Cheryl Blomstrom

Many Nevada homeowners live in Common Interest Communities with Homeowners Associations that govern them. One of several areas that has drawn much interest lately is foreclosures by HOAs. Before the housing crash, HOA foreclosures weren’t all that common. However, as the crash happened and more people defaulted on both their mortgages and HOA fees, their frequency has increased.

During the 2009 session, a bill (AB204) modified the Super Priority Lien for HOA dues. The new law provided that an up to nine-month HOA lien for assessments, created by the recording of the association’s Covenants, Conditions and Restrictions (CC&Rs) took priority over other liens except in certain cases. Those included liens recorded BEFORE the CC&Rs recorded, first trust deeds and governmental assessments like property taxes. However, the new law made 9 months of HOA assessments precedent to even first TDs. Where there was a federal loan guarantor, the lien, by federal rules, was only for six months.

Fast forward to today. Some investor buyers have purchased HOA liens at foreclosure and then claimed that this action eliminates the first trust deed. Most of these have been overturned in Nevada’s courts but there was an attempt last legislature to embed this notion in Nevada law. It failed.

Investors and HOAs complain that banks are slow walking foreclosures. They don’t take into account the Foreclosure Mediation activities as well as other legal and regulatory actions that are required. All of these combine to slow the foreclosure process.

Appeals are pending in the Nevada Supreme Court with an estimated over 100 related to HOA foreclosures. In one of these cases, Villa Palms Court 102 Trust v. Riley, Supreme Court No. 62528, the Court recently ordered oral arguments. The case, an action for quiet title following an HOA foreclosure speaks exactly to this issue. Hopefully, this will help resolve some of the many issues involving this matter. I wonder if the Court may yet order consolidation of some of these appeals?

Since this is not yet settled law, it is ripe for additional legislative action. The key is to follow both the decisions of the Court and possible legislative remedies. As you know, the devil lives in the details, both in court decisions and the legislative process. If you hear something that bears watching, please let me know.