Lawmakers should focus on healthy HOAs

As the 2011 Legislative session raced to its conclusion, we are again reminded of the old adage that politics is like sausage -- if you like it, you shouldn't watch it being made.

For years, the homeowners' association industry has complained that legislation affecting the operation of HOAs was based on unverified, isolated incidents, rather than issues that affected large segments of the industry. The result has been increased regulations and higher assessments for responsible homeowners who regularly pay their bills.

This session, for the first time, a legislator took a more informed approach. Beginning well before the start of the session, Sen. Allison Copening, D-Las Vegas, formed a task force to investigate what legislation was needed in regard to common-interest communities. The task force consisted of stakeholders from all facets of the industry: homeowners, managers, attorneys, accountants and legislators. The group was broken down into smaller working groups, which each considered different portions of Nevada Revised Status 116, which govern the HOA industry.

Based on the findings of the task force, Sen. Copening introduced several pieces of thoughtful legislation. Among these were SB 174 and SB 254.

A HOA is limited to a collection of nine months in assessments, whereas government liens are unlimited. The Commission for Common-Interest Communities conducted an investigation for the Legislature and produced regulations that specify reasonable costs. SB 174 would have capped collection fees at $1,950 and expressly allowed associations to recover those costs as part of their super priority lien.

SB 254 revises mediation procedures and fees for HOAs and homeowners to resolve disputes. It limits lawyers' fees and immediately refers a complaint to mediation rather than arbitration. The cap set in place limits fees to $225 an hour for mediation compared to the usual rate of $300 an hour, and does not allow arbitration fees to go any higher than a flat $1,000.

Unfortunately for the responsible homeowners who pay their assessments every month, a new stakeholder emerged this session.

Some investors seeks to purchase foreclosed properties at bargain basement prices and resell them in the short run for a quick profit. This process is commonly referred to as "flipping."

These investors formed a political action committee called CHAMPS, and they attacked any legislation that could possibly affect their lucrative business. Chief among these was Sen. Copening's bills, which introduced practical, thoughtful ideas meant to set a balance between the homeowner and HOAs.

For years, homeowner associations have been able to recover collection costs and a portion of the unpaid assessments even after a bank foreclosed. Without this ability, costs must be passed on to the responsible homeowners, raising their assessments.

Although some of Sen. Copening's bills did pass, much of the needed legislation fell victim to the attacks. Hopefully, in the off legislative year, the discussion can continue, with the interests of each stakeholder clearly identified. Talks should focus on the health of our HOAs and the interests of responsible owners.

Paul Terry Jr. is the president-elect of the Community Associations Institute, a national membership organization for HOA management companies, volunteer board members and other professional service providers and business partners. He can be reached at pterry@angius-terry.com.