A challenge to Nevada’s regulators and legislators- an open letter (written in 2019)
The following is an example of how a good idea, such as HOAs, can be abused by special interests and deep pockets, when homeowners do not stay vigilant, and when representatives generally fail to protect the rights of constituents. I describe below a lack of transparency, “blind eye” regulators, and huge hurdles in obtaining dispute adjudication experienced by those that live in Nevada HOAs. As you read what follows, consider how so many, tasked to protect the public, could get something so obviously wrong?
A few years ago, I started an effort to get my developer controlled HOA board to fully disclose information necessary to determine why, contrary to owner expectations, developer control had not terminated. Understandably, I wanted all five, not just two, community Directors elected by owners and representing owners rather than appointed by the developer. After all, the community is approaching two (2) decades under developer control.
The effort has thus far failed. There was little disclosure and no change in representation. I filed two complaints, after failing in my formal complaint to my HOA Board, with the Nevada Real Estate Division (NRED) and the State Ombudsman. NRED refused to act on my first complaint, claiming they had “no jurisdiction.” After months working to defeat this absurd position, NRED acquiesced, but refused to reopen the complaint. So, I filed a second complaint. It was eventually forwarded by the Ombudsman for action. After nearly a year “looking into” my second complaint, NRED again closed it, refusing to act.
Just prior to the anticipated and long-awaited response by NRED to my second complaint, my developer filed a defamation lawsuit against me. I was running for election to my HOA board at the time. I, as do many, read this action as nothing more than an attempt to silence me. I would remain in litigation nearly five years. (Since this was written Nevada courts have dismissed the defamation lawsuit under an anti- SLAPP law).
The number of units owned by other than the developer exceed the 75% threshold stated for control change in my CC&Rs and all but standard in state laws. In 2015, Nevada legislators took an egregious action passing AB 192. This bill was a clear special interest effort my community’s developer was deeply involved. It inexplicably passed both legislative houses unanimously.
AB 192 stands in stark contrast to generally recognized democratic principles. The bill provides developers, holding less than a 10% stake in HOAs, as I believe exists in my HOA, continued control of the governing Board of Directors. Nevada law permits developers to appoint their own employees as board directors, who need not live in the community, and even retain their wholly-owned management companies, absent any required contract renewal bid process. All of these conditions exist in my HOA. Needless to say, HOA owners can, as in my HOA, find themselves with no real fiduciary representation.
In passing AB 192(2015) Nevada legislators saw fit to significantly inhibit all future HOA owners from the very process legislators availed themselves in obtaining their privileged postings- free elections.
The final straw in my HOA, was the developer’s unilaterally action to increase the maximum number of units allowed in the community. This is something specifically prohibited as I read Nevada law (NRS 116.2124). The legislature intended to insulate the rights of homeowners and limit the rights of developers. It even used strong language stating “the declarant may not in any event” increase the maximum number of units. Nonetheless, both the Board and developer have refused to effect control change and have yet to provide transparency. (Since this was written Nevada courts, in an absurd ruling, have found a statute of limitations precludes challenging the amendment. See below).
Rebuked by regulators, I was left with only three options. Do nothing, file a court action, or try and get NRED to do its job. After much consideration, not wishing to sue my neighbors and myself, which filing a legal action against my HOA would effectively entail, I decided to seek representation (I am not a lawyer) and file a legal action against NRED. I asked the courts to direct the Division to do its job under the statutes. I was seeking little more than the full disclosure deserved. Seeing how probable cause clearly existed, I looked for NRED to bring the issue before the States’ legislated Common Interest Community Commission (CIC) for adjudication.
The CIC is a seven-member board, comprised of a wide range of stakeholders, appointed by the Governor. It was intended to act, among other things, as an alternative to the constipated and prohibitively expensive court system. The CIC Commission, at least on paper, I thought was a good idea. The problem is NRED holds the keys to accessing the process. It also appears to be the case, the political appointees on the CIC, despite the independent power to act, have elected to turn a blind eye to the manipulation of the process. Our legislator’s well intended alternative to expensive court action, turns out to be just another hinderance for homeowners.
Outrageously, the Nevada court dismissed my action. The court agreed with the Attorneys General’s argument defending NRED’s inaction. The AG asserted, despite the CC&R amendment violating the plain language of the statute prohibiting the developer from increasing the number of units in a community once sale begins, an unrelated statute time barred my action. Given no one, to include the HOA board itself, had challenged the amendment and I was conveyed my home several years after the amendment was recorded, thus supposedly accepting the amendment under the legal fantasy of constructive disclosure, the AG concluded my complaint and/or any action by regulators was precluded.
The real audacity of the AG’s opinion and reflective of the complete failure of the system, is seen when the plain language of the statute used by the AG is examined. The following statute was “ignored” by the NRED and the courts in dismissing my action: No action to challenge the validity of an amendment adopted by the association pursuant to this section may be brought more than 1 year after the amendment is recorded. (NRS 116.2117, underline added) This section has no mitigating language. While I argue one year is a short period to challenge any violation, adopted by the Association or not, there is no evidence in my case, the HOA ever adopted the amendment. An Association’s adoption is distinct from a unilateral developer action. The former requires several very specific steps. Yet, no board action, signature of board member(s), or other “adoption” element was presented or evident. The recorded document showed nothing but the developer’s unilateral action.
In summary, despite the clear legislative intent to insulate rights of owners evident by a very specific prohibition, a developer in Nevada, can nonetheless unilaterally change control provisions of a community contract, depriving owners of their most basic of American rights, the right to elect those that represent them. All the while, the state's highest legal authority and consumer protection regulators defend the developer's actions. Oh- did I say the HOA need not inform owners of all this? Is it no wonder HOA owners are concerned, intimidated, and demanding reform?
Mike Kosor
Las Vegas HOA homeowner