Legislature joins HOA feud

The issue over collection agency fees on foreclosed homes is caroming around like a billiard ball from regulator to regulator to court -- and now to the Legislature.

State Sen. Allison Copening, D-Las Vegas, said late Thursday in an e-mail that she is preparing a bill to "address limiting the amount (that) may be charged to a unit's owner to cover the costs of collecting a past due financial obligation."

The measure would deal with homes that are in foreclosure and homes for which owners are trying to get current with past assessments to avoid foreclosure, she said.

"With all of my bills, I work to find balance," Copening said. "Although the collections companies will not be able to continue on their current paths, if the bill is passed by the Legislature, they should still continue to have profitable businesses."

Nevada Senate President Pro Tem Michael Schneider, D-Las Vegas, said that he expects the Legislature to consider complaints not only about high collection agency fees but also ballooning fees from the homeowner associations.

"We have had problems with collection agencies," Schneider said.

Homeowner associations contract with collection agencies to pursue recovery of unpaid dues and other fees against homes that end up in foreclosure.

Collection agencies, however, often levy their own fees for collection efforts and those fees often are a multiple of the amount owed to the association, analysts say. The collection agency fees and homeowner association fees, however, must be paid before a repossessed home can be sold, based on claims that collection agency fees and association fees have a "super priority" lien against the property.

A provision in state law gives homeowner associations the right to impose "super priority liens" which must be paid before the foreclosed property can be sold. Collection agencies argue that their fees can be included in "super priority" liens.

ForeclosureRadar.com counts 16,000 Nevada homes that banks have repossessed. And some analysts say the burdensome collection agency fees make it harder to reduce the huge overhang of foreclosed properties.

Schneider also is unhappy about the fees associations charge even when collection agencies aren't involved.

For example, Schneider said a home seller is required to give the buyer a copy of minutes and financial statements from the association, and some associations charge $450 for this information.

"Why can't they just pass it along for a minimal amount?" he asked. "They are getting like banks. They are feeing you to death. All of sudden, they see this as a revenue generator for all of these organizations. We have to corral these fees."

Meanwhile, two regulatory agencies have issued advisory opinions on the amount of fees that collection agencies can impose under super priority liens.

Financial Institutions Commissioner George Burns, who regulates collection agencies, in November issued an advisory opinion on fees that collection agencies charge to buyers of foreclosed houses in homeowner associations.

Burns limited the amount that an association and collection agency can collect under super priority liens. The commissioner interpreted state law to limit the total to nine months of association fees.

The Commission on Common Interest Communities posted its own advisory opinion Dec. 10, taking the opposite position of the financial commissioner.

Also on Dec. 10, District Judge Susan Johnson granted three collection agencies a preliminary injunction, which prohibits the Burns and the Financial Institutions Division from enforcing his advisory opinion.

Johnson issued the order in a lawsuit filed on behalf of Nevada Association Services, RMI Management and Angius & Terry Collections. The three collection agencies sued Burns individually and as a state official over the opinion.

The judge wrote that the state's Uniform Common-Interest Ownership Act and another section of state law don't authorize the Financial Institutions Division or its commissioner to issue an interpretation of the Uniform Common-Interest statute.

In an e-mail, Burns said he was acting in the public interest.

"In response to multiple complaints from the public and a specific request for an advisory opinion regarding the fees being charged by HOA collection agencies, the FID issued its declaratory order to protect the public interest based upon existing law and regulation," Burns said.

David Stone, president of Nevada Association Services, said he was pleased with the district judge's preliminary injunction.

He said the judge's decision protects the interests of the majority of homeowners who pay homeowner association dues on time.

Contact reporter John G. Edwards at jedwards@
reviewjournal.com or 702-383-0420.