Homeowners can pull together to reduce plumbing bills

Q: I would like to know the procedure for recovering expenses due to a serious sewer problem that I consider to be lack of maintenance by the homeowners association where my property is located.

This problem has occurred often during the last six years. In the past, I have prevented major problems by watching for signs of an impending backup and notified the management for cleanouts.

This problem recently escalated into a major flood as the sewer backed up inside the property. The monetary cost of cleanup and repairs was more than $6,000, not to mention stress to my renter and myself. I am a disabled veteran with a fixed income, and my wife only works part time. We cannot afford $6,000 dollars every time the sewer backs up. The association advised me it is not its fault because the backup occurred inside the property.

I have an end unit that seems to be connected to a catch-all in the sewer line and any problems in other units naturally cause a blockage in my unit. I do have the property insured for the tenant, but I was informed by them that coverage does not include sewer backups. I do not know where to start with recovering the expense of this disaster. Can you please help? Any suggestions would be appreciated.

A: You sent me copies of your homeowners association newsletters and governing documents. The newsletters report a number of resident sewer backups and reminds owners to not put grease or solid items down their drains. Plumbing stoppages within the homes is the homeowner's responsibility. Information is provided as to a recommended plumbing company. In addition, one newsletter states that if it is determined that it is an association responsibility, the homeowner may request a refund from the board.

The association is responsible for backups past the main cleanout. Anything from within the home is the homeowner's responsibility. Plumbing problems in high-rise properties, condominiums and townhouses are a community manager's nightmare.

The association cannot easily control what actions are taking place within a home that will cause sewer backups that may impact multiple owners.

Owners have to rely upon the opinions of the plumbing company as to whether the sewer backup should be the responsibility of the association. Time is lost when the board and the manager confirm who is responsible before any money is refunded to an owner.

Owners need to review their covenants that include sections pertaining to maintenance issues. Your covenants do not specifically state that the association has any responsibility as to sewer backups. In fact, it states the owners shall maintain the improvements except the exterior walls and the roofs. Section 16 is even more explicit as to the owner's responsibility for the sewer as to repairing, maintaining and replacing it.

You can engage in a contract with a plumbing company so that your line is serviced on a regular basis. In many cases, quarterly servicing would be sufficient. If this sewer backup problem is consistent and widespread, impacting multiple owners, the homeowners may need to strongly voice their opinion that the association investigate the possibility of cleaning the lines past the main cleanout on a regular basis.

Obviously, this becomes a financial issue at a time when associations are having difficulties in collecting assessments, but if there is enough momentum and pressure from the homeowners, the board could be motivated to investigate options as to how to better control the problem and assist the homeowners.

The board could contact different plumbing companies and attempt to negotiate lower rates for service calls, or attempt to negotiate a quarterly cleanout program on behalf of the owners, whereby the plumbing company would charge individual homeowners. For example, if 20 owners engaged in this quarterly sewer backup program, the plumbing company would charge a discounted price because of volume. The more owners who sign up for the quarterly program, the lower the cost to everyone. By negotiating some deal for the homeowners, the board could be alleviating some of the headaches, inconvenience and expenses for its membership.

Q: What are the current NRS 116 regulations pertaining to associations and banking institutions? Can an association invest its reserve money in an out-of-state bank or to a credit union? What is your opinion of lending institutions that are enticing depositors with interest promotions greater than the average interest of 1 percent, such as interest rates of 3 or 4 percent.

A: NAC 116.395 regulates the board of directors with respect to institutions holding associations' funds. First, the institution must be authorized to do business in Nevada, or has consented to the jurisdiction of the courts of the state. The financial institution must insure the accounts either through Federal Deposit Insurance Corp., National Credit Union Share Insurance Fund or Securities Investor Protection Corp., a private insurer approved pursuant to NRS 678.755 or government securities that are backed by the U.S. government. (NRS 678.755 pertains to the approval of private insurers by the state). The funds must be insured 100 percent at all times.

Generally speaking (especially in this economy), if a bank is offering 4 percent interest on reserves, then that is a pretty good indication that the bank is having problems and needs to increase its cash on its balance sheet. Right now, banks loaning mortgages on homes are not too much higher than 4 percent, so it does not make much financial sense to pay out in interest earned almost the amount of money being received from mortgage interest payments.

My recommendation is to suggest to the board to have a financial adviser review the funds and help the board determine its best options, knowing the board has a major fiduciary responsibility to protect those funds on behalf of the owners.

Q: I have a question about delinquencies. Can you give me the calculation as to what percentage of the delinquencies are allowable, and to what income figure. In other words: Our delinquencies should be a percentage of what and what is that percentage?

A: Delinquencies become a problem when you cannot pay your bills; when you cannot provide the services your association is required to perform; and when you cannot properly fund your reserve account. That dollar figure is different for each association. Besides the current delinquencies, a number that you should be looking at on a regular basis is how much money the association is writing off as bad debt each month, quarter and year. Right now, the economy in Southern Nevada has taken its toll on associations' balance sheets. In past years, many association managers did not want to see any delinquencies greater than 5 percent.

Q: Concerning NRS 116, were there any other special rules made for communities with less than 12 units? If so what were they, and where can I find those special rules within 116?

A: SB 204 was the only bill that mentioned 12 units. Section 32 stated that an association must be organized no later than the date the first unit in an association is conveyed, amending NRS 116.3101.1. Under subsection 3, the following was added: "Except for a residential planned community containing not more than 12 units, the association must have an executive board.

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.