ASSOCIATION Q & A
REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL
MARCH 17 2012
Q: I need some information in a small situation with a homeowners association. A seller was given 90 days to vacate the property and have it cleaned after the close of escrow. An HOA representative informed me that the seller has to go directly after the closing of escrow. I represent the buyer who agreed in January to allow this elderly gentlemen 90 days to move since he lives alone and is a disabled veteran. The HOA has made it clear that it has the right to fine the new owner $50 per week. Can they really do this? I have sent an email showing that this is not a lease situation.
A: Interesting question. It would appear that this association has some leasing restrictions. Technically, if the seller is now paying the buyer rent each month, then the seller would now be a renter. The buyer could be fined for violating the leasing restrictions. This matter should have been brought to the association's attention during the sales negotiations. If there is a leasing restriction, this should have been disclosed long before the buyer agreed to allow the gentleman 90 days to move. All the buyer can do now is to ask for a variance from the association's governing documents. The association should know state law allows an association to grant a variance on a case-by-case basis without negating its leasing restrictions.
Q: I need clarification on liens. When a lien is put on a property due to unpaid fines and late fees, once the house is sold either in foreclosure, short sale or regular sale, must the lender, whether it is a bank or mortgage company, pay those liens off for a clear title? I am aware that HOAs can only collect nine months' worth of assessment fees. However, what about liens for late fees and fines? Our management company manager insists these must be written off 100 percent. He said they can't collect on these due to current state laws. Is this factual? I say no. The management company can negotiate a payoff and not write off the whole amount.
Our HOA is losing a lot of money because of this. I am thinking of our honest homeowners who are paying all their fines and fees, and we have to keep raising the assessments because our management company has failed collect these funds. I thought the purpose of a lien was to insure that the HOA would be able to collect those monies once the house has sold.
A: We need to separate the issues. If a lending institution forecloses on a home, the association can only collect a maximum of nine months of past assessments, late fees and collection costs. The only fines that are considered super liens are the maintenance fines where, for example, the association had paid for maintaining the front lawns of the delinquent homeowner. By state law, the association can now collect those maintenance funds from the lending institution, assuming the association followed the proper procedures per Nevada Revised Statutes 116. Fines are not considered super liens and, therefore, would be written off the books.
In a short sale, the homeowner is asking all parties to reduce their obligations from the lending institution to the association. In a short sale, the homeowner tries to negotiate some settlement with the association in reduced assessments or fines and late fees in order to sell their home.
Generally speaking, it is in the best interest to work with the current homeowner. If the owner cannot negotiate lower terms from either the association or the bank, he or she would most likely go into foreclosure or even bankruptcy. None of those options are favorable as it can take quite some time before that unit would be generating any association income. You almost have to negotiate a short sale as if it were a foreclosure, asking for at least nine months of assessments, which the association would receive sometime in the future when the lender forecloses. That would be your starting point. This should not be a management decision but a board decision and it needs to be made quickly but with some good common sense.
In a traditional sale, if there is a lien on the property, the association is due its fees. The association does not need to negotiate any settlement. Late fees, legal fees, fines and assessments are owed. It is a matter of negotiation between buyer and seller of who ends up paying off the lien.
Note: To the reader who wanted to know if the membership needed to be notified of an emergency board meeting in order to appoint the next person who had the highest number of votes to fill a vacant board position. I missed addressing his follow-up question about notifying HOA members that the board planned to schedule an emergency executive session.
The appointment of a director must be held in an open board of directors' meeting and not in an executive session. The criteria for holding a closed board meeting are found in NRS 116.31085 subsection 3. I want to thank Nevada Real Estate Division administrator Gail Anderson who brought this to my attention.
Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. To ask her a question, email email@example.com.