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August 21, 2014

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Nevada Territory

Bill would cap collection fees when HOA bills are past due

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Justin M. Bowen / File photo

Senate Bill 174 would cap collection fees when a homeowner becomes delinquent on HOA dues. HOAs support Senate Bill 174, while investors generally oppose it.

Collection agencies could charge up to $1,950 plus “reasonable attorney fees” on a house that’s late on its homeowner association assessment under a bill passed out of committee Friday by Senate Democrats.

Senate Bill 174 passed along party lines after a fiery debate that had Republicans accusing Democrats of wading into a legal battle in favor of collection agencies.

The bill is generally supported by homeowner associations and collection agencies and opposed by consumer protection groups and investors. Sen. Allison Copening, D-Las Vegas, argued that the fee cap would protect homeowners from the excessive collection practices, and “reasonable attorney fees” could be settled by a judge. She said that the collection agency fees are needed to keep homeowner associations solvent and able to provide services for existing residents.

Copening works as a lifestyle director for a homeowner association management company, and critics, including homeowners unhappy with their association boards, have said her outside employment presents a conflict.

The legislation has been a source of drama this week, and a sign that the Democratic caucus is less than iron clad. Copening this week initially would not say whether she was a part of the Democratic caucus.

Tempers flared Friday in a back and forth between Copening and Sen. Michael Roberson, R-Las Vegas. Sen. Valerie Wiener, chair of the Judiciary Committee, stopped the sides at one point and said, “Take a breath. Take a breath.”

Friday was the deadline for bills to make it out of committee, and SB174 now moves to the full Senate.

Consumer advocates said collection fees on late HOA bills have become a growing issue in the recession and as people walk away from their houses.

“The fees that are being charged to homeowners for past-due HOA fees are exorbitant,” said Cena Valladolid, operations director for the nonprofit Consumer Credit Counseling Services in Las Vegas. She said collection agencies hired by HOAs have been unwilling to bring down payments or offer much flexibility to consumers.

The bill specifies that collection agency fees are “super-priority liens” - moving to the front of the line to be paid back when a house is sold. Investors have argued that collection agency fees should not be “super-priority,” which they say the Legislature specifically reserved for past homeowner association dues.

Republicans argued that the Senate bill would do little to slow a problem in Nevada of aggressive collection agencies taking on fees of thousands of dollars on relatively small homeowner association bills. Roberson said the Legislature should also refrain from getting involved in a legal dispute between two private parties.

Copening brought up the case of Paradise Spa homeowner association in Las Vegas, which was raided by the FBI and Nevada Attorney General’s office last week. A single investor there owes more than $1 million in assessments, she said. Residents face having their gas shut off on Monday, Copening said, calling the investor a “slumlord.”

Roberson, an attorney, scoffed at the “reasonable” attorney fees in the bill. “How are homeowners supposed to dispute ‘reasonable or not?’” he said.

“They’re going to have to hire their own attorney, and have more legal fees?” said Sen. Ruben Kihuen, D-Las Vegas, who added he was not completely satisfied with the bill, and reserved the right to vote against it on the floor. He said he would move it forward to prevent excessive fees right now.

Sen. Shirley Breeden, D-Henderson, was the other undecided Democrat on the Committee. She called Copening’s bill “a good start” to capping collections.

A regulation pending in front of a Legislative committee is designed to cap the collection fees at $1,950 per house, plus costs.

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  1. ANYTHING that Senator Allison Copening introduces is suspect.

  2. Just like with taxes. You can't get blood from a turnip. I don't know where these folks get the idea that citizens are a bottomless resource for money. Does anyone out there actually represent the citizens of this state. Don't forget adding another load on the court system to determine "reasonable attorney fees" in each case. What are our elected officials thinking.

  3. Still excessive. The fact that HOAs are mini-governments and can legally assess you to pay for their obligations is wrong to begin with.

    This reminds me of a dairy co-op in NY. My sister has a large dairy farm in NY. In the early 80s they had several winters with lots of snow. Sometimes the milk trucks couldn't make the hills in the deep snow and that causes the farmers to dump the days production. Cows have to milked everyday and no one could afford enough refrigerated storage for extra days. SO.. Dairy Lee as I remember, a co-op contacted the farmers and said if they would join the co-op the dairy would guarantee pick up. If the trucks didn't come they would pay for the milk anyway. I tried to talk her out of it but she and most of the other farmers joined. They paid their dues on time every month whether they could afford it or not to protect their interests.

    Meanwhile the dairy made some bad investments and lost a lot of money. Then they assessed the members for the loss giving them all a bill for $6,000 each. Dairy farmers are lucky to break even on any day except for a few huge corporate farmers. The government has subsidized the cost of milk for decades to make up for the low prices. Hence government cheese.

    So, like an HOA, the co-op puts their obligations on the members. If an HOA losses money due to a real estate bust and lack of dues paid, let them go bust too. Another one can always be formed if the members want one. But these mini-governments abuse their members the same as our national and state governments do. They mismanage their money, spend too much and nail the taxpayers/members for their p--- poor performance.

    The only good HOA is the one that just lost their charter and went out of business for my money. I'll take care of my own property thank you very much.

  4. When one buys a house, it is important to demand a CLEAR title before taking possession. Clear title means that all back mortgages, leins and taxes be paid up at the day of closing. This includes no back HOA fees be carried over to you as the new owner (other than the normal monthly fees you will owe beginning on the date you take title). It is important to insist that the seller (bank?) pay all back fees, penalties and interest before the final closing. One should contact the HOA to see if there are any back fees owed and get a letter stating the entire amount due as of the date you are closing, and have that amount either cleared before closing, or held out of the proceeds in escrow to clear the title (just as they do to settle mortgages and taxes, and sometimes repairs). If the seller disagrees, take a hike, or be willing to pay the extra. Taking a hike is the best option. The other option is to buy in an area with no HOA, although the security of a gated community makes the HOA's more attractive these days.
    I believe the old BBB phrase is: "Investigate before you invest".
    HOA's are sort of like credit card companies, if you pay on time, no problem. If you get behind, the added fees and penalties make it harder to ever get caught up.
    I don't live in an HOA, therefore I don't have to worry about getting a ticket if my garbage can gets left out a few hours too long, or if my DirecTV dish is visible from the street, or if my neighbor parks his boat in view of the other neighbors. Who cares? Every HOA seems to have a self appointed "enforcer" who feels it is necessary to "patrol" the neighborhood, looking for minor "violations" to report. I used to work for a company that managed a large HOA, and had to approve any building project (patio covers, pools, arbors, additions, etc.) it was amazing what neighbors would call in about to complain.