In Nevada, state law directs mediation or alternative dispute resolution (ADR) before a homeowner can file a civil lawsuit involving disputes with a homeowners' association (HOA). This requirement is governed by Nevada Revised Statutes (NRS) Chapter 38, particularly NRS 38.300 to 38.360, which cover claims relating to common-interest communities.
The requirements of NRS 38 likely do not apply to a dispute isolated to alleged violations of NRS 116 (the law). This is often misunderstood by owners. Furthermore, a recent Nevada Supreme Court ruling decided the plain directive of NRS 38.310, that “the court shall dismiss” an action failing ADR, while “mandatory”, is not mandatory?? Confusing? Join the crowd. The Court found NRS 38.310 is merely a claim-processing rule—effectively recasting the legislative mandatory obligation to engaged in ADR as an optional step that depends on whether a party objects in time. Explore this ruling in more depth in the blog Nevada Supreme Court Ignores the Law on HOA Disputes—Become Policy Makers In Robes.
Caution: CC&Rs are often written incorporating direct statutory provisions in the language of the declaration. Consulting with an attorney, raising this specific question, should be an early consideration.
The law was aimed at reducing court congestion and encouraging resolution through less adversarial means. Whether it actually does or not is a matter of dispute-particularly in light of recent ruling in Kosor v Southern Highlands Community Association. In any case, failing to comply with this requirement should result in your case being dismissed.
Key Points of the Law:
1. Mandatory ADR Before Litigation (NRS 38.310):
Any “civil action” (NRS 38.300(3)) that involves:
The interpretation, application, or enforcement of CC&Rs (covenants, conditions, and restrictions),
HOA rules or regulations,
Decisions of an HOA board or enforcement actions, must first be submitted to mediation or arbitration.
This applies to disputes between:
A unit owner and the HOA,
An HOA and a unit owner.
It does not apply to “an action in equity for injunctive relief” or a title action to residential property.
2. Jurisdiction:
Until Kosor, it was generally accepted Nevada courts did not have jurisdiction over such disputes unless ADR has been attempted. This has changed.
If a party files a lawsuit without first participating in ADR, the court “shall dismiss" the case if timely raised by the parties (see NRS 38.310(2)). A key point here, according to Nevada's high court in Kosor, is the parties must dispute the lack of ADR if dismissal is to occur. Failing to file the require affidavit affirming to the court ADR was accomplished appears irrelevant.
3. ADR Options:
The parties can choose mediation (non-binding) or arbitration (can be binding or non-binding).
These services are coordinated through the Nevada Real Estate Division's Office of the Ombudsman for Common-Interest Communities.
4. Exemptions:
The ADR requirement does not apply to cases involving:
o Threats to health or safety,
o Actions to collect delinquent assessments,
o Foreclosure of liens,
o Certain small claims cases.
5. Process Overview:
A party submits a claim to the Office of the Ombudsman.
The Ombudsman assists in scheduling mediation or arbitration.
If ADR fails or is unsuccessful, the party can then file a lawsuit in court.
Importantly, parties have 30 days after concluding nonbinding arbitration to commence a civil action (NRS 38.330(4))
Practical Implications:
This law is meant to reduce litigation costs and court congestion by encouraging informal resolution.
Many HOA disputes (e.g., architectural approvals, fines, rule violations) are resolved at the ADR stage without going to court.
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