ASSOCIATION Q & A

REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL

MAY 26 2012

Q: I enjoy your column. I am condo owner, and apparently someone visited me when I was not at home. He were driving a camper and, when backing up, hit the side of the building and caused stucco damage. One of the homeowners association board members saw this, and the board send me a certified letter, indicating that I am responsible for the damage since they were visiting me. I do not even know who it was. They have the plate number of the camper. Am I responsible?

A: I don't believe that your board can legally make you responsible for the damages. Even if the board were to charge you for the repairs, I believe that you could dispute the charge through the arbitration process administered by the Nevada Real Estate Division.

If the board has a plate number, they need to file a police report. The police should be able to inform the board if this owner has automobile insurance so the association can contact their insurance company. If the damage is substantial, the association needs to contact the insurance company and provide it with the specific information of time and date as well as the plate number and photos of the damaged building.

Q: I belong to a HOA. At yesterday's meeting the subject of pools came up. We have chlorine in our pools. Is there a law that says we cannot change to salt? By the way, we have two pools. We are talking about changing one of the pools. I would appreciate your response.

A: I am not an expert about pool regulations so I made a couple of calls.

In order to use salt in your pools, you would first have to obtain a permit from the Southern Nevada Health District. That will cost the association.

Once you have the permit, you will have to drain the pool. You will need to buy a salt system that consists of a salt generator and a salt cell.

After it is inspected, as to normal operations, be prepared to dump bags of salt into the pool. The salt generator will convert the salt to liquid chlorine. You tend to see this system more in residential homes and not in commercial pools of an association community. Many pool service providers do not recommend using a salt system especially when your pools have high-capacity usage.

Q: We have a great community of 82 formerly million dollar homes. There are no city lights. Thus, at the urging of residents, our HOA board of directors decided to install some lights on the community's main street. Without a formal plan, our board authorized the community manager to pay our landscaper, who is a friend of our president, more than $8,000 to lay an electrical line down the side of the street. I believe that no bids were solicited. At the most recent meeting, the lights were on the agenda. This is how things went:

1. An HOA board member moved that we install the lights within 30 days (without a plan being available). It was seconded and passed.

2. Another board member moved that we spend up to $3,500 to purchase and install the lights. It was seconded and passed.

3. I asked what the lights looked like, and had anyone seen the lights (apparently only the president has an idea about this). The president described the lights as inground lights. As best as I could determine there was no lighting expert consulted and the rest of the board did not have a clue what the lights looked like. The president has been in contracting and apparently is conceptualizing this project and our landscaper is doing the installation.

4. I then asked how many lights were going to be installed. The president did not know. But, with the help of the board and audience, the president did some mental calculations and came up with a number. Based on what he thought his cost would be, he said that $3,500 was not enough.

5. The board member who made the motion of $3,500, then said "I move that we spend up to $5,000 for the lights and installation." It was seconded and passed.

Frankly, I was astounded by these actions. There is no plan (except possibly in the head of the president) and no bids have been solicited. We have a professional manager and he let this go through.

I have privately let it be known that this is not the way to run a HOA. I am not certain what is happening since I am not on the board. The meeting was more than 30 days ago and the lights are not installed. That may be a good sign that the board may have decided to come up with a written set of plans to consider at an open meeting. Once a plan has been arrived at, it seems to me that we should have the manager call for sealed bids. Once those bids have been studied and acted on, then the lights should be installed.

A: A couple of quick comments. First, according to state law, the board needed three sealed bids prior to selecting a company to install the lighting. Second, unless the landscape lighting has the proper electrical license, they would not be able to install the lighting, let alone obtain a building permit.

Yes, there should have been a plan established that would have included what kinds of light, light fixtures and any poles, if necessary. It also should have addressed the impact on the budget. And the plan should have listed any building code requirements.

You should send a certified letter to the board and the management company that if the lighting project is initiated, you will contact the Contractor's Board along with the municipal or county building department and code enforcement department. This project needs to be done correctly, the first time.

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q&A, P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759, or she can be reached by email at support@hlrealty.com.

