Laws are of little value when they cannot be meaningfully enforced.
by Mike Kosor, Founder NVHOAREform Coalition
To understand the frustration of many Nevada homeowners, one need only look at NRS 116 — a framework that speaks the language of accountability while making enforcement nearly impossible.
NVHOAReform’s work has identified how statutory design, administrative capture, and judicial deference collectively produce what we call paper accountability. Reform is needed to transform Nevada’s paper accountability into enforceable accountability — beginning with three entrenched barriers:
First, prevailing-party attorney-fee clauses deter owners from testing their rights in court and freeze the natural evolution of HOA law, depriving lawmakers of the feedback needed to modernize it.
Second, a captured regulator can—and we argue does—impede administrative enforcement that all agree should be the primary, if not sole, dispute option.
Third, overly broad interpretation of confidentiality laws conceals outcomes from public scrutiny and from the independent regulatory oversight lawmakers intended when establishing the CIC Commission
This post introduces a fourth—and perhaps most consequential—contributor: Nevada’s codification of the Business Judgment Rule (BJR).
The BJR originated in corporate law as a judicial presumption of propriety. It is a doctrine guiding courts to defer to directors’ business decisions if they acted in good faith, on an informed basis, and with honest belief that the decision was in the corporation’s best interest. ] The rule exists to shield entrepreneurial risk-taking; investors assume risk, and directors must be free to fail without personal liability. It governs the personal standard of care for directors and officers shielding them from personal liability for informed, honest decisions.
The Nevada legislature enacted one of the nation’s strongest, declaring all directors are fiduciaries, yet paired it with a statutory presumption of deference that, in practice, all but nullifies enforcement. The result is a fiduciary duty without a remedy — a statutory promise stripped of enforceability. That contradiction erodes both owner trust and constitutional principles of due process.
We first discused the BJR in a post HOA Boards & The “Right to Be Wrong" But Not To Be Abusive. The BJR clause was arguably introduced with good intentions—to protect volunteers. However, the ALI and the Uniform Law Commission (ULC) provide a better model: protect volunteers through indemnification and insurance, not judicial immunity.
Administrative Agencies: A Better Fit
If we are to treat institutions like HOAs as the powerful quasi-governmental entities that they are, it is not unreasonable to demand a deference rule that, if not closely tailored to them, at least fits them relatively well and is designed with their particular processes and characteristics in mind.
As Professor Michael C. Pollack argues, homeowners associations more closely resemble administrative agencies than corporations. Both exercise coercive power over captive populations, but administrative agencies must earn judicial deference showing they acted rationally, followed fair procedures, and based their decisions on evidence. Pollack would extend that model to community associations: deference earned through accountability, not presumed through status.
Corporate deference presumes risk-taking in pursuit of private profit. HOA governance involves neither investment risk nor market competition; it governs captive owners through statutory servitudes. When the same deference is imported wholesale, it shields coercive authority rather than entrepreneurial judgment. That inversion is what makes the current rule structurally unsound.
From Misplaced Protection to Structural Reform
The Legislature can restore accountability without discouraging civic participation. Four targeted corrections would achieve that balance:
Delete the BJR clause from NRS 116.3103(1).
This single clause converts a fiduciary duty into a presumption of correctness. Deleting it restores judicial discretion to weigh conduct under the proper standard.
Codify reasonableness as the governing test.
Directors should act “reasonably, in good faith, and in compliance with law.” This aligned with ALI and ULC guidance and ensures judicial or administrative review focuses on fairness, not presumption.
Mandate heightened review during declarant control.
When a developer’s appointees dominate the board, internal accountability is weakest. The statute should mandate more searching scrutiny during that period.
Retain indemnity protections for true volunteers under NRS Chapter 82. True volunteers deserve protection for good-faith errors; declarants and compensated agents do not.
They should also consider the 1994 recommendation of the Uniformed Law Commission raise the duty of declarant-appointed directors to one of a trustee.[1]
These reforms would realign Nevada with the national standard—protecting honest volunteers while reinstating meaningful oversight where it matters most. Only then will Nevada’s promise of fiduciary accountability move from paper to practice.
Lawmakers would do better to focus on the real drivers of costly or unnecessary disputes: a non-responsive administrative dispute process, prevailing-party fee provisions, and under use of alternate dispute-resolution structures in existence leaving few options but an unsuited civil litigation system-- rather than insulating boards through an overbroad rule of deference.
These reforms are part of a broader movement to restore enforceable accountability within Nevada’s common-interest community system — aligning statutory intent, administrative process, and judicial doctrine around a single principle: authority must be answerable.
Further Reading
HOA Directors Are Fiduciaries Absent Meaningful Accountability — Full NVHOAReform white paper examining Nevada’s codification of the Business Judgment Rule and proposed statutory corrections. Read the full paper at Remedies For Coniseration, C0Reform HOA Laws #6 here.
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1. 1994, the Uniform Law Commission amended § 3-103 of the Uniform Common-Interest Ownership Act to replace “fiduciary” with “trustee” when describing the duty owed by declarant-appointed directors. The Commission explained that appointed directors “should be held to a very high standard of duty because the board is vested with great power over the property interests of unit owners, and because there is a great potential for conflicts of interest between the unit owners and the declarant.” Uniform Common-Interest Ownership Act § 3-103 cmt. (amended 1994).
