Last-minute changes made to new laws affecting HOAs

Editor's Note: This column will take a break from its usual format, to allow Barbara Holland to present a four-part series on the recent laws affecting area homeowners associations.

The legislative session is now over and many new laws have been passed. Unfortunately, many changes were made behind smoked-filled conference rooms without public comments.

It is ironic how the Legislature wants association boards to have complete open meetings for their members, and yet the final versions of bills are the result of negotiations and deals.

Assembly Bill 350 is one of these "life-after-death" pieces of legislation that has created many changes in association management and amended NRS 116.

Section 1.7 states that an association may charge reasonable fees to cover the cost of collecting any past due amounts. However, the new law authorizes the Common-Interest Community and Condominium Hotels to adopt regulations establishing the amount of the fees that an association may charge regardless of what is currently stated in the covenants.

This new law will apply not only to the association, but also to the collection agencies that are engaged by them.

The law defines what constitutes the cost of collecting, which includes collection, filing, bankruptcy search, title search lien, referral and preparation fees; recording or delivery of a lien, lien rescission, postage, investigation and enforcement.

The term does not include any costs incurred by the association if a lawsuit is filed to enforce any past-due obligation or any costs awarded by the courts.

NRS 116.31031 (8) is amended and states that any past-due fines must not bear interest, but may include the cost incurred by the association during a civil action to enforce the payment of the past-due fine.

NRS 116.3108 (3a) is amended and now requires an association, if requested by a homeowner, to send the minutes or the summary of the minutes in electronic format at no cost to the owner. If the HOA is unable to provide minutes this way it can provide paper copies, at a cost not to exceed 25 cents per page for the first 10 pages and 10 cents per page thereafter. (The same language is found in section 6 of NRS 116.3108 and also in NRS 116.31083 (4a) and (7).

NRS 116.31083 states that board meetings must be held every 90 days and must be held at a time other than during standard business hours at least twice annually.

NRS 116.31151 (2a) originally allowed, an association in lieu of distributing copies of the budget, to inform owners that it is available for review at the association's business office.

This section of the law sensible and most associations mail their budgets to the homeowners in the first place, so it really impacts very few.

However, the second part of the law has some serious problems. It now stipulates the location of the business office cannot exceed 60 miles from the physical location of the community. Now this is a real issue, especially in the rural locations where a professional management company may not even exist.

NRS 116.31183 subsection 2a and b are new additions to the law. The first part of the existing law states that an association board or agent shall not take any retaliatory action against a unit owner who has complained in good faith about any alleged violation, or who has requested to review association records.

Also, the new law states that in addition to any other remedy provided by law, a unit owner may bring a separate action to recover compensatory damages and attorney fees and costs of bringing the separate action.

NRS 116.4103 (1k1) has been added to the public offering statement and requires a home developer to provide the homebuyer with more information.

A statement is to be included describing all current and expected fees or charges for each unit including fees, fines, assessments, late charges, penalties, interest rates on delinquent assessments, additional costs for collecting past due fines and charges for opening or closing any file for each unit.

This section of the law is repeated again in NRS 116.4109 and is part of the resale package when a homeowner is selling his home to another homeowner (1f).

The other changes that were included by amendment during the conference committee pertained to the management agreement.

Most of the sections are already part of NAC 116 regulations and have been in existence for quite some time. By adding these sections to the law, the only way to change any of the sections is through legislation (unless a court of law claims that it is unconstitutional). The Common-Interest Community and Condominium Hotels lost some of its authority when these sections were included as regulations cannot be modified when conditions warrant change without waiting for another legislative session. Some of the new requirements pertain to insurance coverage for the community manager. Another problem with some of the laws' verbiage is that it uses manager and management company as interchangeable terms.

Here are some of the new additions to NRS 116A and NRS 116B:

* The community manager will disclose any material or relevant information that he or she knows, or should know, relating to the performance of the management agreement, and his or her ability to comply with the laws in a written statement.

* The manager and his or her associates will disclose any direct or indirect compensation, gifts or profits they have received. They also will identify all service persons and the nature their services.

* Manager will disclose any affiliation with or financial interest in any person or business that furnishes goods or services to the association.

* The community manager will disclose any pecuniary relationships with any unit owner, or member or officer of the HOA board.

* Management agreements will be in writing, and signed by all involved parties. They will state the terms, basic consideration of services and payment schedule. These may include startup costs, special and non-routine services, reimbursable expenses, fees for the sale or resale of a unit. The written agreement would also relate to setting up an account of a new member and explain the portion of fees that are to be retained by the client and by the community manager. This is an example of one of the flaws of the current law as the contract is generally with the company and not with the individual community manager, unless self-managed and the association hires a community manager.

* Manager will state the identity and the legal status of the contracting parties. He or she will state any limitations on the liability of each contracting party.

* The association will include a statement describing the scope of work of the community manager. It will also state the spending limits of the community manager. It also will include grounds and procedures of termination of the community manager

* Management must have insurance coverage for errors or omissions, professional liability or surety bond in the amount of $1 million or more. Again, this is where the Legislature does not understand insurance matters as most community managers would not qualify to obtain such insurance. It is the kind of insurance that a company maintains on behalf of their employees including the managers. This is an indication of who will maintain fidelity bond coverage (not unusual for both the HOA and the management company).

* Manager must provide a statement of who maintains the directors' and officers' liability coverage for the board. Again, this shows the lack of knowledge by the Legislature as only the HOA can maintain this coverage.

* The manager must include provisions for dispute resolution.

* The manager must acknowledge that all records and books are the property of the HOA. This includes everything except proprietary information and software belonging to the community manager.

* State location of office must be within 60 miles of the physical location. Since this is law, the commission cannot modify it and this could cause some problems with existing contracts.

* New laws affect frequency and extent of the regular inspections.

NOTE: If you would like more information and a my full opinion on these bills, e-mail me at support@hlrealty.com.

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q.&A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759, or she can be reached by e-mail at support@hlrealty.com.