ASSOCIATION Q & A

REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL

MAY 19 2012

Q: Last October, our homeowners association board approved as much as a $100,000 loan that was to be repaid by the end of the 2011-2012 budget year, which ended Feb. 28. The loan was to specifically pay a community and a golf course water bill. The actual loan was $50,000 and when it came time to repay it, the board voted not to. Is this an acceptable action by the board and, if so, is there a limit to how often and how much they can borrow from the reserves and not pay it back?

The same board has not funded the reserves for four months now, and they are planning on having additional grass removed from the golf course and desert landscaping installed. The board's reasoning is that it will be reimbursed by the Las Vegas Valley Water District for installing the desert landscaping. So they are again borrowing money from the reserve. If they have failed to fund our reserve for four months, would these actions be acceptable and legal by the board?

The same board members say our reserves are over funded, so they feel it is OK not to fund the reserve and keep the funds in our operating account as they do not want to see the operating account reduced to a minimum.

Should they decide to use the funds from the operating account to pay for the golf course desert landscaping project, would this be acceptable or would they be obligated to fund the reserve?

Our HOA dues have increased 10 percent ($175) for the last two years, and our reserve account is over funded. Why would they do this to 1,358 homeowners?

A: 1. According to Nevada Revised Statutes 116, the reserve funds are not to be used for normal operating expenses. They are to be used for the repair, replacement and restoration of the components of the common elements. Technically, the association owes the reserve account the $50,000 loan that was borrowed for paying the water bill. It should be paid back, as the borrowing of funds for normal operations is in violation of the state law.

The desert landscaping may not be explicitly listed in the reserve study, but landscaping as a category would. Your association is changing its method of landscaping.

It is a fine line, and one could argue that this conversion should not be funded by the reserves. The conversion will save much money as to water costs, which are being substantially increased. The new rates just went into effect this month.

The reimbursement for the conversion by the Southern Nevada Water District will not be 100 percent, but it is substantial.

The fact that the association has not funded the reserve account in four months is a separate issue.

As a homeowner, you have the right to obtain a copy of the reserve study, which will have a chart of what the recommended reserve balances should be for your association. There also will be additional information that lists the recommended reserve projects for any given year. You have the right to obtain the exact dollar figure of the reserve balance.

If the association is fully funded for this period of time, then it would not have to contribute any funds. For example, if your association had $150,000 in reserves and the study stated that by Dec. 31, 2012, it should have $120,000, then it would not need to fund that account. That is assuming that any projected reserve projects could be funded and the account would still maintain its year-end minimum balance of $120,000.

If the reserve account is short by the four months, the association needs to have a plan as to how to reimburse it. In addition, the association needs a plan as to how the reserve account will be replenished if funds are used for the conversion of the landscape in order to reach the recommended reserve balance at the end of the year.

You have the right to review year-end financial reports, as well as projected budgets to learn why the assessments were increased. Utility costs have increased each year. Insurance has increased. Legal costs also may have increased. In addition, your association may have a significant delinquency factor that forced it to increase assessments in order to have enough funds to operate.

All this is speculation. Contact the management company and obtain the financials, and ask the community manager whether they can properly explain why there was a 10 percent increase for the last two years.

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q&A, P.O. Box 7440, Las Vegas NV 89125. Her fax number is 385-3759, or she can be reached by email at support@hlrealty.com.

ASSOCIATION Q & A

REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL

MAY 12 2012

Q: First, I would like to thank you for your continued advice to homeowners. I read as much as possible about every question raised by homeowners. I do, however, have some questions of my own.

First, is it typical or normal for management to preside over a homeowner's association board meeting instead of the president of the association? My understanding is that when a president is elected he or she should be presiding over the meeting, and the role of the community's management company is to give a report, just like any other committee.

In addition, it is also my understanding that when voting on some issues, the president should not vote unless there is a tie, which is typical on any other HOA board.

Second, regarding the installation of security doors, can a homeowner just install them without any prior approval by the architectural committee or the board of directors?

Our directors seem to think that a homeowner can install these doors as they please.

A: Often, presidents of associations require community managers' assistance in presiding over board meetings. You must remember, we have many board members who are inexperienced in HOA business. The presidents may need to learn by example.

Normally, the president votes to make a tie or break a tie, or when there is a formal vote by ballot of the board. Having stated that, the president also can vote on other matters as he or she is an elected board member.

