When you buy a single-family home, townhome, or condominium that's part of a planned community with covenants, you'll most likely pay fees and assessments, often collectively called "assessments," to a homeowners' association (HOA). If you fall behind in the assessments, the HOA will likely first try to collect the debt using traditional methods. For instance, the association will probably call you and send letters. But if those tactics don't get you to pay up, the association will probably try other ways to collect from you. The HOA might take away your privileges to use the common facilities or file a lawsuit to get a money judgment against you. Most HOAs also have the power to get a lien on your property if you become delinquent in assessments. Not only will an assessments lien cloud the title to the property, which hinders your ability to sell or refinance the home, but the property can also be foreclosed to force a sale to a new owner—even if the property has a mortgage on it.
In Nevada, if your home is part of an HOA and you fall behind in assessments:
If the HOA initiates a foreclosure, you might have a defense to the action, such as the HOA charged you too much, charged you unreasonable fees, or failed to follow state laws. Or you might be able to negotiate a way to get caught up on the overdue amounts and save your home. For example, you might be able to pay off the entire delinquency, negotiate a reduced payoff amount, or enter into a repayment plan.
Chapters 116 and 116A of the Nevada Revised Statutes govern common-interest communities in Nevada.
Based on the association's Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and state law, an HOA can usually get a lien on a property if the homeowner is delinquent in paying the assessments. Once a homeowner becomes overdue on the assessments, a lien will usually automatically attach to the home. In some cases, the association will record its lien with the county recorder to provide public notice that the lien exists, regardless of whether state law requires recording.
In Nevada, the recording of CC&Rs constitutes record notice and perfection of the lien. So, the HOA doesn't have to record the lien in the county records it to be valid. (Nev. Rev. Stat. § 116.3116(9)). Though, the association might choose to record its lien.
Nevada law limits the types of charges that the HOA may include in an assessments lien. (Nev. Rev. Stat. § 116.3116(1)). Unless the CC&Rs provide otherwise, the HOA can include charges for:
Within ten business days after you make a written request, the HOA has to provide you with a statement of the amount of unpaid assessments. The statement is binding on the association. (Nev. Rev. Stat. § 116.3116(13)).
In Nevada, the HOA may hold a foreclose sale and sell the property to a new owner after sending the homeowner a notice of delinquent assessments, recording a notice of default and election to sell, and providing notice of the foreclosure sale.
Before starting the foreclosure, the HOA must mail a notice of delinquent assessment by certified or registered mail, return receipt requested, to the homeowner, which states:
Not less than 30 days after mailing the notice of delinquent assessment, the association has to then record a notice of default and election to sell (NOD) with the county recorder. The NOD must contain much of the same information as the notice of delinquent assessment, along with a warning that if you don't pay the delinquent amount, you could lose your home, even if the amount is in dispute. The HOA must also mail a copy of the NOD to you, the homeowner. (Nev. Rev. Stat. § 116.31162).
The homeowner (or successor in interest) may pay the amount of the lien, including costs, fees, and expenses pertaining to its enforcement for 90 days after the notice of default and election to sell is recorded or the date when notice of default was mailed to the owner, whichever is later. (Nev. Rev. Stat. § 16.31162).
After the 90-day period described above expires and before selling the unit, the association has to give notice of the time and place of the sale by:
The association must also mail the notice to the unit owner (or successor in interest) on or before the notice's first publication or posting date. A copy of the notice of sale also has to be served to an occupant of the property who is of suitable age. Or it has to be served by posting a copy of the notice of sale in a conspicuous place on the unit. (Nev. Rev. Stat. § 116.311635).
Nevada offers foreclosure mediation for homeowners in common-interest communities. Though you'll have to pay the association any amounts enforceable as assessments that become due during the pendency of foreclosure mediation (Nev. Rev. Stat. § 116.31162, § 107.080, § 107.086). To learn how to file a petition to participate in mediation, talk to a lawyer. You may also contact the state's Office of the Ombudsman for Owners in Common-Interest Communities (see below) for assistance.
If you don't pay the amount of the lien, including costs, fees, and expenses within 90 days following the recording of the NOD (as discussed above), the home will be sold at a foreclosure sale. (Nev. Rev. Stat. § 116.31162). The sale will be a public auction, with the property selling to the highest bidder.
Fines and penalties, in contrast to assessments, are charges that an HOA imposes if you violate the CC&R's or other governing documents. For example, letting your lawn become overgrown, leaving trash cans outside, and parking in forbidden areas might result in fines and associated fees.
In Nevada, the HOA may not foreclose a lien based on a fine or penalty for a violation of the governing documents of the association unless:
In Nevada, the homeowner can redeem the property within 60 days following an HOA foreclosure sale. (Nev. Rev. Stat. § 116.31166(3)-(6)).
To redeem, you'd have to pay the purchaser:
Other costs might also apply, depending on the situation. (Nev. Rev. Stat. § 116.31166). To get more information about how to redeem the property, talk to a lawyer. You may also contact the state's Office of the Ombudsman for Owners in Common-Interest Communities for assistance.
A lien for unpaid assessments is extinguished unless a notice of default and election to sell is recorded or judicial proceedings to enforce the lien are instituted, within three years after the full amount of the assessments becomes due. (Nev. Rev. Stat. § 116.3116(10)).
A common misconception is that the association can't foreclose if you're current with your mortgage payments. But an association's right to foreclose isn't dependent on whether you're up to date on your mortgage. Instead, lien priority determines what happens in a foreclosure.
The priority of liens establishes who gets paid first following a foreclosure sale and often determines whether a lienholder will get paid at all. Liens generally follow the "first in time, first in right" rule, which says that whichever lien is recorded first in the land records has higher priority than later recorded liens. A first-lien has a higher priority than other liens and gets the first crack at the foreclosure sale proceeds. If any proceeds are left after the first lien is paid in full, the excess proceeds go to the second lienholder until that lien is paid off, and so on. A lien with a low priority might get nothing from a foreclosure sale.
But state law or an association's governing documents can adjust lien priority.
In Nevada, generally, an association's lien is prior to all other liens, except for:
But in Nevada, an unpaid amount of assessments, not to exceed an amount equal to assessments for common expenses that would have become due during the nine months immediately preceding the date when the notice of default and election was recorded, gets super-lien status. So, that portion of the lien has priority over a lender's first mortgage or deed of trust. (Nev. Rev. Stat. § 116.3116).
If you're thinking about buying a home in an HOA community in Nevada—or you already live in one—take the time to familiarize yourself with state association laws, and the community's governing documents, like the CC&Rs. That way, you'll understand how the association operates and any legal restrictions on it. If you have any questions about the HOA's governing documents or your legal rights, consider talking to a real estate lawyer.
If you're facing an HOA's foreclosure in Nevada, consider consulting with a foreclosure attorney to learn more about state laws, how they apply to your situation, and to discuss all legal options available in your particular circumstances.