Witnesses call Homeowners groups ‘Gestapo,”cartels’

CARSON CITY -- Heather Spaniol loved living with a homeowner's association for eight years -- until three years ago, when the harassment began.

Her car was towed twice. She was penalized for putting the trash cans out an hour too early.

"I understand that HOAs are a business and we live in them, but to not feel comfortable in your own home?" she told Nevada legislators on Friday. "I hope none of you have a soccer ball that goes onto your neighbor's lawn. That would be called 'use of your neighbor's enjoyment.'"

Spaniol was one of several dozen disenchanted homeowners' association members who shared their stories about board members they referred to as "the gestapo" and "cartels." One homeowner recited portions of the Magna Carta in his testimony that the governing boards denied fellow residents due process.

Homeowners associations, which are especially common in the Las Vegas area, collect dues from members to maintain security, clean common swimming pools and landscape the neighborhoods.

The bad blood that arises between homeowners and their elected board of directors when associations enforce their strict standards is shaping up to be one of the hottest issues in the legislative session. Numerous bills are in the works, with the first to see action being reform to better protect homeowners.

SB174, the 43-page product of a 30-member working group, changes Nevada statute on HOAs and features many pro-homeowner measures, according to sponsor state Sen. Allison Copening, D-Las Vegas.

The bills on HOAs reflect the recession's blow to Nevada, which has the highest unemployment rate in the nation. As homeowners foreclosed en masse, HOAs have increasingly sent the homeowners' delinquent dues payments to collections agencies.

Some collection agencies -- seeing a business opportunity -- have cashed in.

The reform bill still wasn't enough for one homeowners group that is upset it doesn't address what it called "egregious" collection fees when homeowners fall behind on their monthly association dues. One homeowner who fell behind on a payment of $78.24 racked up $3,300 in collections fees for the debt.

When homes go into foreclosure, buyers are often deterred by the thousands of dollars in liens from the homeowners associations.

A commission on common interest communities set caps on the fees that collections agencies can charge, but the regulation is on hold after Gov. Brian Sandoval declared a freeze on new regulations the day he took office.

Copening said she has a back-up bill in the works that mirrors the commission's proposed cap, locking the fees at $1,950.

But a lobbying group, Concerned Homeowners Association Members PAC, said the cap still allows for exorbitant fees -- collectors can charge $400 for sending notice that a home is in default -- and is full of loopholes that allow for fees beyond the proposed limit.

Copening said the questionable sections of her bill ensure liens should not be kicked back to HOAs, where homeowners who are keeping up on their payments must pick up the slack. Board members said they have to cut security and other services to balance out the high numbers of foreclosures within the associations.

CHAMP lobbyist Chris Ferrari said he appreciates the work, albeit imperfect, that legislators are doing to reform HOA rules. But the inflated collection fees don't benefit the struggling HOAs themselves, he said.

"Nobody wins on that except the HOA collectors," he said.