Depending upon your governing documents and your architectural guidelines, your association may allow homeowners to install security doors without approval. That is not the norm for most associations, which would first require approval unless there is a standard door or doors that have already been approved by the architectural committee or the board and is on some list for the association members.

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q&A, P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759, or she can be reached by email at support@hlrealty.com.

ASSOCIATION Q & A

REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL

MAY 5 2012

Q: My husband and I live in a condominium with overgrown trees in front of our unit. We believe one of them is a mulberry tree. It drops a greenish-yellow pollen in the spring, and next to that tree is a berry tree that drops red berries all over the place.

Our homeowners association doesn't listen to my complaints all the time, but this is a serious problem affecting our health. We bought a Honeywell large air purifier to help us inside the condo as we are taking allergy pills.

We were tracking the pollen from our shoes directly from our parking space and walkway into our condo and, as much as we try not to, it is still difficult not to track the pollen onto the patio. Our car and our neighbors' cars were loaded with the pollen.

My question to you is how can we get our HOA to trim this tree or cut it down? We know it's illegal to plant these trees now, but they were here six years ago when we moved in. Please advise us how to get the HOA to trim or cut this tree down. Thank you.

A: These trees are located in the associations' common area. If the association is ignoring your request to at least trim the trees, you should contact Neighborhood Justice Center, which is a division of our court system, to help mediate this problem. They will review the issue with you and then attempt to contact the management company or the HOA board to discuss the matter in an effort to reach a mutual settlement. It does not require any expense.

The only other alternative is to hire an attorney to send a demand letter to the association to remove or to trim the trees. In that letter the attorney would probably state that he or she is seeking reimbursement for air purifier and for your medical expenses due to your health issues.

Q: I am in an HOA and I have a question regarding board elections. Our governing documents require candidates to be owners and full-time residents. Our legal counsel says they may be any owner - even absentee owners. Aren't our governing documents the correct basis for requirements for board candidates?

A: There is no specific state law that addresses this question. You would need to find out from your legal counsel on what basis he or she gave this opinion.

My personal view is that they should be allowed to serve. Not to allow them to serve would be taking away one of their rights as an owner within your community. I would not be surprised if some court has made this ruling.

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q&A, P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759, or she can be reached by email at support@hlrealty.com.

ASSOCIATION Q & A

REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL

APRIL 28 2012

Q: We have a board member that owns a towing company; he does all the towing for our homeowners association. We do not pay him.

The owners of the cars and trucks, which are towed off the property, pay his company. He does make money as a result of our need for his services. He is the only towing company with a license in our area.

I feel this is a conflict of interest, and that he should not be on the board. Am I right or wrong?

A: According to Nevada Revised Statutes 116.31084, a member of the board who stands to gain any personal profit or compensation of any kind from a matter before the board shall disclose that matter and shall abstain from voting on it. In considering the contract with the member's towing company, this board member cannot vote on accepting, modifying or terminating the towing contract.

He should not be involved in any discussions about his towing company or engaging in any actions the board wants to make pertaining to towing policies that would affect his company.

Q: I love your column! I am writing today to ask for your assistance and direction in locating some information.

It is my understanding that reserve funds are to be spent on only items listed in the HOA reserve study.

Last summer a barbecue pavilion, which includes a structure with a roof and seating area, was constructed at the south end of the community.

I have evidence from the HOA accounting records that this structure was paid for with reserve funds. This structure is not listed anywhere in the reserve study.

I also recall reading somewhere that if a new structure was to be erected in a common-interest community and it was not listed in the original plans, all owners within so many feet (300 to 500) of the proposed structure would need to grant permission.

I need to be directed to legal material that I can cite to the board members and the auditors who are in the process of doing an audit for 2011.

The board is spending funds on these types of items and not addressing items in the reserve study, such as resurfacing the parking lot and painting the buildings.

A: Yes, that is correct.

The reserve funds may not be used for daily maintenance.

It is explicitly to be used for the repair, replacement and restoration of the major components of the common elements and any other portion of the common-interest community that the association is obligated to maintain, repair, restore or replace per NRS 116.3115 subsection 2b.

