Panel approves bill on homeowner associations

A bill governing homeowners associations moved forward Friday after weeks of fierce debate over runaway collection fees involving overdue payments.

A Senate committee passed SB174, sponsored by Sen. Allison Copening, D-Las Vegas, in a 4-3 party line vote.

The amended bill specifies that collector and related fees an association incurs to recoup dues must not exceed $1,950.

It also allows for reasonable attorney fees beyond that cap.

"I'm not happy with the $1,950," said Sen. Ruben Kihuen, D-Las Vegas, who offered his conditional support but said he wanted the cap lowered and planned to consult constituents about how to vote on the bill when it heads to the Senate floor.

"But I'd rather have something than nothing on this bill," he said.

Lawmakers had to pass bills out of their committee of origin Friday or the legislation would die.

Homeowners who fall behind on their association assessments - which are used for services such as pool cleaning, security and landscaping in common areas - are often turned over to collection agencies.

As the foreclosure crisis intensified, more and more accounts ended up in the largely unregulated collections industry. Homeowners complained that what started as a $60 or $80 infraction often snowballed into bills of $3,000 or more.

People who seek to buy foreclosed homes often encounter large association liens. Some complain that most of the money goes straight to collection agencies and has a minimal benefit to the associations.

SB174 changes numerous provisions relating to HOAs, including rules about governing boards. But the most controversial section deals with "super-priority liens," which homebuyers must pay before other liens.

The legislation allows collection agency fees up to $1,950 in the lien, along with reasonable attorney fees.

Numerous lawsuits are pending over whether attorney fees get the priority status, Courts have ruled on both sides of the issue.

"For those of you concerned about homeowners, it blows a hole wide open," said Sen. Michael Roberson, R-Las Vegas, who vehemently opposed the bill and said he was suspicious that collection agencies keep sending him emails supporting it. "I don't see where they would be prevented from continually charging a large amount of fees for attorneys."

Copening described a situation in Paradise Spa in Las Vegas in which a single buyer purchased about half of the homes before he stopped paying association dues. The association faces a deficit of about $1 million, Copening said, and the rest of the unit owners are in danger of having their homes foreclosed under them and utilities cut off.

"Their collection costs are way beyond $1,950," Copening said. "Our choice is not to put these in super-priority, and leave seniors to figure out how to pay."

Roberson said Paradise Spa's conundrum can be addressed with existing laws.

Roberson argued that homeowner association boards must be more diligent before contracting with collection agencies that gouge members. He also said the bill needed to include more protections and did not provide a strong enough cap on fees.

He told the story of a friend who was charged a $400 fine when he first joined an HOA for not developing a landscaping plan. Nine years later, he was told the fee and penalties had ballooned to $27,000.

The bill now heads to the Senate floor for a vote.

Other HOA bills passed by the committee were SB204, which revises rules about HOA governing board procedures, and SB254, which revises rules about resolving disputes in an association.

The Assembly Judiciary committee passed AB448, which bars HOAs from charging fees for a homeowner to request landscaping changes, and prohibits restrictions on small satellite dishes. Another bill, AB389, was amended to take out a provision that would have brought HOAs under the open meeting law.