HOA foreclosure process comes under scrutiny

By: - March 19, 2021 6:53 am
foreclosed home

A foreclosed home in North Las Vegas in 2009 during the Great Recession. (Photo By: Scott Drzyzga via Flickr, CC BY-NC 2.0)

Nevada lawmakers last summer declared racism a public health crisis and signaled a desire to address systemic racism. Now, it’s time for lawmakers to pass policies to support that mission, says state Sen. Pat Spearman (D-Clark).

And they could start with homeowners associations.

Spearman is sponsoring Senate Bill 144, which would change the process used by HOAs when they foreclosure people’s homes over fines and fees. Currently, such foreclosures are non-judicial, meaning courts are not involved in the process. SB 144 would make that foreclosure process judicial, which Spearmen argues would insert a layer of due process for homeowners and additional scrutiny on associations that many people believe abuse their power.

“Right now it’s really what the HOA says that you owe (goes),” said Spearman during the bill’s first hearing in the Senate Judiciary committee on Thursday, “and who you gonna call? Ghostbusters? They can’t help.”

The bill would also require associations to create a website or portal where homeowners can easily track important information, including what outstanding fines and fees they have, what collection agencies work with the HOA, and the name of the community manager.

Brenda Bertsch told lawmakers about a dispute with her condo’s HOA which stemmed from a plumbing issue that flooded her condo with sewage while she was recovering from major back surgery. The dispute ultimately ended with the association initiating a foreclosure.

She wondered aloud whether a judicial process could have helped.

“Maybe the judge would have said (to the HOA), ‘You don’t get to steal that money.’ Maybe the judge would have said, ‘They owe you.’ Maybe I wouldn’t be forced into bankruptcy, or having the nightmares that I have.”

Peter Aldous, a lawyer from the Legal Aid Center of Southern Nevada, told lawmakers that stories like Bertsch’s are “all too common.”

Her horror story was echoed by other supporters of the bill, who recounted experiences trying to navigate the confusing process of catching up on fines and fees that are often passed around and compounded.

The bill was opposed by groups like the Nevada Association of Community Managers and the Creditor’s Rights Attorney Association of Nevada, who expressed concerns that changing the process would lead to increased costs and unintended consequences.

Two Republican lawmakers raised concerns about smaller HOAs that might not have a dedicated community manager. Spearman said a conceptual amendment that exempts HOAs with fewer than 100 homes is expected to be introduced.

The systemic racism component

HOA foreclosures disproportionately affect communities of color. Spearman framed the bill as a way to follow up on a resolution that declared racism a public health crisis, which was unanimously passed by the Nevada State Legislature during a special session last summer: “We have to ask ourselves the question: Were those just pretty words, were they just something we did, was it just something to make us feel good and make us forget there are people that are suffering? What do we intend to do about ending structural racism?”

Spearman referenced an analysis using foreclosure data from the Nevada Association of Realtors that found HOA foreclosures happened most frequently in zip codes with higher percentages of people of color.

In Clark County, it’s 89030 and 89106. The former zip code is predominantly Hispanic. The latter is predominantly Black and Hispanic. In both zip codes, HOA foreclosures made up more than 10% of foreclosures.

“I did not say the HOA or their representatives were racist,” emphasized Spearman. “What I did say is that the process as it currently exists feeds into the systemic structure of racism.”

Home ownership is one of the primary ways people attempt to build generational wealth. Taking a home away from someone whose HOA fines ballooned out of control and went unpaid — perhaps because that person was out of work due to the pandemic, or because of medical bills — has an effect not just on the homeowner but on their children and their children’s children.

Spearman said that for anyone whose life could be upended by an unexpected $400 bill, an HOA membership can be “an expense of which you are incredibly proud because it signifies you have bought your first home, but of which you are also terrified because you know that if a water line breaks, a tree dies, you may be assessed fines you cannot pay.”

And if enough of those fines pile up, your home could be foreclosed by the HOA.

Spearman imagined a hypothetical situation where an investor purchased the foreclosed home: “Isn’t it ironic that the person who probably made less than $70,000 a year has lost their home and it now can be sold to somebody who has a nine figure — a nine figure — net worth?”

[Editor’s Note: This article has been updated to correct the name of Legal Aid Center of Southern Nevada’s lawyer. He is Peter Aldous.]

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April Corbin Girnus
April Corbin Girnus

April Corbin Girnus is an award-winning journalist with a decade of media experience. She has been a beat writer at Las Vegas Sun, a staff writer at LEO Weekly, web editor of Las Vegas Weekly and a blogger documenting North American bike share systems’ efforts to increase ridership in underserved communities. An occasional adjunct journalism professor, April steadfastly rejects the notion that journalism is a worthless major. Amid the Great Recession, she earned a B.A. in journalism from the University of Nevada Las Vegas, where she served as editor-in-chief of the student newspaper. She later earned an M.A. in media studies and a graduate certificate in media management from The New School for Public Engagement. A stickler about municipal boundary lines, April enjoys teaching people about unincorporated Clark County. She grew up in Sunrise Manor and currently resides in Paradise with her husband, two children and two mutts.