There is no requirement that the funds need to be returned to the reserve study via a special assessment. If you are following the recommendations of the reserve study, the mechanics of the study is formulated to replace funds as funds are used for the various components. A special assessment would not be necessary, unless you did not have adequate funding in the first place. The law states the executive board may impose any necessary and reasonable assessments against the unit owners without seeking or obtaining approval from the unit owners as long as the assessments are based on the reserve study per NRS 116.31152.

It would appear, based on your information, that reserve fund was used for the construction of the barbecue pavilion contrary to state law. As to approval of the structure, you would need to review your community's covenants, conditions and restrictions.

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q&A, P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759, or she can be reached by email at support@hlrealty.com.

ASSOCIATION Q & A

REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL

 APRIL 21 2012

Q: I do read and enjoy your column in the R-J every week and I would like to ask a question about my homeowners association board of directors' actions.

I know that there is a clause in the covenants, conditions and restrictions that gives immunity for actions that are in good faith taken by the HOA. However, is this immunity also granted for acts of willful malfeasance?

Thank you for any help that you may be able to provide in this matter.

A: Most insurance companies will defend the members of an association when a lawsuit has been filed claiming that the association failed to act in good faith. But the insurance companies will send a letter of reservation that they have the right not to pay for any damages awarded to the plaintiff if the courts find that the association's act was one of malfeasance.

Q: I have a question about your column on recalling HOA board members. What if the community's bylaws state a majority of the voting membership must vote affirmative. Would that then be 51 percent of the total memberships?

A: First, a comment. You no longer can nominate directors from the floor of an annual meeting because the law requires that candidates for the board must first complete a disclosure statement per Nevada Revised Statutes 116.31034 subsection 8.

The candidate must make a good-faith effort to disclose any business, financial, professional or personal relationships or interests that would result, or appear to result, in a potential conflict of interest if elected. The second part of the disclosure is that the candidate states that he or she is a member in good standing.

As to the removal of directors, state law supersedes your governing documents. NRS 116.31036 has two parts. The number of votes cast in favor of removal constitutes at least 35 percent of the total number of voting members of the homeowners association and at least a majority of all votes cast in that removal election.

Secret written ballots for the removal election must be sent to the homeowners not less than 15 days or more than 60 days after the date on which the recall petition is received.

The board sets a meeting date on which the secret written ballots will be opened not less than 15 days or more than 90 days after the date the petition is received.

On a personal note, I would like to say I'm back at my desk typing replies to my readers' questions after this past weekend's surgery. Thanks to my surgeon, Dr. Jonathan Sorelle of the Minimally Invasive Hand Institute, the growth in my right arm has now been removed. No cancer.

Barbara Holland, certified property manager, broker and supervisory certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q&A, P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759, or she can be reached by e-mail at support@hlrealty.com.

ASSOCIATION Q & A

REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL

APRIL 7 2012

Q: We want to recall one or two board members. We do not have the mailing addresses for our unit owners. The homeowners association's management company said it cannot release them because of privacy concerns, which I see as a valid concern.

How do we set in motion the recall? Your insights are most welcome and appreciated.

A: Your management company appears to be playing games with you. In order to start the recall, you will need a petition signed by the homeowners, not renters. In that petition, have the homeowners print their names, list their telephone numbers and sign their names. Each page should state the reason for the petition so that it does not look like you had homeowners just sign blank pages. You will need to have at least 10 percent of the members in good standing with your HOA to sign the petition. It is always best to obtain more signatures if possible.

You need to hand-deliver the petition to the management company, and/or send it by certified mail, return-receipt requested. If you hand-deliver the petition, have one of the staffers, preferably the community manager, sign for it.

Not less than 15 days, and no more than 60 days, after the receipt of the petition, the management company is to send recall ballots in the mail to homeowners in the same manner as it sends election ballots.

Homeowners have 15 days in which to return the secret ballot for the recall of the directors. The board sets the date of the meeting, not more than 15 days after the deadline to return the ballots, and not more than 90 days after the receipt of the recall petition.

Only secret ballots are counted at an open meeting. In order to successfully recall directors, at least 35 percent of the total number of homeowners must vote. So, if you had 100 units, at least 35 owners would have had to vote in the recall. To remove a board member, the HOA must have a majority of all votes cast. So, if 35 voted, the HOA would need 18 to vote yes to remove the board members. A quorum is not required to be present at the meeting.

