Assembly panel weighs bill limiting power of HOAs

By Jeremy Twitchell

Wednesday, March 25, 2009 | 8:45 p.m.

Several bills relating to homeowners associations, including one dubbed by its sponsor as “the homeowners bill of rights” moved through a Nevada Assembly subcommittee Wednesday afternoon.

In all, the Assembly Judiciary Subcommittee heard seven bills that would change the way the state regulates homeowners associations. The full Judiciary Committee will consider the bills for referral to the entire Assembly at a later date.

Chief among the bills was Assembly Bill 350, which sponsor Assemblyman Harvey Munford, D-Las Vegas, said would require homeowners associations to be more open and responsive to their homeowner constituents.

“The homeowners bill of rights,” as Munford called it, would help a growing number of Nevadans as homeowners associations become more common, he said.

“Particularly in Southern Nevada, it is nearly impossible to purchase a relatively new home that is not part of a homeowners association,” he said.

The bill would require any change to an association’s governing documents to be approved by 85 percent of residents, lower the cap on interest that associations can charge on past-due assessments from 18 percent to 5 percent — and 3 percent for special assessments — and forbid associations from foreclosing on homes with unpaid assessment liens.

It would also place limits of two, two-year terms on board members in communities with more than 50 residences, require associations to provide free copies of minutes and association documents to homeowners upon request and allow any homeowner to speak on any item on a board meeting agenda for at least five minutes.

Several Southern Nevada homeowners testified in favor of the bill via video-conference at the Grant Sawyer State Office Building in Las Vegas, saying the changes would bring much-needed accountability to association boards.

“Assembly Bill 350 goes a long way to restoring homeowners’ rights,” Las Vegas resident Jonathan Friedrich said. “It cannot and will not be able to cure all the evils that are created by out-of-control and unknowledgeable homeowner boards.”

Attorneys, community management association representatives and association board members from around the state, however, strongly objected to the proposed bill, saying it would cripple the ability of boards to act.

Opponents said some provisions would be problematic because homeowners associations see very little public participation. There may not be enough interested volunteers to keep the board seats filled if term limits are enacted, and getting 85 percent of homeowners to approve anything would be virtually impossible because few homeowners actually vote, they said.

They also said providing free copies of documents would place a heavy financial burden on the associations and could be misused by angry residents as a form of harassment.

Reno attorney Bill Magrath, who has sat on his association’s board for 20 years, said capping interest rates and taking away associations’ ability to foreclose for unpaid dues would take away the only strong enforcement capabilities that associations have.

At 5 percent interest, he said, homeowners would be more likely to pay off mortgages, credit cards and other bills that have higher interest rates. The only thing an association could do is place a lien on the home and collect if and when it is sold, Magrath said.

“You, in effect, would be turning us into a bank,” Magrath said. “We will collapse if suddenly members are able to borrow money from us and pay their mortgage and other bills.”

Attorney Michael Schulman, who said he represents about 800 homeowners associations, acknowledged that there has been corruption on some association boards, but he said the bill would only punish good board members.

“I don’t think you can legislate bad behavior out of existence,” Schulman said. “There’s nothing you could write that would stop people form doing bad things.”