I believe HOAs (Homeowner Associations) were generally a good idea, certainly as originally envisioned. Without a way to effectively enforce their legal and contractual basis, there's a good possibility they become problematic—some are already suggesting this is the case.
The general impression of HOAs is a mixed one, reflecting both their functional benefits and the controversies surrounding their expansive powers. The way they have evolved into entities that perform many governmental functions—spark debate.
HOAs should deliver real value for both owners and the community. Unfortunately, a toxic combination of unengaged homeowners, deep pocket special interests, and a blind eye regulator has led Nevada legislators to prefer a root canal over working on HOA legislative reforms. As one who has for years tried to make meaningful changes in HOA laws, I understand lawmaker disdain. I now find my "good" evaluation of the HOA concept in Nevada challenged. A few reasons for this assessment can be found here in my testimony before the Nevada Senate Judiciary in 2019 as well as my comments below.
HOAs today 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). It’s a well-documented fact that state leaders tend to resist serious regulation of HOAs, due to opposition from community developers, institutional investors, and the HOA management industry. In adopting Nevada's original HOA laws (NRS 116) lawmakers sought to limit the industry's power. Unfortunately, over the past few decades, the industry has co-opted our laws and captured the regulator.
In Nevada declarants establish at will, "special declarant rights" provided for in the CC&Rs -they write- during a "Declarant Rights Period". The latter is not defined in NRS. Nonetheless, it is found in many declarations encompassing special declarant rights that remain applicable during the period a Declarant owns any property subject to the declaration. This is not what legislators envisioned.
For example, my association has been under declarant control (Olympia Corporations) for over a quarter century. The declarant has not, nor is he required to provide transparency on when, if ever, his control of our community will end. As a result, the declarant's approval is required to amend the governing documents, redesignate neighborhood boundaries, override Board desecration to change community standards, amend architectural guidelines and more- even following a majority vote of owners.
Our country is a Constitutional Republic working through a representative government that is based upon a constitution and a rule of law. HOAs should be governed, in theory, similarly. There is a set of Covenants, Conditions, and Restrictions (CC&R’s), a set of bylaws and a few other documents – collectively called the “governing documents”. There is a body of law (the corporations code, the civil code, and a bunch of case law) that should act to uphold the sanctity of the governing documents that bind all owners.
CC&Rs are a complex bundle of rights and obligations that attach to each unit purchased. They are usually written by and for developer lacking many generally accepted "consumer protections". They are undisputedly one-sided contracts. Furthermore, governing documents are not subject to state or federal review and Nevada laws impose few restrictions on the terms of HOA contracts. Importantly, under current Nevada law they can be changed without the consent of owners.
Developers supplement CC&Rs with special rights for themselves. Not only are the terms of most “modern” CC&Rs onerous in terms of restrictions, they also skew to benefit declarant/developer and the HOA corporation to the detriment of individual rights.
While not perfect, the HOA system could be good in theory-- provided owners are informed on what they are buying and owners (not developers) elect on an informed basis the Board of Directors charged with carrying out the governance of the association. The two primary justifications for permitting the creation of HOAs that subject property owners to extensive powers affecting their property values and quality of life is first, the decision to purchase is done so voluntarily and on an informed decision. The second, is owners have the power through political process to control actions of the association. I argue, neither is satisfactorily addressed in Nevada HOA law today. For readers interested in a deep dive into common interest community law I recommend this website by the Uniform Law Commission.
An association's management company is licensed by the state and should function as an added fiduciary to owners.
The governing documents should identify preferential terms. Once executed, a community must be protected from changes to what is in effect its constitution. Changes should only be possible by the owners and then only through a difficult process of informing all parties, protecting the under represented, and in compliance with the law.
Changes have been made to Nevada's HOA laws. They are advocated by politically connected deep pockets aided by politicians overwhelmed by other issues and/or willing to turn a blind eye. Changes have put at risk our home investments and our community life. Owner education and involvement is critical to stop and reverse this damaging trend.
I moved to my HOA in Southern Highlands because like most of you, I saw a beautiful community where home values were protected and the future looked promising. As I became more knowledgeable and develop insights into the "systems" at play, I came to see how HOAs, specifically the laws and regulators that impact them, are being abused by special interests.
I also watched our Clark County Commission ignore the owners of Southern Highlands and other HOAs in favor of those with "influence".
Staying informed is difficult. Homeowners do not and understandably often cannot, given the demands of their daily lives, stay vigilant to the many county and state level issues impacting their community. This is not lost on those who wish to take advantage.
Board representative must stay vigilant. I believe they should employ the sizable political influence of their HOAs possesses on behalf of owners. To make this possible, owners need to come together and act collectively. We cannot exclusively count on our traditional elected officials to act in our interests. We cannot afford to remain silent.
To be clear, I am not suggesting the Board, should advocate for one political party's platform and ideas over the other. To the contrary. Most all issues I see affecting HOAs have little or no political party affiliation. Instead, they result incrementally through abuse of power by special interests controlling the narrative and a lack of engagement and/or adequate representation of owner interests.
Today, the collective voice of Southern Highlands owners, as a community, is completely absent from county and state level discussions. HOA boards should keep owners informed of potential threats to the collective interests and advocate on your behalf; something in my assessment most boards completely failing to do.
If you share in my concerns, please get involved. At least lend your voice. It does not take much effort. Together we can make a difference. Separate as we are, we have no chance.
Mike Kosor
Founder, NvHOAReform