The board members -- both those being recalled and those not being recalled -- are not allowed to have access to the ballots, and they are not allowed to participate in the opening and counting of them.

The management company prepares the recall information (i.e. the process and deadlines) and ballots to be mailed to the homeowners.

Per state law, your HOA would not be allowed to prepare the ballots or mail them to homeowners. If the association failed to follow these regulations, you could file a formal complaint against the association and management company with the Nevada Real Estate Division or the ombudsman office.

Q: I have a question regarding terms of board members. Our covenants, conditions and restrictions state board members serve a two-year term. We have five board members. Three board members' terms expired in January. Our association has elections every year at our annual board meeting. This year no elections were held.

In our other association we have five board members. All five positions are up annually. They serve one-year terms. This year, the board decided to have only three vacancies filled, and next year they plan on having the other two filled. Can they just do this?

A: If the association sends a second notice for candidates and gets no volunteers, it would not need to send ballots to elect candidates, as they would be elected by acclamation. This would be the only scenario where formal elections with ballots would be exempt.

If your association has not even sent out candidate applications, you will need to contact the Nevada Real Estate Division and the ombudsman office, as the board would be in violation of state laws and of your governing documents.

NRS 116.31034 subsection 3 requires that the terms of office are to be staggered in such a manner that there are an equal number of members elected each year. This section does not apply to board members who are appointed by the community developers, or for boards with directors that only serve for one year or less.

It would appear that your association with one-year terms decided to stagger elections. The staggering law, which is not mandatory for associations where terms are one year or longer, does not prohibit your association from making the change.

It is a better system to have staggered terms, because it allows for continuity on the board as opposed to the possibility of a complete new board of directors each year. Your board should have contacted its legal counsel when considering this change, and it should have been on the board's agenda when the change was to be considered and voted upon by the directors.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. To ask her a question, email support@hlrealty.com.

ASSOCIATION Q & A

REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL

MARCH 31 2012

Q: Hoping you can help us again, we have two questions: 1. If a tenant has full power of attorney for the 11 years they are living in our community, can they run for the board? 2. If you are an active member of the Henderson Police Department, is it a conflict of interest to be a board member? Especially when we are trying to determine security and neighborhood watch issues. We are in unincorporated Clark County.

A: Unless otherwise prohibited in your governing documents to have non-owners become board members, you must have three board members who are unit owners. With a three-member board, all would have to be unit owners. If you had a five-member board, you could have a tenant director.

If the board member who works for the police department personally gains from any decisions that you make pertaining to security, there would be a conflict of interest. Most boards would appreciate having a member of the police department on their boards to help address security and neighborhood issues.

Q: Our homeowners association board of directors elections are coming up soon, and I have a question about the voting procedure.

Are HOA members allowed to vote cumulatively for one candidate; i.e., more than one vote for one candidate? Our bylaws and governing documents are silent in this matter.

A: If they are silent, then the answer would be no. There are specific procedures that are associated with cumulative voting. To be on the safe side, check your covenants or bylaws and see if the language states one vote per household. If so, that will confirm the premise that you do not have cumulative voting.

Q: Is it legal for an apartment complex to charge each tenant homeowners association fees?

A: An apartment community cannot charge association fees to a tenant.

A landlord who has a lease agreement with a tenant who resides in an association could pass along to the tenant association fees if such a clause was stated in the tenant's lease agreement.

This is a standard clause in most lease agreements for tenants residing in associations.

Q: We are a small gated community, and have several owners that are behind in their monthly assessments. Is there any downside to going to small claims court and attempt to recover the assessments?

A: An association has a choice of filing action against a delinquent homeowner by going to small claims. Assuming that you win in small claims, you still have the issue of collecting the money. Depending upon the homeowner's personal finances, you may find yourself back to square one where you would have to file foreclosure actions against the homeowner.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. To ask her a question, email support@hlrealty.com.

ASSOCIATION Q & A

REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL

MARCH 24 2012

Q: I purchased a townhome in Henderson in September of 2004. I had been living there for 3½ years and then decided to buy it. I received a notice in December that my townhome is in a flood zone, and the lender is requiring I purchase flood insurance. I found out from a city of Henderson's engineer that the property has been in a flood plain for years.

When I approached my homeowners association, board members said it was my responsibility to cover the insurance.

