New laws passed concerning rights of homeowners associations

EDITOR'S NOTE: Barbara Holland takes a break from her usual Q&A format to address some timely issues.

In response to many readers' questions about the legal rights of homeowners associations, the following laws were passed to help bring some relief to communities:

This past legislative session, there was a proposed law to NRS 116 that would have extended the existing super lien from six months to 24 months in recognition of the financial crisis affecting homeowner associations. The proposed law to NRS 116 was amended and was passed. When a property is foreclosed upon by a lending institution or if a short sale is transacted, the lending institution or the new buyer would be obligated to pay nine months of the back assessments owed to the association from the previous owner, (NRS 116.3116.2c).

In addition, a second NRS 116 law was passed that created a super lien for the maintenance costs expended by the association on homes that were not maintained.

If, for example, after due process, a homeowner did not maintain his or her front landscape, the association could authorize its landscape company to maintain the front landscape. The association would then have a lien placed upon the home, because by law the lien is a super lien, once again whether it be a lending institution or a new owner, either would have to reimburse the association the cost of the maintenance of the property (AB 361 sections 4-5).

NRS 116.345. 4 allows an association to disrupt the utility service of a homeowner who is delinquent in that portion of the dues that pays for the utilities (again following due process). The law requires the homeowner to pay for that portion of the dues that are applied against the utility service, such as water, which in turn would require the association to activate the services to the home, even if the homeowner has a balance in assessments that are applied to other operating services of the association.

Associations have explicit governing documents pertaining to the payment and the collection of assessments that each homeowner agreed to abide by when purchasing a home within an association. The community has a legal and fiduciary obligation to the membership at large to collect the monthly assessments in order to fund the operating and reserve accounts. Homeowners in most cases have an opportunity to work a payment arrangement with the collection company, which then will send the arrangement to the management company and the HOAs board of directors to review, approve, modify or reject the plan. Most boards will accept a payment plan that is reasonable as long as the homeowner properly pays his or her assessment per the payment plan. It should be noted that boards are under no legal obligation to accept a payment plan.

A recent newspaper article discussed the affects of the recession upon associations that are having difficulties in meeting their financial obligations. In some cases, associations may have to file bankruptcy, for other associations major services have been temporary discontinued or decreased such as pools, security, janitorial and landscape, etc. There are associations right now that do not have the funds to even repair or replace roofs (and we have encountered more rain this year than all of last year). It is not fair to the paying homeowners to pay for special assessments or midyear increases in assessments in order to meet these obligations because the owners who are not paying their fair share.

It is not a question of empathy for one single homeowner. It is a question of empathy for the homeowners at large.

It is a question of fairness in the enforcement of the covenants of the association of which the payment of assessments is one of the most critical covenant. All of us who manage or serve on boards truly understand that times are tough; we as individual people have our own financial issues. Some of our employees and directors who work or live in communities have lost their homes or their spouses have lost their jobs or have significant reduced work hours. We have family and friends who are suffering during these times.

There is a deep feeling of anger and resentment in our state and in our country. There is a growing backlash that our political leaders need to recognize and respond with positive programs.

Where are the programs for homeowners who actually pay their mortgages each month on time that would allow them to benefit, not for a loan modification, but just to have their interest rates reduced? Why are the people who are in foreclosure are the only homeowners who have an opportunity to modify their loans to the point where their principal loans may even be reduced?

As much as people want to be sympathetic for those who have lost their jobs and are losing their homes, it is taking a major emotional and financial toll on those homeowners (and taxpayers) who are funding the bills and their sympathy and tolerance are at an all time low.

During the first week of May, I will be in Washington, D.C., along with other managers throughout the United States, meeting our congressional delegates. If any reader would like me to bring an e-mail or letter to our congressional delegates, please send it to me.

Barbara Holland, CPM, and Supervisory CAM, is president of H&L Realty and Management Co. To ask her a question, e-mail support@hlrealty.com. To view a power-point presentation of the new laws that were recently passed affecting HOAs, visit hlrealty.com, click on press release button on the left side, then click on article title, "The 2009 Legislation for common interest communities."