Who is running your homeowner association (HOA)?

To a greater extent than in traditional housing, members of an HOA are dependent on their neighbors. Collectively owners invest in maintenance and depend on the care and skill exercised by those that govern the property and its financial affairs. As such, who is running your HOA is an important question all HOA owners should know and understand the implications. An article in the Nevada Current "Who is running your HOA" describes, in part the issues in Southern Highlands and HOAs in general.  
 

HOAs are not created for the benefit of home buyers. It's a business model that increases profit potential for the real estate industry and double tax revenue for local governments (privatize public services). To its credit, in adopting The Nevada Uniform Common-Interest Ownership Act (UCIOA) legislators sought to limit industry powers. Over the past few decades, the industry has co-opted Nevada HOA laws and captured the regulator (NRED).

Over a quarter century under the developer's (Olympia) control- How is that possible and why?  Is this in the best interest of owners? It has been more over twenty (25) years since SHCA's inception. Three of five board members are appointed by our developer- Olympia Companies.

-Olympia provides no estimate when, if ever, it plans to complete construction and/or end its control.

-Until 2021, all three appointed members were employees of Olympia. Today, two remain employees of Olympia and do not even live in our community.

-SHCA's manager and Olympia Management Services (OMS) is a wholly owned company of Olympia Companies.

-OMS' management contract was recently (and in prior years) renewed without competitive bids.

Amazingly, Nevada regulators are aware of this encompassing span of control and have done nothing.

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SHCA owners should be concerned. Can we be assured the association fiduciaries (Board and manager) will always act in the best interests of owners, when they conflict with Olympia interests- an inevitable event?

 

Under the law a developer can appoint who he wants to the board. However, once appointed a board member has a fiduciary duty to the association - composed of the homeowners not the developer. When the developer is your employer, that puts you in a difficult spot - where I believe we find most of the current appointed SHCA directors. If Olympia did not recoup its money by the time 75% of the units were conveyed, it should not be permitted to pass its bad planning or its bad decisions onto the homeowners of Southern Highlands by restricting their fundamental rights.

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Secret/Closed Board Meetings?
One of the pillars of public governance has been limits on secret deliberations. 

However, there is no definition of “meeting” in Nevada HOA law (NRS 116) and 

Open Meeting Laws typically applied to governmental meetings, have not been 

applied to HOAs. Nevada defers to the governing documents (those written

exclusively by the developer) of an association (CC&Rs & By-laws) to detail the 

procedural rules for meetings. 

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Section 5.5 of the SHCA by-laws provide "The Directors shall have the right

to take any action in the absence of a meeting which they could take at a

meeting by obtaining the written approval of all the Directors. Any action so

approved shall have the same effect as though taken at a meeting of the

Directors."  While the (Nevada Real Estate) Division "discourages use of such

action in lieu of a meeting unless absolutely necessary (i.e. pipe burst, fallen tree)" (see slides pg 25 & 26)  it does not take meaningful action or material sanction on a board for acting outside a formal board meeting. At point, without appropriate checks and balances Nevada HOA boards have an open and unguarded door to abuse.

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Additionally, an HOA board so inclined can meet in quorum and discuss business of the association in secret. I find this in opposition of what the law makers of Nevada intended- albeit not technically illegal. I have refused to participate in such meetings held by the SHCA board. They call them "workshops". I believe if the board is going to gather to discuss business it should let owners know and allow them to participate - just like all governmental bodies are required to do in Nevada.

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The Nevada Supreme Court has concluded homeowners’ associations open meetings are public forums and as such play “’a critical role in making and enforcing rules affecting the daily lives of [community] residents.’” Yet, HOA meetings are treated differently from other public board meetings. HOAs are exempt from Nevada's open meeting laws.

 

Since Nevada first adopted the Uniform Common Interest Ownership Act as the foundation of Nevada's HOA laws creating NRS 116 in 1992, strict limits have been in place on when a board could meet and what it could discuss in executive session- i.e. in secret (see NRS 116.31085(3)). Unfortunately, in the 2020-21 legislative session this was changed. As a result of SB 72(2021), the right of HOA boards to meet in executive session and discuss "proposed and pending litigation" was expanded to virtually any subject. To do so the board invites legal counsel and therein invoking privilege. A board and contracted counsel so inclined, can easily abuse this change in the law holding discussions it may seek to keep from one or all owners- and ironically, owners foot the tab for the added legal fees.   

 

Nevada Real Estate Division does not track declarant control.
The SHCA board and Olympia have asserted in response to my challenges annual reports filed with the Nevada Real Estate Division (NRED) verify it is in compliance with Nevada HOA laws when it comes to the continuation of the declarant's (developer's) control of Southern Highlands. This is misleading and incorrect. According to Monique Williams, at the Department of Business and Industry, the parent agency NRED, “NRED does not monitor (developer control) threshold percentages. Pursuant to NRS 116.625, we educate the public (about what the law says and work complaints filed timely). We (NRED) do not preemptively seek out associations who may be reaching the threshold for transition.” “The expectation is that these elected unit owners, who do not represent the declarant, keep track of transition dates and requirements. This would coincide with their fiduciary duty to the community.”

 

So what recourse exists for owners when a board fails to live up to NRED's expectations? My experiences indicate NRED will not act.  It is only when owners come together, get involved, and speak out will we get our regulators to act. If you believe as I do action is needed and transparency provided, I respectfully ask you to vote for me and join me that effort.

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