State law does not allow HOAs to collect deposits from renters

Q: I have two questions. First, we are a homeowners association in a condominium development of nearly 400 units and have some of the same problems as most other developments have with unit owners who are delinquent in their HOA assessments. Some date back to more than three years.

We have discussed collecting rents from those delinquent units, however, our attorney has told us that foreclosure must take place first before we can collect rents from the units’ tenants.

Foreclosure is a long tedious process that can lead to many legal questions regarding HOA ownership versus bank ownership versus the first-mortgage owner’s rights.

I read your June 22 column with great interest. It covered going to small claims court or Justice Court civil division to attach the rent from delinquent units and to enable the HOA to collect rent and recover losses from these delinquent units. I saw nothing in your column about initial foreclosure on these units. If you have information, can you address that issue?

Secondly, we have received information that HOAs in other states are requiring homeowners who rent units to collect a deposit to be held in escrow by the HOA management company. If the renters violate the community’s covenants, conditions and restrictions, the fines can be deducted from the deposit.

As we know, in an apartment complex, you have a manager who runs background checks, financial checks, etc. on prospective tenants.

In condominium complexes, owners do their own thing. The HOA doesn’t know whether a unit is being rented, and if so, whether background information is, or isn’t, provided on the tenant. We have tenants moving in and out of our community, living here for a few months and then getting evicted because they did not pay the rent. While they are living here, they are causing all kinds of havoc, breaking rules, destroying property and causing grief to the homeowners, who have the right to enjoy their property in peace.

In your June 22 column, you mentioned Florida on another HOA matter. Florida is one of the states where this renters’ deposit requirement is used and enforced.

Our understanding is that there is not a law in any state that prevents an HOA from setting this as a policy before homeowners rent their units. Can you address this?

A: The answer to your first question is no, you do not need to initiate foreclosure to file a complaint with either the small claims court or the Justice Court civil division. You have an option — file a foreclosure action or file a complaint in either of these two courts. You are correct in your opinions of the increased complexity of foreclosing on homes because of the games investors and banks are playing.

As for your second question, Nevada Revised Statutes 116.335 subsection 4c states that associations “may not charge a fee to the unit’s owner for the registration or submission of information.”

It would appear that your association would be violating the state law if you were to assess unit owners a deposit even if the money was placed in an “escrow account.”

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. Fax is 702-385-3759, email is support@hlrealty.com.