1. As far as the state is concerned, a past due assessment can not be charged interest until it is 60 days late. It can be construed that the state law suggests that a homeowner is not delinquent until after 60 days but it is silent as to when the foreclosure process should begin, other than sending out the notifications.

One of the other requirements in the new laws passed this legislative session amended NRS 116.31151 by stating that associations must adopt a collection policy and distribute it annually to owners. (from AB 204), effective Oct. 1, 2009. The reader should ask the association to send him a copy of its policy. Some associations have developed more stringent foreclosure regulations.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. To ask her a question, e-mail support@hlrealty.com.