HOA fee issue likely headed back to Nevada Supreme Court

Bloomberg News

A foreclosed home is shown in the Silverado neighborhood of Las Vegas.

The Nevada Supreme Court may soon be asked to weigh in again on the issue of past-due homeowner association assessments and fees levied against buyers of foreclosed homes.

Attorneys for the Southern Highlands Community Association, in a bid to short-circuit an existing class-action lawsuit over those fees, last week told Clark County District Court Judge Susan Scann that they will appeal one of her rulings in the suit.

The ruling at issue was favorable to investors in foreclosed homes and homebuyers suing the HOA over the fees.

The investors, represented by Las Vegas attorneys James Adams and Puoy Premsrirut, in recent years have sued hundreds of Nevada HOAs and their collection agencies in state and federal court and before the state Real Estate Division.

The investors’ attorneys claim HOAs and their collection agencies regularly file inflated liens against foreclosed homes to recover not just excessive past-due monthly HOA assessments that accumulate while the homes sit vacant, but unauthorized collection costs for those assessments as well.

The liens must be paid off for the investors and other buyers to obtain titles to the homes.

The investors claim state law and sometimes HOA governing documents limit the liens to an amount equaling six or nine months of assessments depending on the circumstances.

In one recent suit, for instance, the investors said a party purchased a home in Spring Mountain Ranch and was required to pay off an HOA lien against the home of $5,895. They said state law limited the HOA’s lien authority in that instance to $357, with the remainder representing an "unlawful lien amount."

The investors say this pattern of alleged overcharging has been repeated thousands of times at scores of HOAs, potentially subjecting the HOAs to significant damages.

Homeowner association and collection agency attorneys, however, insist that collection costs can be added to the six- or nine-month assessment cap and they say state courts have no business ruling on the investor and homebuyer lawsuits unless the buyers first arbitrate their disputes with the Real Estate Division.

They also say Nevada HOAs have faced budgetary problems because of the glut of foreclosures that left no one paying monthly assessments against vacant homes. They say that for financial reasons, the HOAs need to recover accrued assessments and collection costs from the buyers of foreclosed homes.

At least one judge in Clark County, Rob Bare, has sided with the HOAs on whether the disputes must be arbitrated at the Real Estate Division. He ruled against the investors May 14 in a suit against the Mountain’s Edge HOA.

The investors, in the meantime, have won District Court declarations capping the liens at six or nine months and/or certifying their lawsuits as class actions from Judges Abbi Silver, Elizabeth Gonzalez, Mark Denton and Scann in cases involving the Aliante, Horizons at Seven Hills, Peccole Ranch, Peppertree and Southern Highlands HOAs.

In the Southern Highlands case, its attorneys last week filed papers announcing their intent to appeal Scann’s ruling certifying the suit over the fees as a class-action.

''The association believes that the (district) court does not have jurisdiction to hear any of plaintiffs’ and/or the classes’ claims for relief that have not been arbitrated or mediated before the Nevada Real Estate Division,'' HOA attorneys said in their filing.

If the state Supreme Court takes the case, it may provide some clarity on whether homebuyers can take their fee grievances straight to court without arbitrating them at the state real estate agency.

The state Supreme Court dealt with the fee issue earlier this year when it ruled the Real Estate Division — not the state Financial Institutions Division — has the authority to regulate HOA fees.

Investors’ attorneys said that ruling didn’t address the key issue of whether HOA liens are capped at the six or nine months claimed by the investors.

Observers say the Nevada Supreme Court or the Legislature may ultimately resolve that issue.

In another development, the Peccole Ranch HOA, after suffering legal setbacks in the suit filed by the investors against that HOA, has now filed a third-party negligence complaint against its own collection agency, Nevada Association Services (NAS).

That suit appears to be an effort by the HOA to spread the financial pain should the investors ultimately win damages in their lawsuit.

NAS President David Stone said Monday that on the advice of his company’s attorney, he couldn’t comment on the Peccole Ranch suit.

In other developments, investor attorneys sued three more HOAs since July over the fee issue. They are the Sun Country Communities Unit 1, Green Valley Ranch and Spring Mountain Ranch HOAs.

So far the Green Valley Ranch HOA is the only defendant to have answered the suit against it. Its attorneys denied allegations of wrongdoing on the part of the HOA and said the issue should be arbitrated or mediated at the state real estate agency.

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