Saturday, Oct. 26, 1996 | 11:59 a.m.
Thousands of new-home buyers in Southern Nevada each month are bombarded with letters from official-sounding companies warning that their equity is at risk because they haven't filed the necessary paperwork with the county.
The businesses offer to fill out the forms for a small fee -- usually $25 -- and return them to the homeowner to file with the county recorder. Usually the homeowners don't know they still have to pay notarization and filing fees.
Some of these companies are operating on the edge of state law, and at least one has been shut down in Arizona and California for providing similar services.
They're called homestead declaration recording services, and they use names such as State Recording Service, Municipal Recording Service, Clark County Registration Services and the Office of Homestead Declaration Service Agency. But it's hard to track them down because they use mailbox services and don't list their phone numbers.
With 3,000 new homes sold in Clark County each month, they have a huge market of home buyers who may not be familiar enough with state law to know they can get the forms from any stationery store and fill them out themselves.
And when homeowners realize they can do it themselves, they usually call the county recorder or assessor to complain.
"They're new homeowners, so they continue to be duped," Clark County Recorder Judy Vandever said. "Some companies use frightening words in them. A lot of it's intimidation."
The companies' tactics run the gamut, from providing the service as promised to taking the money and disappearing, Vandever said. But because most of them operate within the law, there isn't much Vandever said she can do to stop it.
"It's a lot more complex than it appears," Vandever said. "We cannot file a complaint with the district attorney because they just stay on the right side of the law."
The businesses are capitalizing on a Nevada law that allows homeowners to shield up to $125,000 of their equity from being taken in a lawsuit, said Clark County Assessor Mark Schofield, whose office has also received numerous complaints.
"Let's say you don't have enough motor vehicle insurance to cover liability, and you have an accident that's ruled your fault, and you killed someone," Schofield said. "The family sues you, and are awarded a settlement that requires you to sell your house. They couldn't touch $125,000 of the equity."
All the companies do for their fee is a title and property search to get the legal description for the homeowner. Once that's done, they return the form to the homeowner, who must file the form with the recorder's office for an additional $7.
"Some people quietly avail themselves of this because they think they have to," Schofield said.
While it's legal to provide the service, many consumers are misled by the official-sounding names, Schofield said.
"In and of themselves they are not wrong, but they try to characterize themselves as a government agency, which they are not," he said.
One Las Vegas-based company that's been providing the service for nine years has been forced to stop doing business in Arizona and California for misleading the public with its official-sounding name.
That hasn't stopped State Recording Services from continuing to operate in Nevada. But that may be changing. Jerry Donovan said he and his wife, Agnes Costas, are getting out of the homestead declaration business, moving on to other ventures.
Arizona shut down their operations in 1994, when state prosecutors there obtained an injunction against the company and required them to pay $4,000 in restitution and $5,000 in attorney fees.
In August, the Ventura County, Calif., District Court issued a permanent injunction against State Recording Services and ordered Donovan and Costas to pay more than $200,000 in civil penalties and restitution.
According to the court, the company sent out misleading information regarding homestead declarations and property tax exemptions. The court said the company violated provisions of California law that regulate homestead filing services, including sending misleading solicitations that appear to be from or affiliated with a government agency.
"The California homestead statute requires specific disclosures for homestead declaration information," Ventura County Deputy District Attorney Mike Schwartz said. Donovan sent out more than 1 million solicitations and got 47,000 orders in California in 1994-95, bringing in about $1.25 million, Schwartz said.
"There's a real public danger: We felt and the court felt he was misleading people into believing he was a government agency and that they needed to pay this money to protect their homes, when that wasn't true," Schwartz said.
These homestead businesses have plenty of potential victims. From January to September, 15,369 homesteads were filed and 62,665 deeds were recorded in Clark County, Assistant Recorder Jeff Jaeger said.
A 1995 state law requires the solicitations to disclose in bold letters that they are private companies not associated with any government entity, and that people can fill out the forms themselves.
One company, the Office of Homestead Declaration Bureau, sent a flier out warning homeowners to stay away from their competition: "Beware of agencies claiming to be a 'State Recording Service' or 'County Recording Service'," the notice said. "These are privately owned businesses and are not affiliated with any governmental office."
The warning seems to imply that the Office of Homestead Declaration Bureau is a government agency of some kind, but in very small print at the bottom of another page full of small print, the company declares that it is a private business.
As long as a company declares that it's a private business, it's not breaking the law, said Margaret Stanish, head of the state attorney general's consumer fraud division.
"Under the deceptive trade practices act it's unlawful for a company to represent that a business is somehow associated or endorsed by the government" Stansh said. "What it all comes down to is what is actually represented, and are there appropriate disclosures in the material. They must adequately disclose the true nature of the business and they must have disclaimers to the effect that they are not a government agency."
Donovan said he is acting within the law by declaring on the back of his form that he is not associated with any government agency.
"We are not doing anything differently in Nevada," Donovan said. "There was a misperception in California because California laws are different than Nevada laws."
Donovan said he follows all state laws, and has been investigated by the Nevada attorney general.
"We've spoken with them," Donovan said. "They're confident we're not bad guys or bilking the people."