HOA regulators captive to deep pockets of developers, property management industry, say critics 

By: - October 30, 2023 5:18 am

Most homeowners are oblivious to the goings on in their HOAS and the complex laws that govern them. (Photo: Ronda Churchill/Nevada Current)

The state agency charged with regulating homeowners’ associations is a smokescreen, designed to do the bidding of the multi-million dollar industry it oversees, at the expense of homeowners subject to HOA control, according to critics.  

More than half a million Nevadans live in properties subject to homeowners’ associations. Wielding powers generally reserved for government tribunals, HOAs can assess fines, deny property rights, and even foreclose. 

But with the exception of seeking occasional architectural reviews, most homeowners are oblivious to the goings on in their HOAS and the complex laws that govern them.

“No one reads the CCRs,” Ken Richardson, a former staff member of the state’s HOA Ombudsman’s office, says of the Covenants, Conditions and Restrictions that govern homeowners in HOAs.

“It’s apathy,” says Centennial Hills homeowner Sam Covelli, who admits he ignored his HOA for years. “That seems to be common. People don’t have time to go to these meetings, and there’s really something wrong on the regulatory side.” 

Covelli, a retired state corrections officer, has been around long enough to remember how state regulators turned a blind eye to a scandal involving control of local HOAs. An FBI investigation resulted in the largest political corruption case in Southern Nevada history – marked by the pre-trial suicides of four defendants and multiple convictions of co-conspirators – HOA officers, attorneys, and retired police.

Covelli and others contend little has changed, and that industry insiders are embedded in the regulatory landscape. He says a task force created by the 2019 Legislature was prematurely killed for fear it would lead to exposure of the system’s flaws.

The task force, the brainchild of former Sen. Joyce Woodhouse, met twice in 2020 and was disbanded. It has not met in more than three years. Minutes from its second and final meeting in September 2020 have never been posted, presumably for lack of a subsequent meeting where they could be approved. 

Woodhouse declined to comment. 

“It was like, ‘well, we’re kind of done for now,’ and that was it,’” recalls Richardson, a member of the task force during its brief existence. “I thought when the task force was created that it would be more of an ongoing body, organized to review and recommend the enactment of legislation or regulations that would be helpful to homeowners in HOAs. I did expect that it would be much more involved than it actually turned out to be.”

A spokeswoman for the Nevada Real Estate Division (NRED) says the legislation creating the task force was permissive. It allowed but did not require the director of the state’s Business and Industry Division to establish a task force and meet when needed. 

Ultimately, the pandemic led the Real Estate Division to prioritize it’s (sic) work after returning to in-person operations due to staffing shortages, reduced budgets, backlogs, etc.,” spokeswoman Teri Williams said via email. She says subsequent bills involving HOAs have been “vetted during the legislative process,” and cites “a lot of legislator engagement related to HOA issues and ongoing discussions.”  

Nevada’s legislature meets every two years for 120 days, and is often hard-pressed to complete its business. Complex issues, such as HOA laws, are sometimes given short shrift.  

“It is in the nature of a gubernatorial transition and a short legislative session that there is just not the time to do that kind of deep dive now, but we can come back next session with ideas on how we can better enforce these,” then-Business and Industry Director Michael Brown told lawmakers in 2019 of the proposed task force’s function. 

“These are very complex issues. And they take some time to study and sort out,” observes Ferguston. “And of course, they’re written in legalese that often is subject to interpretation. Therefore, you need to ask, what does this actually mean? So I think the task force could be beneficial in that way.”

Covelli, a Las Vegas homeowner, points to a 2023 bill that increased the fine for filing a “false or vexatious complaint” from $1,000 to $10,000 – an amount critics say is designed to deter complaints. It also allows an HOA to ban a homeowner from serving on its board for up to 10 years for filing a vexatious, defamatory, or false complaint with the state. 

“It would have had such a chilling effect on homeowners that are already on the short end of the stick in this whole process,” says Covelli. 

The bill would have allowed HOAs to use community funds to recover compensatory damages, attorneys fees, and costs from a person who takes “retaliatory action” against a board, as determined by NRED. The provision was eliminated from the final version, which was signed into law by Gov. Joe Lombardo. 

Williams, the state’s Real Estate Division spokeswoman, notes the division has “conducted regulation workshops during which stakeholders are brought to the table to address pertinent issues.”

