Protecting Nevada Homeowners from Discretionary Debt and Coerced Subsidy.
Summary:
Nevada CICs increasingly use mandatory assessments — enforced by lien and foreclosure — to fund social events and even commercial amenities. This post explains why such spending exceeds the intended purpose of “common expenses,” introduces a four-category framework to restore property-based limits, and outlines a three-step reform path that begins with rulemaking to stop foreclosure-secured spending on discretionary activities.
Sounds Absurd
How do you respond if you open your mail to find your HOA has approved contracting for a month-long circus residency — and you’re footing the bill?
Sounds absurd — but is it?
It is not uncommon for HOAs in Nevada to require owners to pay for movie nights, Fourth of July celebrations, and other seasonal events. Many homeowners enjoy them and regularly participate. These gatherings can strengthen community ties and provide shared experiences. If your community is developer controlled, it helps sell homes.
But social-event spending does not stay trivial. In moderate-to-large communities, annual programming budgets can rise into hundreds of thousands of dollars. And when budgets grow, the pressure to expand programming grows with them.
Lifestyle programming, however, should not be the governing legal standard for assessing association costs.
Mandatory Entertainment Becomes Private Taxation
The operative test for imposing assessments is not whether an expense is necessary to protect shared property interests — but merely whether the board declares it a “general benefit” to owners. That framing creates three fundamental policy problems.
First, it leaves no principled boundary.
If some owners benefit from a movie night, more may benefit from a parade; if a parade is justified, why not a festival? And if a festival — why not a circus? Without limits, discretionary enjoyment becomes a taxable mandate — enforced through lien and foreclosure, the same extreme leverage meant to protect essential infrastructure.
Second, HOAs were established as special-purpose property regimes — created to preserve and operate shared real-estate interests.
They are not entertainment authorities. A preference enjoyed by some owners, even if available to all, should not be converted into a compulsory property-secured debt simply because a board declares it so. Even majority approval should not transform discretionary spending into a legitimate lien-enforceable obligation.
Third, when homeowners buy into communities with amenities, they often are not informed of the actual long-term costs of sustaining them.
Deferred maintenance and expanding service expectations convert lifestyle features into long-term liabilities.
The Line Is Clear
Foreclosure enforcement power is the dividing line between the voluntary culture of a club and the compulsory private taxation of a CIC. That power must be tied to a legitimate property purpose.
Yet today, Nevada HOAs spend on discretionary enjoyment.
Mandatory assessments should protect homes — not subsidize entertainment preferences.
How Nevada Got Here — Flexibility Without Guardrails
When Nevada adopted UCIOA in 1991, lawmakers granted associations broad latitude over spending.
“NRS 116.019” defines “common expenses” as:
“expenditures made by, or financial liabilities of, the association, together with any allocations to reserves.”
Practical effect: if the association spends the money, it becomes a common expense owed by the owners, unless expressly excluded by statute.
This design left the real guardrails to developer-drafted CC&Rs. As a matter of commercial convenience, developers insert open-ended authority to spend association funds — authority they control during declarant governance. The familiar phrase found across Nevada is:
common expenses are those incurred “for the general benefit of the Owners.”
The problem is not what it says — but what it does not say.
There are no statutory criteria separating shared-property obligations from discretionary lifestyle programming. Thus, the extraordinary enforcement power of foreclosure can be applied to almost anything a board chooses to label a “benefit.”
Nevada did not intend this outcome. It simply failed to build the guardrails that would prevent it.
CC&Rs Are Not Unlimited Spending Licenses
HOAs enforce assessments by lien and foreclosure — the most severe tools in civil law. Servitudes that burden property must therefore be strictly construed, and any ambiguity resolved in favor of the owner.
But Nevada’s broad definition of assessable expenses neutralizes strict-construction safeguards. Courts defer to boards — allowing the scope of foreclosure-backed obligations to expand with board preference, not property necessity.
Where compulsion exists, clarity must exist.
Four Categories of CIC Expenses
Homeowners’ associations were created to manage shared property — not to manage shared interests. Yet over time, the scope of “common expense” in Nevada has expanded well beyond what the law clearly defines. To re-establish predictable limits, it helps to distinguish four categories of association spending.
This framework is not final — it invites further stakeholder review — but it provides a much-needed starting point for clarifying what should and should not be funded through mandatory assessments.
#1- Property-Based Infrastructure
Obligations inseparable from the land and central to the association’s core purpose.
