When Advice of Counsel Becomes De Facto Law

Nevada law protects HOA directors who make decisions on an informed basis, even when those decisions later prove wrong. Consulting association counsel should ordinarily be strong evidence that a board acted responsibly.

But what happens when allegation rise that the board’s action itself violates Nevada law? If NRED can, as it is now doing, terminate a complaint simply because the board consulted counsel, something important has gone missing.

The regulator never openly decides whether the conduct was lawful.

If the Division can close a complaint while concealing whether—and how—it resolved the underlying legal question, and formal petitions seeking public rulemaking are not meaningfully considered, both paths to regulatory clarity disappear. The result is a system in which boards and counsel can operate under unresolved legal interpretations while owners are left to bear the cost of testing those interpretations in court.

That is not merely inefficient. It undermines the role Nevada’s administrative process was designed to serve.

Advice of Counsel Is Not a Regulatory Determination

Association counsel may reasonably advance the interpretation of Nevada law most favorable to the board’s position. But counsel is also retained through an ongoing contractual relationship with the association, overseen by that same board.

That relationship should not be ignored. Lawyers, like everyone else, operate within institutional and economic relationships. And legal advice frequently involves judgments about risk: How certain is the law? How aggressive a position can reasonably be defended? How likely is a challenge?

Does the continuing relationship influence where counsel draws those lines? Perhaps, perhaps not. The point is that association counsel is an advocate for a client—not an independent regulator charged with determining what Nevada law requires.

Advice of counsel vs regulatory determination

Sometimes counsel’s interpretation will be straightforward. Sometimes it may be aggressive. Sometimes it may be a stretch—or simply wrong. That makes counsel’s opinion important advice, but not a substitute for independent regulatory review.

Suppose counsel advises a board that Nevada law permits a particular action. The board is then presented with a substantial legal challenge to that advice, declines to seek further review, and proceeds anyway. An owner files a complaint alleging that the action violates Chapter 116 and points NRED to statutory language that appears to say exactly that.

This is not merely theoretical.

What is NRED’s role? Surely it cannot be enough to determine that the board asked its lawyer. The underlying question remains:

Did the action violate Nevada law?

If NRED closes the complaint exclusively because counsel was consulted, it has not answered that question. It has effectively accepted private counsel’s interpretation without independently determining whether that interpretation is consistent with the statute NRED is charged with enforcing.

But there is a second question as well.

If NRED does make that legal determination, should it be making it through a confidential complaint closure without Commission involvement?

A determination that a disputed board practice is consistent with Chapter 116 can have significance far beyond a single complaint. It establishes, at least in practice, the legal standard the Division will enforce.

That begins to look less like investigation of an individual complaint and more like interpretation of Nevada HOA law.

And that raises an institutional question Nevada should confront directly:

Who is supposed to make those interpretations—Division staff acting confidentially, or the Commission through a public process?

This Is a Recognized Regulatory Problem

Administrative law has long recognized the concern that informal legal interpretations, though not themselves binding law, can become binding in practice. Nevada’s HOA system presents a troubling variation.

Here, the interpretation may originate not with the regulator, but with private association counsel—and without any explicit agency policy statement at all. A board adopts the interpretation, an owner challenges it, and NRED closes the complaint without publicly determining whether the interpretation is correct. Over time, an aggressive legal opinion can become de facto law without ever becoming law or having precedential support.

That is precisely why the distinction between Division investigation and Commission adjudication matters. When a complaint presents an unsettled legal question with consequences beyond the individual case, Nevada needs a mechanism for producing a public, authoritative answer—not merely a confidential closure.

This Is a Due-Process Problem

The Legislature did not create an administrative complaint process merely to determine whether an HOA board talked to a lawyer. It created a process through which alleged violations of Nevada HOA law could be investigated and, where appropriate, enforced. An owner who alleges facts showing that a board violated Chapter 116 should be entitled to regulatory consideration of that allegation.

The board’s consultation with counsel may be highly relevant to whether the directors breached their fiduciary duties or should face discipline. But it is a separate question from whether the challenged conduct violated Nevada law in the first place. Collapsing those two questions effectively denies owners the regulatory review the statutory process was intended to provide.

NRED Needs to Answer the Legal Question

None of this means NRED must reject counsel’s advice every time an owner disagrees. Nor does it mean every disputed interpretation requires discipline. It means the regulator must perform its regulatory role.

When an owner alleges that a board violated Nevada law, NRED should determine whether the challenged conduct is consistent with that law—or, if the issue requires Commission interpretation, place the legal question before the Commission.

What it should not do is substitute this question:

Did the board consult counsel?

For this one:

Did the board comply with Nevada law?

Because when that happens, “advice of counsel” does not merely protect the board.

It replaces regulatory enforcement.