'Why HOAs don't work' state Senate bill introduced

Article Courtesy of THE LAS VEGAS REVIEW-JOURNAL

By Michelle Rindels

Published March 11, 2011

CARSON CITY -- Sen. Michael Schneider, long a champion of regulating homeowners associations, unveiled his senatorial swan song Wednesday: an omnibus bill that does everything from limiting fees when homes are sold to barring HOAs from using radar speed guns.

The Las Vegas Democrat, in his last legislative session because of term limits, dubbed his bill "Sex, drugs and money: Why HOAs don't work." He cited allegations of corruption among some HOA board members, their attorneys and the companies that manage the developments.

"This is organized crime," Schneider said at a Senate Judiciary Committee hearing, choking up as he described death threats to his family over previous HOA bills he sponsored. "They've embarrassed this state. They've embarrassed this Legislature."

Schneider's bill, SB185, is one of at least 18 expected this session addressing Nevada's nearly 3,000 HOAs and the 475,000 homes and some 1 million people within them.

Homeowners associations collect dues from members to maintain security, clean swimming pools and landscape the neighborhoods. But bad blood arises when they enforce standards. Disenchanted HOA members last month shared stories with Nevada lawmakers about board members they referred to as the "Gestapo" and "cartels." They said reforms are needed.

A key provision of SB185 is a ban on transfer fees, which are incurred when someone sells their home and can flow to several groups, including homeowners associations and developers.

In one example, a New York company wrote contracts that take a 1 percent cut of the sale price each time a house is sold within the following 99 years.

"The law has long resisted the 'dead hand reaching out from the grave' and collecting money," Schneider said.

But the fees could be considered pro-homeowner, said Sen. Allison Copening, D-Las Vegas, who already has presented a competing omnibus HOA bill, SB174. Transfer fees help HOAs keep overall dues low and let them recover the losses when a property is sold, she said.

Transfer fees have helped associations maintain common areas and keep reserves high, said Favil West, who has served as president of seven HOAs and is a member of Nevada's Commission on Common-Interest Communities.

Schneider countered that keeping dues low and relying on unpredictable home sales to fund capital improvements was "irresponsible."

One provision in Schneider's bill expands the rights of people sanctioned by a governing HOA board for a violation; another limits HOAs from charging attorneys' fees to losing parties in non-binding arbitration.

Yet another section bars HOAs from using radar gun speed readings as a basis for penalties. Schneider said the guns are sophisticated devices that need a professional operator but are used by HOA board members "to harass people they don't like."