The Nevada State Supreme Court made a ruling last week pertaining to a bank’s obligation to pay the nine-months superlien to homeowners associations. The court’s decision focused on two questions: (1) Does the foreclosure of an HOA lien extinguish the bank’s lien and (2) Can the extinguishing of the bank’s lien be through a nonjudicial foreclosure.
The court ruled an HOA foreclosure does wipe out the bank’s lien. This should not be a surprise. Property law has always dictated that a senior lien will wipe out any junior liens. The nine-month superpriority lien is statutorily senior to the First Deed of Trust.
The court’s decision also stated that associations did not have to initiate foreclosure actions through the judicial court system since the Nevada legislature had specifically approved the nonjudicial foreclosure process (which by the way, lenders also are allowed to initiate foreclosures through the nonjudicial process).
The court stated that they saw no benefit to be derived by forcing all foreclosure actions to go through the judicial court system. In its decision, it was also noted that the banks receive adequate notices and warnings through the notice of default and notice of trustee sale, both of which are required to be sent to the bank before a foreclosure sale can proceed.
In its ruling, the court also decided that mortgage protection clauses that are included in many community rules are invalid and unenforceable because they are deemed to be in conflict with the express provisions of NRS 116.
More to come. Please note that this decision does not address the issue of whether the nine-month superior lien includes late, legal and collection costs.
Regardless, this decision is a big win for the associations. In essence, banks, in order to protect their deed of trusts, will start paying the nine-months’ superior lien to the associations which will certainly help associations meet their financial obligations.
What this means to associations? Do not let delinquencies go beyond nine months because the banks will only be obligated to pay nine months of HOA fees.
Could a bank have to pay nine months of fees more than one time for any given delinquent homeowner? The answer is yes, if that homeowner fell behind in HOA fees a second time. In this case, I would assume that the bank would take action against the homeowner.
Q: I’m on a board that will be displaying holiday lights on the community’s clubhouse and trees. We have a member who is Jewish and doesn’t want a white wreath put up — he says it’s celebrating Christmas. Most of us disagree with him.
We realize we can’t put up a Nativity scene or Christmas tree. But what constitutes “holiday” decorations/lighting without offending any religious group?
A: This is a no-win scenario. For many people, “holiday lighting” equates to “Christmas lighting,” without expressly saying “Christmas,” to make it sound politically correct. Holiday wreaths, mistletoe and Yule logs all have pre-Christian origins, but in a non-Christian’s eyes, they might be seen as Christmas symbols.
You will not please everyone. The Nevada Revised Statutes don’t cover this and the association is a private organization, not a public one. Your board will have to make a decision and hopefully offend the least amount of members.
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 the Association Q&A, P.O. Box 7440, Las Vegas, NV 89125. Fax is 702-385-3759, email is email@example.com.