Homeowners Association (“HOA”) Foreclosure laws in Nevada
If you live in the Las Vegas, NV, or Reno, NV, area, chances are you live in a Homeowners Association (“HOA”). Those pesty neighborhood watchdogs you pay a monthly HOA assessment fee too, just so the HOA can send you a notice letter for having a couple of weeds in your front yard. But a beautiful neighborhood is lovely.
You probably don’t realize that Nevada HOA’s are one of the most powerful organizations when it comes to collecting on their fees. In fact, your Nevada HOA is much more powerful than your mortgage company.
Nevada law didn’t intend to give HOAs this great power, and the reasons HOAs have this power are complicated. But it stems from NRS Chapter 116 and the Nevada Supreme Court’s 2014 decision, SFR Invs. Pool 1, LLC v. U.S. Bank, N.A. (if you are interested). All a Nevada homeowner needs to know is if faced with the choice between making the mortgage payment vs. the HOA payment, it is most likely in your interest to pay the HOA payment.
NRS Chapter 116.3116-116.3117 allows your HOA to place a lien on your home if you fail to pay your HOA assessment or other fees to your HOA. If the lien remains unsatisfied, the HOA can sell your house. The person who buys your home from the HOA can then evict you. After the Great Recession, Nevada changed its mortgage foreclosure laws to make it much more difficult for a bank to foreclose on a homeowner. However, Nevada did not make many changes when it came to HOA foreclosures.
To illustrate the severity of NRS, chapter 116.3116, consider the following example: Suppose Tim Smith owns a house in Las Vegas that he purchased for $200,000.00 in 2001. The house is now valued at $700,000.00. Mr. Smith has never missed a mortgage payment, and the remaining principal is $50,000.00. Mr., Smith’s home is in an HOA that requires Mr. Smith to pay a monthly assessment of $100.00, and he has never missed payment, except for last month.
Last month, Mr. Smith didn’t pay the HOA because the HOA included a $75.00 fee for leaving his trash cans out for too long. Mr. Smith disagrees with the HOA’s fee, so he doesn’t pay out of protest. The HOA then sends his account to collections and eventually sells the house at public auction for $70,000.00 to recover an alleged $5,000.00 past balance. The remaining $65,000.00 goes to Mr. Smith’s mortgage company to satisfy the principal. Mr. Smith gets what is leftover, $15,000.00, and is evicted from his home. His $650,000.00 in equity is gone, and he may never get it back.
So what’s the take-away? If you dispute any charge from your HOA, you should pay it and try to obtain a refund later. You could literally lose your home if you don’t handle HOA disputes correctly.