Homestead laws can provide some protection

Q: First of all I read your Las Vegas Review-Journal articles every Sunday, it is very interesting, indeed.

As you already know, there are more than 3,000 homeowners associations in Nevada. I’m a homeowner in one of them, and I’m very much concerned regarding what is happening regarding a $20 million settlement of a swingset lawsuit that would require each homeowner to pay $90,000. The local news media have reported that homeowners are demanding answers from their HOA.

It was mentioned last week on a local TV channel that adding a lien assessment coverage to an owner’s individual insurance policy and filing a homestead declaration would offer some protection.

I would like your take on this subject matter. I think it will concern all communities sooner or later. Some of them have a gym or workout rooms. Could there be issues with swimming pools or spas?

A: Nevada Revised Statutes 115, homestead laws, protects the equity in your home up to $550,000 from general creditor claims, such as unpaid medical bills, bankruptcy, charge card debts, business/personal loans and accidents but would not preclude a seizure or forced sale of your residence from general creditors if your equity exceeds the $555,000.

Recording a declaration of homestead — you can obtain a form from the Clark County Assessor’s Office — will protect your principal residence up to the statutory maximum. Investors are excluded. If the value of your home is $645,000 and you have a first mortgage of $485,000 plus a second mortgage of $10,000, the equity is $150,000.

What is not protected are debts secured by a mortgage, a deed of trust, payment of taxes, IRS lien, mechanic’s lien, child support or alimony payments and your association assessments: according to NRS 115.010 (3b), any lien to which prior consent has been given through the acceptance of property subject to any recorded declaration of restrictions, deed restrictions, restrictive covenant or equitable servitude, specifically including any lien in favor of an association pursuant to NRS 116.3116 or 117.070.

NRS 115.010 (1) states that the homestead is not subject to forced sale on execution or any final process from any court except as otherwise required by federal law or recovery of money owed to Department of Health and Human Services pertaining to Medicaid benefits.

In the recent $20 million case against an association that we all heard about in the news, it would appear that based on NRS 115 and the protections afforded by the Nevada homestead, homeowners would not lose their homes.

The plaintiff does not have direct claims against the individual homeowners, so the judgment would only be enforceable against the association. The association will consider all its options, so we will see how things unfold.

Barbara Holland is a certified property manager, broker and supervisory certified association manager. Questions may be sent to holland744o@gmail.com.