HOA official, state senator debate HOA legislation

Nevada homeowners may get "trapped" in foreclosure by legislation passed on Memorial Day by the state Assembly requiring mediation and nonbinding arbitration for HOA complaints, a Las Vegas homeowners' advocate said Tuesday.

Senate Bill 254 could cost homeowners their homes if they can't afford to pay for the mediator and arbitrator, said Jonathan Friedrich, a Rancho Bel Air resident who is leading efforts in Carson City to reform homeowners association regulations.

If complaints can't be resolved in mediation, they go to arbitration, with the $1,000 cost split between the homeowner and HOA. Arbitration goes against homeowners in 85 percent of the cases, Friedrich noted.

"Now the arbitrator socks the homeowner with reasonable attorney fees, whatever that is. Now you can't pay it, they put a lien on your house and now they can foreclose on you," Friedrich said. "All because you filed a complaint. That's the trap."

State Sen. Allison Copening, D-Las Vegas, author of SB 254, said the bill is good for homeowners. It puts a cap of $225 an hour on mediation when the going rate is about $300 an hour and caps arbitration fees at $1,000, she said.

"The problem with the current situation is mediation and arbitration can get expensive because there are no caps in place," Copening said. "SB 254 creates a process by which a complaint is immediately referred to mediation because most cases are resolved in mediation."

The bill passed by a 35-7 vote.

Homeowners who felt they were unfairly fined often discover they were indeed in violation of HOA codes, covenants and regulations when the by-laws are presented at mediation, she said.

"That doesn't take away that some homeowners feel they're being harassed or they're getting too many notices and they're not given the opportunity to fix the problem," the state senator said.

Copening said the Nevada Real Estate Division established an ombudsman office to handle HOA alternative dispute resolution, but the office was insufficiently compensated to handle the case load. People were waiting months upon months to get an issue resolved, she said.

Friedrich said SB 254 will drive home prices in HOAs down further because nobody will want to be subjected to the "tyranny" and "uncontrolled abuses" of the board.

"HOAs are a social experiment that failed in America," he said.

Friedrich favored Assembly Bill 448, introduced by Assemblyman Harvey Munford, D-Las Vegas, but that bill was killed and parts of it were rolled into SB 254.

The Commission for Common Interest Communities, which oversees HOAs for the Real Estate Division, added about 600 words to SB 254 and changed its terms without sending it back to the Legislative Counsel Bureau for review, Friedrich said. Much of AB 448 was removed, he said.

Copening said the commission took out those parts that would "muddy" otherwise good legislation. While AB 448 is technically dead, some of it may find its way into Senate Bill 174, which seeks to cap HOA collection agency fees at $1,500, she said. Current regulations set the cap at $1,950.

Kevin Wallace, president and chief executive officer of RMI property management firm, said very few homeowners have ever faced foreclosure action from HOAs. Friedrich is off base with his assertions, he said.

"That's a scare tactic more than anything," Wallace said. "We manage 90,000 doors and I can tell you I get emails every day from homeowners thanking us for representing them in the Legislature. The vast majority of homeowners are happy where they live and interact with the HOA boards rarely. But a dozen or so have had bad experiences."

Limiting fees to $500 for a homeowner is a "bargain" for situations that require arbitration, he said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.