New law will affect area homeowners’ associations

Editor's note: Barbara Holland takes a break from her question- and answer-format to talk about the recent legislative session. This is the second column in a special three-part series.

One of the major bills that was passed in the 2011 legislative session was SB 204, as a result many changes were made to NRS 116.

The first change allows a unit owner to inform the homeowners association as to whether he or she would like to receive notices either by mail or by electronic.

If a unit owner does not designate how notices should be delivered, the association has the choices of sending them by hand delivery, by U.S. or electronic mail and any other reasonable method.

What makes this section of the law more significant is the inclusion of the following which states "the ineffectiveness of a good faith effort to deliver notice by an authorized means does not invalidate action taken at or without a meeting."

The provision of this section of the law does not apply to sections NRS 116.3116 to NRS 116.31168, which pertains to liens and foreclosure actions by the association.

Another important section pertains to associations where substantially all the units have been destroyed or are uninhabitable. It addresses the methods for giving notice of a meeting to consider termination under NRS 116.2118. The board or any other person holding an interest in the association may commence an action in district court to terminate the association.

The court may take any action including the appointment of a receiver. After a hearing it may terminate the association, or reduce its size or issue other orders it considers to be in the best interest of the unit owners.

Section 5 of the bill provides for indemnification of a board member. It is basically word for word of an existing section of NRS 116.31036 subsection 3.

Section 6 of the bill requires equal time if an official association publication contains any mention of a candidate or ballot question.

The publication must, upon request and under the same terms and conditions, provide equal space to opposing views and opinions. Again, this part of the new law is exactly the language already found in NRS 116.31175 subsections 6, 7, 8 and 9.

What is new to this section is that if an association has a closed-circuit TV station and the station interviews or provides time to a candidate or a representative of the association that supports the passage or defeat of a ballot question, the station must under the same terms and conditions allow equal time for all candidates or a representative of an opposing view to the ballot question.

Section 30 subsection 6 was a significant change to NRS 116. It states that an amendment to the declaration that prohibits the uses of a unit may not be enforced against original unit owners.

As an example, if the association were to pass an amendment to the covenants that would prohibit pets, the amendment would not apply to those owners who owned their units at the time that the amendment was recorded.

Subsection 8 states that if consent is needed by the lender pertaining to an amendment to the declaration, consent is deemed to be granted if the lender has not requested in writing notice of the proposed amendment. It is also considered granted, if a written refusal to consent is not received by the association within 60 days after notice has been sent by certified mail.

This will greatly help associations that were passing amendments that required the lenders to vote upon those amendments.

Section 33 of this new law changes the equal enforcement of the association's governing documents.

Whether this section will turn out to be a nightmare or not will remain to be seen over the next two years. The law states that a board may determine if it wants to take enforcement action against a homeowner either for unpaid assessments or for violations.

The board does not have a duty to take enforcement action if it determines circumstances do not justify taking any action, or that the covenant, restriction or rule is or likely to be construed as inconsistent with current law.

The board does not have to take action if it determines that the violation, that may exist or may have occurred, is not so material as to be objectionable to a reasonable person, or to justify the expending of the association's resources, or is not in the association's best interests.

Finally, the fact that the board may not pursue enforcement of one set of circumstances does not prevent the board from taking enforcement action under another set of circumstances, but the board may not be arbitrary or capricious in taking enforcement action.

This section of the law could turn out to become the "full-employment act" for attorneys.

It turns the clock back. The equal enforcement provision was passed because of complaints by homeowners to the Legislature that boards were acting subjectively and not objectively in dealing with homeowner issues.

As a manager of associations, this change in the law can be a positive one as it allows for flexibility in the decision-making process by the boards but at the time, it calls for caution and objective thinking.

The board will need to be able to rationally explain why an action was or was not taken if challenged by a homeowner.

Section 34 adds to the fiduciary responsibility of officers and members of the board to include the conflict of interest rules governing nonprofit organizations under the laws of this state. The law already states that board members are to exercise the ordinary and reasonable care of a nonprofit corporation, subject to the business-judgment rule.

There had been some issues pertaining to the construction penalty that was addressed with the passage of this bill. The association has to include a notice of the maximum amount of the construction penalty and schedule as part of any public offering statement or resale package.

Consistent with the notification laws, the new law states that if the association adopts a policy imposing fines for any violations that the homeowners are to be sent a copy of the fine schedule.

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.