Why wasn't this in the policy all along? Our covenants, conditions and restrictions are very clear about the association 100 percent covering any building that is in a designated flood hazard area.

My board is are trying to say that Nevada Revised Statutes 116.31152, states it is not obligated to do so. However, our management company and our main insurance company feels the law refers to the governing documents of the association and how they were written.

There are also board members who feel that if the association does provide the flood insurance, the two buildings in the zone would have to be assessed for the insurance company.

I simply do not understand this. All of these buildings are a part of the association. The nine units that are affected pay HOA fees and pay for other damages to common areas.

We had a fire and all of us had to pay higher fees because of it. Why is that different? Plus, we don't own the outer portion of the buildings. It is considered common area. I can see us as individuals making sure that we cover the inner portion, but the outer shell?

This just doesn't seem right. Every homeowner would benefit if these two buildings were covered by flood insurance for keeping up common area and maintaining the value of the property.

I tried talking to our ombudsmen and he was of little use. Another owner and I might file a grievance with the state's Real Estate Division but I have heard from others that this is of little help and costly. I can't afford a lawyer.

I was also told by the state's Real Estate Division that because it has been past five years, I can't go after the real estate agent, previous owner or the title company for not disclosing this information when I purchased the property.

I have tried to get quotes from insurance companies and they are worse than the mortgage company.

If the mortgage company decides to insist that I pay for the entire building, I might as well just tell them to take the house. I have paid on time for 7½ years.

The management company of the association is trying to find out how these two buildings can be removed from the "A" zone, which requires insurance, to the "X" zone, which is a low-risk area and does not need insurance.

However, this could take time and might not be possible. I have lived in this unit for almost 13 years as a renter and an owner and have never had any problem with flooding even when we had some terrible storms and other areas were flooded. It is ridiculous! Apparently, the Federal Emergency Management Agency has been changing maps and they don't seem to make that much sense.

I realize you are not a lawyer and I am sorry to trouble you. I just wonder if you have run into any similar circumstances. I feel helpless. If this insurance becomes so high I can't afford it, they could take my home and I have been reliable and I have good credit.

A: When you purchased the home, the seller (assuming that it is not a lender as lenders are exempt) should have disclosed the fact that your home is located in a flood zone.

You would need to contact an attorney to see if the statute of limitation has expired per the sellers' real property disclosure act, as the omission of this fact would be considered a material omission. You may be entitled to monetary compensation.

As to your association, NRS 116.31152 has absolutely nothing to do with this matter.

Your covenants, Article VI, entitled, "Insurance" Subsection D, absolutely requires your association to maintain flood insurance. The words, "shall maintain a policy of flood insurance" are quite explicit.

In addition, Article IV, entitled, "Purpose of Assessments," under Section 2, states that one of the purposes of assessments are for the "establishment and maintenance of insurance coverage" and then refers to Article VI, the insurance section. Finally under Section 6, "Uniform rate of Assessment" requires the association to have one rate of assessment for each unit.

Here are some suggestions. First, contact the insurance company that insures the association and confirm whether or not the association has flood insurance coverage. Assuming that the association does not have flood insurance, inform the insurance company that you plan to file a lawsuit against the association's current insurance policy for failure to have such a coverage as required by the covenants.

Second, contact the Insurance Division of the State of Nevada and find out if it has any enforcement powers over the association for failure to obtain the required flood insurance.

Third, file a formal complaint against the association for failure to comply with its governing documents with the Nevada Real Estate Division. Now, the Division cannot make the association obtain the insurance, but it could apply other sanctions against the board and individual board members.

Fourth, if your mortgage company purchases flood insurance and adds that cost to your monthly mortgage payment, then file a small claims action against the association for reimbursement of that cost.

I do not believe the insurance company can require you to assume the flood cost for the entire building, only your unit, but you would have to review your mortgage agreement.

Fifth, send a demand letter to the association, to the board of directors and to the management company informing the board that it has a legal obligation to obtain the flood insurance.

In addition, in this letter inform the association that you will hold the association liable for any costs incurred by the mortgage company as to the payment of the flood insurance, any legal expenses and the complete restoration of your unit and compensation for any loss of personal property that could be damaged by any floods to the building and your unit.

In that letter state the association's covenants require a uniform rate of assessment, and that you do not believe that the association has the right to have a special assessment against your unit or the other units in the two buildings.