NRED’s website indicates the division held one workshop in 2020, none in 2021, three in 2022 and none this year. 

‘The appointments probably could have been broadened’

Southern Highlands homeowner Mike Kosor, a vehement critic of the state’s regulatory scheme, says the workshops are a ruse designed to further the goals of a cadre of community association management companies and attorneys, and generally result in anti-homeowner regulations, such as a 2022 workshop-prompted change that prohibits HOA board members from acting without the consent of the board. 

“What is the definition of ‘act’? If I want to hold a town hall meeting for my constituents, I have to get approval from the board before I can do so or it’s a fiduciary violation,” says Kosor. “It’s silencing the minority.” 

Kosor has long been at odds with Southern Highland’s developer Garry Goett over Goett’s refusal to turn over the board to homeowners. Goett sued Kosor for defamation over comments Kosor made in materials disseminated to homeowners. Kosor filed a countersuit alleging Goett was trying to chill his right to free speech. 

The Nevada Supreme Court agreed with Kosor. Justice Kris Pickering wrote that Kosor’s statements were intended to “drive civic engagement” among his neighbors. 

The Southern Highlands Community Association employs and shares an address with Goett’s Olympia Management Services. The five-member HOA board is controlled by three developer-appointed members, a balance of power that would shift to homeowners if Goett relinquished control. Southern Highland’s development agreement calls for the developer to transfer control to homeowners after selling 75% of the community’s properties, a threshold Kosor contends has been reached.  

In 2015, lawmakers increased the previous threshold for transferring control from 75%, the national standard, to 90%, prolonging developer control, sometimes at the expense of homeowners.  

The increased threshold is one of several issues Kosor says could be addressed by the task force, if it existed. 

“The Task Force process holds value if the discussion results in a conclusion, as the Legislature intended,” says Kosor, who says the expectation was the task force would hear concerns, and determine whether to recommend legislative action, regulatory change, more education, or embrace the status quo. 

Kosor has spent hundreds of thousands of dollars on legal battles he says could have been avoided by effective regulation. 

“The task force’s role was to get the stakeholders together and discuss potential changes to the laws and regulations,” says Kosor. “For instance, the statute is unclear as to whether HOAs are required to seek competitive bids, and that’s never been addressed.” 

But NRED administrator Sharath Chandra, who declined to be interviewed for this story, said in response to written questions the task force “was not meant to represent the State’s HOA members.”  

The law specifies the task force have a member from the Real Estate Division, the Ombudsman’s office, the Attorney General’s office, and the HOA industry, to be appointed by the director of Business and Industry, who serves as chair. 

“The appointments probably could have been broadened to include homeowners who maybe don’t have quite the same perspective, but nevertheless, have something to contribute to the issues that they face in their own communities,” says Ferguson, who served as a training officer for the HOA Ombudsman.  

(Graph from Nevada Real Estate Division Ombudsman Report)

Chandra notes the division’s seven-member HOA commission, which is appointed by the governor,  meets regularly, and “acts in an advisory capacity to the Division, adopts regulations, and conducts disciplinary hearings.” Four members are industry representatives, including a lawyer, accountant and developer. Three members must own property governed by HOAs.

Kosor notes the Attorney General’s office serves not only as prosecutor before the commission, but also provides its legal advice. 

“Why would I want to take any complaint before the Commission under that scheme?” asks Kosor, adding the complaint process involves a maze of red tape, and the majority of complaints are dismissed for lack of evidence, with no direction from NRED on what’s missing. The division provides no option for appeal other than legal action.  

The state’s report for fiscal year 2022/2023 through April of this year says of 84 complaints received about HOAs, NRED identified violations in two cases, making them eligible for a determination from the state’s HOA commission. 

Kosor says the task force, by holding regular meetings, and inviting participation from homeowners, could have pre-empted complaints, and prevented homeowners from having no recourse but to sue their HOAs. 

NRED administrator Chandra declined to say whether he has suggested that Business and Industry Director Terry Reynolds reconvene the task force.  

“While the task force is currently dormant, engagement regarding HOA matters continue to be addressed,” says Williams, the division’s spokeswoman. “The director and the division retain the authority to reconstitute the task force at any time.” 

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Dana Gentry
Dana Gentry

Dana Gentry is a native Las Vegan and award-winning investigative journalist. She is a graduate of Bishop Gorman High School and holds a Bachelor's degree in Communications from the University of Nevada, Las Vegas.