HOA board members should disclose conflicts of interest

Q:As a homeowner, do I have the legal right to request and expect from my homeowners association, a copy of their financials, a list of companies in their employ, such as management firms, landscapers, lawyers, collection agencies, trust companies and any affiliations (personal and business). I'd also like to know if board members, their families or friends/acquaintances may stand to gain from those affiliations. Are there statutes that mandate an arm's length relationship between HOAs and the businesses they employ?

Do I have a legal right to gain access to the books: to know how much money the community has, where that cash comes from, how it's spent, etc? Are there rules governing use of funds, how much the HOA can have on hand at any one given time, laws portioning out how percentages need to be spent?

Can I view the bylaws that are bound by Nevada law? How do I gain access the history of my HOA and its board of directors' lineage?

A: You have the right under state law to receive copies of the financial report from your association. It can provide a profit and loss statement as well as listing the balances of all financial accounts, amount of money owed by delinquent homeowners and a total of delinquent accounts and how many are being foreclosed upon by the bank or by the HOA. It cannot give you the names or addresses of these owners because of the privacy regulations.

The association can provide you with the list of the contractors or vendors that service the community.

As far as conflict of interest issues, when a member of the association decides that he or she would like to run for a board position, the member is required to complete a candidate application form that includes a section pertaining to conflict of interest.

The member is to make a good faith effort to disclose any financial, business, professional or personal relationship that would result, or would appear to a reasonable person to result, in a potential conflict of interest for the candidate.

Even if the member does not disclose his or her conflicts of interest, there is no legal penalty, the member can still run and be elected.

You could ask your association to send you copies of the candidate application forms that were published in the newsletters when the current board members were originally candidates for directorship positions.

Some of these forms may be in archives and not readily available. You could be charged a fee to obtain that information.

Section 116.31084 of the Nevada Revised Statutes states that if a board member stands to gain any personal profit or compensation from a matter to be decided by the board, that member is to disclose the matter to the board and is to abstain from voting on the matter. The law states that a member of the board, who has a member of his or her household, or any person related by blood, adoption or marriage within the third degree of consanguinty or affinity who stands to gain any personal profit or compensation from a matter before the board, should disclose the matter before voting.

NRS 116.31187 prohibits a director from entering into a contract with the association. For example, you could not own a landscape company that services your association if you were a board member.

What is required is full disclosure. For example, if the management company wants to use one of its subsidary companies to do the collections for the association, it can as long as there is disclosure and that the association agrees to the contract.

Under NRS 116.31083, you have the right to obtain copies of the minutes of the meetings with the exception of the executive meetings where the board presides over hearings. There is no charge for electronic copies but the board/management company can charge you for copying of them.

According to NRS 116.31175, upon written request to the association, it is to make available the community's books, records and other papers for review, as well as all contracts. This does not apply to the personnel records of the employees of the association, except for those records that relate to the number of work hours, salaries and benefits.

The law does not include the records relating to another unit owner. The association must maintain a general record concerning violations of the governing documents with descriptions of the general nature of violations, but must not contain the name of the unit owner or any address.

The association can charge $10 per hour to review the books, records and contracts, etc. The cost is 25 cents for the first 10 pages and 10 cents per page thereafter.

Under NRS 116.31177, the association has 14 days from the date of the request to provide the information. To expedite your request, you need to be specific as to what you want to review.

As to how money is spent each year, you should be receiving a copy of the proposed budget, which is ratified or rejected at a meeting of the homeowners. In order for a budget to be rejected, a specific percentage of homeowners must vote to reject the budget as required in the association's governing documents. If there is no quorum, the budget by default is approved per state law. There is no law as to how the funds are used, as the expenditures should be reflected of the approved budget (NRS 116.31151).

In addition, there is no state requirement as to how much money the association can have at any one given time, or laws outlining what percentages need to be spent. The law does require that the association fund its reserve account based upon a reserve study, which must be updated every five years (and is one of the documents you can have a copy, NRS 116.31151.)

NRS 116.3114 pertains to surplus funds. Any surplus funds remaining after payment of or provision for common expenses and any prepayment of reserves must be paid to the unit owners in proportion to their liabilities for common expenses or credited to them to reduce their future assessments.

As a homeowner, you should have received copies of the governing documents when you purchased your home. Those would have included the articles of incorporation, covenants, conditions and restrictions, bylaws, rules and regulation.

Upon request, you can obtain them from the association, which has the right to charge you for the copies. Associations must follow the laws under NRS 116 as well as their governing documents.

Not every single section of NRS 116 is required of an association. There are sections of the law that refer back to the association's governing documents. There are other sections that override an association's governing documents.

The minutes of the meetings, board and annual meetings, of the homeowners and information obtained from the secretary of state, along with the various association record would provide you with the history of your association.

Some associations have better records than others depending upon whether the association was self-managed or if the association has multiple management companies over the years.

Technology has made information more available, but if you are looking to go back many years ago, the information will be more difficult to obtain.

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