Sixth, organize the other owners so that you have a stronger position as to the board.

As to the association trying to remove your community from the flood zone, this is a costly and time-consuming project that may or may not happen for years. The association cannot rely on an instant solution by the government to remove the buildings from the flood zone.

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. To ask her a question, email support@hlrealty.com.

ASSOCIATION Q & A

REPOSTED WITH PERMISSION FROM LAS VEGAS REVIEW JOURNAL

MARCH 17 2012

Q: I need some information in a small situation with a homeowners association. A seller was given 90 days to vacate the property and have it cleaned after the close of escrow. An HOA representative informed me that the seller has to go directly after the closing of escrow. I represent the buyer who agreed in January to allow this elderly gentlemen 90 days to move since he lives alone and is a disabled veteran. The HOA has made it clear that it has the right to fine the new owner $50 per week. Can they really do this? I have sent an email showing that this is not a lease situation.

A: Interesting question. It would appear that this association has some leasing restrictions. Technically, if the seller is now paying the buyer rent each month, then the seller would now be a renter. The buyer could be fined for violating the leasing restrictions. This matter should have been brought to the association's attention during the sales negotiations. If there is a leasing restriction, this should have been disclosed long before the buyer agreed to allow the gentleman 90 days to move. All the buyer can do now is to ask for a variance from the association's governing documents. The association should know state law allows an association to grant a variance on a case-by-case basis without negating its leasing restrictions.

Q: I need clarification on liens. When a lien is put on a property due to unpaid fines and late fees, once the house is sold either in foreclosure, short sale or regular sale, must the lender, whether it is a bank or mortgage company, pay those liens off for a clear title? I am aware that HOAs can only collect nine months' worth of assessment fees. However, what about liens for late fees and fines? Our management company manager insists these must be written off 100 percent. He said they can't collect on these due to current state laws. Is this factual? I say no. The management company can negotiate a payoff and not write off the whole amount.

Our HOA is losing a lot of money because of this. I am thinking of our honest homeowners who are paying all their fines and fees, and we have to keep raising the assessments because our management company has failed collect these funds. I thought the purpose of a lien was to insure that the HOA would be able to collect those monies once the house has sold.

A: We need to separate the issues. If a lending institution forecloses on a home, the association can only collect a maximum of nine months of past assessments, late fees and collection costs. The only fines that are considered super liens are the maintenance fines where, for example, the association had paid for maintaining the front lawns of the delinquent homeowner. By state law, the association can now collect those maintenance funds from the lending institution, assuming the association followed the proper procedures per Nevada Revised Statutes 116. Fines are not considered super liens and, therefore, would be written off the books.

In a short sale, the homeowner is asking all parties to reduce their obligations from the lending institution to the association. In a short sale, the homeowner tries to negotiate some settlement with the association in reduced assessments or fines and late fees in order to sell their home.

Generally speaking, it is in the best interest to work with the current homeowner. If the owner cannot negotiate lower terms from either the association or the bank, he or she would most likely go into foreclosure or even bankruptcy. None of those options are favorable as it can take quite some time before that unit would be generating any association income. You almost have to negotiate a short sale as if it were a foreclosure, asking for at least nine months of assessments, which the association would receive sometime in the future when the lender forecloses. That would be your starting point. This should not be a management decision but a board decision and it needs to be made quickly but with some good common sense.

In a traditional sale, if there is a lien on the property, the association is due its fees. The association does not need to negotiate any settlement. Late fees, legal fees, fines and assessments are owed. It is a matter of negotiation between buyer and seller of who ends up paying off the lien.

Note: To the reader who wanted to know if the membership needed to be notified of an emergency board meeting in order to appoint the next person who had the highest number of votes to fill a vacant board position. I missed addressing his follow-up question about notifying HOA members that the board planned to schedule an emergency executive session.

The appointment of a director must be held in an open board of directors' meeting and not in an executive session. The criteria for holding a closed board meeting are found in NRS 116.31085 subsection 3. I want to thank Nevada Real Estate Division administrator Gail Anderson who brought this to my attention.  

Barbara Holland, certified property manager, is president and owner of H&L Realty and Management Co. To ask her a question, email support@hlrealty.com.