Examples:
Roads, drainage, perimeter walls
Structural systems in shared buildings
Private sewer or water systems
Common area maintenance and reserves
These costs preserve property values and are properly mandatory.
#2- Deeded Amenities and Facilities
Some communities include amenities as part of the real-estate value proposition — recreation centers, pools, fitness rooms, guarded entries, and similar capital assets.
These are legally-embedded obligations.
Permissible mandatory funding applies only to:
maintaining the asset as property, and
operational needs foreseeable at purchase
Maintaining a pool is one thing. Paying for pool parties is something else entirely.
#3- Social, Recreational, and Lifestyle Programming
Voluntary activities that do not maintain or preserve common property and are not inherent to real-estate ownership.
Examples:
Parties, festivals, movies in the park
Yoga and fitness classes
Hobby clubs and social mixers
Holiday celebrations and concerts
Enjoyment is optional. Foreclosure risk must be optional as well.
#4-Commercial Operations
There exists a separate class of amenities — such as golf courses, restaurants, and club-style facilities — that cannot function without continuous commercial activity, revenue-generation, and business risk. These are not property-preservation functions. They are private enterprises requiring marketing, programming, staffing, and consumer demand to remain viable.
Commercial amenities face:
Aging demographics → fewer active users
Subject to trends/substitutes (tennis today, pickleball tomorrow)
Structural obsolesce:
Capital reinvestment (equipment, facilities, new technology)
Competition (anti-completive practices, bargaining power., market saturation)
When revenue drops potential losses shift onto every homeowner, including:
Non-users
Future buyers who did not bargain for the risk
Owners on fixed incomes
Those unable to afford rising assessments
And if an owner cannot keep up? Nevada allows foreclosure to enforce payment — meaning a failed business model can cost someone their home.
That is fundamentally inconsistent with the purpose of a CIC. These are private enterprises, not shared-property obligations. Participation must therefore be voluntary, and payment governed by ordinary contract law — not lien-secured servitudes.
Homeowners should not be involuntary investors in somebody else’s changing or failing business vision.
And outsourcing does not solve the governance problem. Even with a professional operator:
The association remains the financial principal
The board must approve budgets, losses, and capital risk
Vendor incentives rarely align with protecting non-users
The downside still falls entirely on homeowners
Foreclosure remains the enforcement tool
Outsourcing shifts the operator — not the liability.
Volunteer HOA boards were created to preserve shared property, not to act as CEOs of commercial enterprises with neighbors’ homes as collateral. They are:
Unpaid
Not professionally trained in hospitality, retail, or revenue management
Subject to frequent turnover
Legally obligated to protect all owners, including those who do not use the amenity
When business failure occurs — and the economics of aging golf-amenity communities show that it will — boards have only one viable statutory lever:
Raise assessments and enforce them through foreclosure. As one scholar observed, community associations’ ‘ability to levy assessments on an ongoing basis’ presents a structural distortion. [1] Bankruptcy is not a realistic option. [2] Unlike any ordinary corporation, an HOA cannot “go broke” — it simply takes more from homeowners. If a corporation mismanages finances, it goes bankrupt. If an HOA mismanages finances, homeowners do.
That is not business governance. It is forced subsidy of commercial risk with no ability for owners to opt out.
These are private enterprises, not shared-property obligations. If offered at all, participation must be voluntary, and payment governed by ordinary contract law, not lien-secured servitudes.
Homeowners should not be involuntary investors in somebody else’s business vision.
Reform Pathways
Nevada’s framework requires both immediate and prospective correction.
A rational three-step path.
Step 1 — Immediate Regulatory Guardrail (Rulemaking)
When an HOA uses coercive assessments to fund lifestyle preferences:
non-participants are forced to subsidize others’ entertainment; and
homeowners face foreclosure for failing to fund events unrelated to their property.
Nevada’s laws currently allow that — because “common expense” lacks a clear property nexus.
That gap needs to be closed.
No homeowner should lose their home because they skipped paying for a party.
Step 2 — Prevent New Commercial-Amenity Mandates (Legislation)
If an amenity requires commercial operations to function — such as a golf course, restaurant, or club-style programming — then:
It does not belong in the recorded CIC declaration
It must not be a mandatory common expense
Owners must choose whether to participate
Standard commercial law applies — not foreclosure-backed compulsion
Voluntary participation = voluntary payment.
