Homeowners associations act as mini-governments

The sales agent presents sheet after sheet for the buyer to sign, so many that even when he mentions a monthly charge for a common interest community, the buyer pauses only briefly before signing where indicated. Only after moving in does the buyer get a sense of where the money's going.

Most new-home buyers in Southern Nevada pay a local fee of some sort -- either for an HOA, CID, LID or SID, or some other three-letter combination. In the case of homeowners associations however, there's a whole set of rules and responsibilities that accompanies that monthly expense.

Homeowners associations resemble mini-governments based on property ownership within a defined area. They manage common areas that benefit their members as a whole, such as community pools, golf courses and landscaping. Some are established solely to maintain a water source that all members share, or to maintain a private road or flood control that all members need, or to take care of shared landscaping.

In Nevada, a common-interest community is defined legally as "any real estate with respect to which a person, by virtue of his ownership of a unit, is obligated to pay for real estate other than that unit." For homeowners, this means homes where the owners pay dues to cover expenses for facilities and/or landscaping in areas of their subdivisions that they share. Community association and homeowners association are synonymous with common interest community.

An association is a private organization, often established as a nonprofit corporation, that essentially has the legal authority to tax. It is modeled after American government, for better or for worse.

The state regulates most of these entities, the exceptions being those with very limited purposes and those with fewer than 12 units. Basically, it boils down to whether or not a homeowner can be fined, according to Eldon Hardy, the state's ombudsman for common-interest communities. "That's the common denominator."

Hardy said homeowner associations have existed "since the Romans" and date to the 1920s in Las Vegas (The oldest on record dates to 1923.), but have emerged as a strong presence since the 1980s.

Although the ombudsman is the state liaison for homeowners associations, Hardy said his office doesn't have an exact count of how many associations exist statewide. He estimates there are about 2,000 to 2,500 statewide with about 80 percent of those in Southern Nevada. More than half of all homes in Clark County are in associations, including more than 80 percent of new homes.

"That's a thing that's almost impossible for us to know, because the associations don't all know they are supposed to report and register with the ombudsman."

"Over the last decade CICs have become an important feature of everyday life in Nevada," Hardy said.

Hardy believes the growth can be attributed more to lifestyle than to rules.

"In a way, they are a blessing because you get all these things like swimming pools that some residents might not otherwise be able to afford," he said. "It was the ability to buy a nice condominium for $60,000 with a pool and other things people enjoy."

By several accounts, however, the rules have a more serious effect on people's lives.

Such rules may be as simple as architectural review to ensure nothing outlandish is built in an area, or may be as particular as how long a garbage can may sit on the curb. The pretense for such rules is that they regulate things that directly affect the community's property values.

The rules actually do serve a purpose, Hardy explained. When an association requires residents to keep their garage doors closed, it isn't merely an aesthetic issue, but a potential liability to the association should a crime be committed. Hardy doesn't believe the intent by associations was ever to make lots of little rules for residents to follow, but that they came about out of practical concerns for safety and liability.

"It evolved into a more controlled atmosphere than a lot of people anticipated," he said.

Who asked for the rules, one might ask. Technically, no one did.

"The developer makes the rules," Hardy said. "He gets a vision of what he sees the community looking like and designs the rules to fit in with those plans."

On the other hand, every homeowner freely accepted the rules when they purchased the home and read (or promised to read) the association documents, according to Barbara Holland, a longtime Southern Nevada property manager who writes a weekly column for this Real Estate section.

Holland has a different theory as to why associations began to appear in great numbers in the 1980s -- money.

"Developers could earn a higher return," Holland said. "You basically have the same land costs and unit costs whether you build condominiums or apartments, but rents for apartments just weren't making enough to justify the investment."

Holland said the rules have become important in the popularity of associations because they make a community more attractive by requiring owners to use their property responsibly.

"If you drive through some of these older neighborhoods in town, what do you see?" Holland said. "(Associations) keep up neighborhoods. The association has the power to make sure you're cutting your grass, you're maintaining your landscaping."

"(Associations) are very popular," Holland said. "In fact, plenty of people not in associations ask me what can they do to create one."

Detractors say board members are intrusive and arbitrary with rules, pursue vendettas and play favorites. Worse yet, sometimes they overreact.

All of the above were cited in a case that started last year at a northwest Las Vegas homeowners association. What started as a mere slap on the wrist escalated into ethics charges against two board members when Lola Gottlieb, a resident of an age-qualified community, hit fellow resident Robert Passmonick with a rolled-up piece of paper. Board members accused her of physical assault and tried to remove her from the association, despite the fact that the swat did no harm whatsoever. Ultimately, the board was found to have overstepped its responsibilities and no action was taken, but the event has led to hostility among residents.

The effects of overreaction are sometimes greater than chilled relations. Sometimes, it puts the home itself at risk.

Such was the case in March when Dean and Pattie Waters lost their home in northwest Las Vegas over $81 in dues owed to their homeowners association. A costly legal battle was needed to reclaim their property, which was foreclosed and sold at auction.

The Waterses, who live in California, did not refuse to pay the bill, rather they said they never received notification that they owed it over the course of a year. They found out the home was sold only after the renter of the home received an eviction notice. The matter, which was later dropped by the association, was chalked up to clerical error and a failure to communicate.

Holland believes this is exceptional. She said less than 1 percent of association residents have "a real problem" with their associations.

"The average condominium owner is happy with their association," she said. "What people see in the news is the abnormal rather than the norm."

Holland said buyers often don't read the covenants and ignore the rules until a problem arises.

"People go into these things without a sense of what they are committing to," she said. "They just don't realize how important it is to follow the rules."

Hardy agrees that buyers need to know what they are joining before they commit. He would like to see the documents explaining the homeowners association presented differently, so that buyers who are not well-suited to associations can avoid them.

The state did not address the issue in the last session of the legislature, but has taken on other homeowners association issues in the past. State legislators over the past 10 years have passed a series of laws intended to protect homeowners from the excesses of overzealous association directors. NRS 116 is the chapter of state law, including all of its revisions, that regulates homeowners associations.

The first major block of homeowners association legislation was passed in 1995, when a body of laws was established to ensure executive boards were responsible to their members and governed fairly. It also defined what types of legal actions a board could take, particularly regarding construction defect lawsuits. Later legislation established mandatory reserve accounts and created the office of the ombudsman, who serves an advisory and mediation role for homeowners and their boards.

"We'll probably be the poster child of homeowner associations over the next few years as some of the other states address issues we're already (addressing)," Hardy said. "A lot of other states are looking to our example because we've already had so many of these issues come up."

Meantime, Holland believes a change of attitude is needed on the part of homeowners.

"A lot of people move to associations because they think it's carefree living," Holland said.

This false notion, she said, makes it difficult to find residents willing to take on the tasks of managing their association, such as volunteering on boards and committees. Holland said the responsibility of serving on a board is a big one, but the time commitment isn't so bad if the association is well-organized and the board members understand their responsibilities, which include keeping the association financially solvent and maintaining confidentiality.

"A lot of people join the board for the wrong reason," Holland said. "They have an agenda, sometimes a one-issue agenda and they think they're going to clean up the association. They don't realize how many little things the board must handle on a regular basis."

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