Mandatory servitudes = property obligations only.
Nevada should never again allow a private business venture to be funded by foreclosure-backed assessments.
Step 3 — Safe-Exit Process for Existing Commercial Liabilities (Future Legislation)
Some existing communities already bear the burden of commercial amenities now failing to sustain themselves. When the business model collapses, homeowners deserve a lawful way out, including:
divestment or sale
repurposing of the land
conversion into voluntary contract services
Exit pathways must be carefully designed and owner-approved, but they must exist.
If survival depends on foreclosure, the amenity has already failed.
Reform Recommendation
If an expense does not preserve or operate shared real property interests, it must not be enforced by lien and foreclosure.
Illinois provides a workable model. There, “common expenses” are defined as:
“proposed or actual expenses affecting the property, including reserves.”
765 ILCS 160/1-5
This ensures:
Mandatory = property preservation
Voluntary = lifestyle consumption and commercial services
Nothing in this reform restricts culture or community identity.
It simply ensures no one loses their home over discretionary consumption.
Property obligations are compulsory. Lifestyle choices are not.
Nevada must install guardrails where CC&Rs failed — because foreclosure should only back property-based debts, never preferences.
Conclusion And Larger Challenges
First, Nevada has no off-ramp when amenities become unsustainable. Golf courses, clubhouses, and developer-era attractions can evolve into unaffordable liabilities — yet remain compulsory forever. Legal scholars have identified this trap, but Nevada law provides no mechanism to unwind these obligations before they damage property values or owner solvency.
Second, even with a property-nexus standard in place, a future legislative question remains:
Should Category 3 and Category 4 obligations be allowed in CC&Rs at all?
If included, how can homeowners:
understand the risks at purchase?
control expansion over time?
unwind or reduce liabilities when the environment changes- as it certainly will?
Third, no Nevada statute requires any agency to review CC&Rs — before or after recording — to determine whether the obligations they impose substantively comply with NRS 116’s property-based purpose, are appropriate for volunteer governance, or expose homeowners to discretionary or commercial risk.[3] In the absence of such a mandate, developer-drafted declarations become enforceable servitudes by default, regardless of whether they function as infrastructure, public services, or private consumption. Once recorded, they bind every owner — and foreclosure remains the enforcement tool — without any public review of purpose or prudence.
CICs govern real neighborhoods and affect real lives — and the law should at least recognize when a line might be getting crossed. Why should insurance customers enjoy greater consumer protection than homeowners who can lose their homes?
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[1] See Stitzer, HOA Fees: A BAPCPA Death-Trap, 70 Wash. & Lee L. Rev. 1395, 1409-10 (2013) (noting that ‘association bankruptcy is not a viable option’ given mandatory assessment power).
[2] Legal scholarship confirms that homeowners associations are rarely subject to the typical financial discipline of corporations—because they can raise mandatory assessments and enforce them by lien and foreclosure. Bankruptcy protections offer little practical relief, and assessment liability often survives foreclosure, making regulatory oversight critical. See Perkins, Privatopia in Distress, 10 Nev. L.J. ____ (2010); Stitzer, HOA Fees: A BAPCPA Death-Trap, 72 Wash. & Lee L. Rev. ____ (2013); Knaust, Guilt by Association, 41 Stetson L. Rev. 836 (2012); Koves, Tyrannical HOAs, 102 Barry L. Rev. ____ (2024).
[3] This standard is well-established in sectors where private obligations carry systemic or financial consequences. Insurance policy forms must be approved by state agencies before they can bind consumers. Public utility tariffs require review by independent commissions. Several states require condominium declarations and governing instruments to undergo agency pre-approval prior to recording. Given that HOA assessments may be enforced through lien and foreclosure — the most severe civil remedy available — a comparable public screening function is both appropriate and consistent with consumer-protection norms.
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This post is part of the NVHOAReform.com series exploring how Nevada’s HOA system drifts further from public accountability — and how it can be fixed.
Readers may also be interested in:
Nevada Supreme Court Ignores the Law on HOA Disputes—Become Policy Makers In Robes
Nevada Knows Fee-Shifting Is Dangerous — But Uses It In HOAs
The Secrecy Wall: Regulator’s “Confidentiality” Undermines HOA Accountability and Trust
Nevada’s HOA System Remains “Unfinished”
Dispute resolution (ADR) reform must be a Legislative priority
