| Las Vegas Press
Serving the Las Vegas, Nevada Community February 24, 2000 |
||||||
|
|
||||||
|
Private government gone bad Breaking rules and going bankrupt, homeowners association have the look of an ugly scandal waiting to happen By Larry Wills Nevada homeowners associations are coming apart at the seams. Despite recent reform legislation, many association boards are meeting in secret, hiding financial records and keeping members in the dark about what's going on. One result is some associations are facing financial ruin. Worse, the only state oversight, the common interest communities ombudsman, has been ordered to stay out of the issue. Mary Lynn Ashworth, who works in the state Department of Business and Industry, says she's been ordered not to speak to the press or attend association meetings without permission from her superiors. "It's gotten crazy," state Sen. Mike Schneider, D-Las Vegas, says. "We have dozens of associations in this town that are legally bankrupt. There is no money to cover major repairs, such as streets and roofs." And Las Vegas isn't alone. In Elko, the Spring Creek Property Owners Association, a huge 20-year-old development encompassing 5,420 lots, is facing bankruptcy. "We've never had an audit in 17 years," board member Christina Naungayan says. "They put the minutes in a safe. We cannot get the whole record. I'm not shown one receipt and am expected to accept what is told to me without one shred of paper. The members take oaths to the corporation, not the people. "We are so much in debt. In a year or so, we'll be bankrupt. We can't afford to increase assessments for mismanagement of funds. A lot of people are on fixed incomes. We have to look at some other form of government." Spring Creek's situation apparently deteriorated when the board received an exemption last year from a state law mandating open meetings. Schneider recalls, "At Spring Creek, open meetings were part of the deal. Even though they were not part of NRS 116 [the law governing homeowners' associations], they promised to be in compliance." The Elko members had argued that complying with the law would have been too expensive for the property owners. Steve Sexton, a reporter for the Elko Daily Free Press, says the board quickly forgot its promise. "They met among themselves, didn't even have a quorum and selected a president. They made a news release for the following Thursday. I got a hold of it on Tuesday and printed it." Sexton sees a pattern of secrecy at Spring Creek where board members defy requests for openness, leaving the only recourse in the courts. "The biggest violations of the open meeting law is when they appoint people to the architectural committee. It's all in secret. The membership doesn't know how they're voting." Naungayan says that policy is deliberate. "I made a motion for the board to accept the NRS 116 rules. There was no second." Schneider sees Spring Creek as typical of Nevada associations. "We have quasi-governmental agencies that are out of control," he says. "Some do work well. But have a theory that every good homeowners association will eventually go bad." Even upscale communities are running into problems. The Sun City Summerlin board election was marked by candidates' calls for better fiscal control and more openness. One burning issue is whether the board should reveal the salaries of the top three employees. Bernard Silver, a persistent critic of Sun City board policy, has demanded those figures, but ran into a brick wall of legal opinions. Silver gained a favorable ruling from the attorney general's office and a subpoena from the Nevada Real Estate Commission demanding the information, but still the board has resisted, arguing the information is confidential. Board member Bob Passmonick has claimed that, in addition to the pay secrecy, there may be other irregularities, such as a bonus paid to an employee without board approval. He has threatened to take the issue elsewhere if the board doesn't change its policy. "We paid out a $15,000 bonus to an employee on Sept.17," he says. "If this doesn't end, I'm going to put together a package and give it to someone outside Sun City." Newly elected board member Sheldon Factor blames Sun City's problems on a lack of understanding on how good government works. He's optimistic that basic management reforms will make the difference. In the meantime, Sun City residents saw their membership dues rise from $490 a year to $520. "It's not just Sun City and Spring Creek," Schneider says. "It's many associations all over the state." Las Vegas assocations that have reportedly encountered problems with management and fiscal accountability include Paseo Del Rey, Canyon Gate, Rock Springs Vista III and Peccole Ranch. Some of the worst problems lie in older condominiums, which have deferred maintenance for years. A homeowner may believe he has only to pay his monthly $80 or $100 fees, and is unaware that huge repair bills--in the thousands of dollars--may be coming. "All this stuff is inexcusable to me," Schneider says. "A quasi-governmental agency should operate like regular governments. You pay your money with the anticipation that you're entitled to monthly or quarterly statements. You have to know that to make an intelligent decision." Schneider says one solution would be to require associations to maintain reserve funds to cover future maintenance. "This is just good consumer protection. I sure don't want to buy a house in an association that's bankrupt." Schneider also wants to implement criminal penalties for violations, gross misdemeanors and even felonies in severe cases. "If this continues, in the next session, we'll go for penalties. This is serious stuff." But he cautions it's also a nationwide problem where legislators are trying to keep up with homeowners board abuses. In Texas, reports of irresponsible behavior were so rampant, the Legislature considered outlawing homeowners associations. Another reform may be to license property managers, like real estate agents. "The way it is now, they can actually run a multimillion-dollar association out of the trunks of their cars," Schneider says. Couple that with unscrupulous attorneys, and you have the groundwork for more trouble. "I would think that if a board received a bad legal opinion, it could go after the attorney," Schneider says. "Somebody's going to be liable." State Sen. Ann O'Connell, R-Las Vegas, says the first priority lies in strengthening the ombudsman's office. She's received assurances from Gov. Kenny Guinn that $350,000 in earmarked funds finally will be funneled to that office. That money was paid by the associations, at $3 per unit per year. "These are not taxpayer funds," she says. "They're paid by the community association owners." O'Connell says she's also working on ensuring Ashworth retains the latitude to do her job. "This is something that we put in place after seeing critical need. There seems to be a resistance to enforcing the law. You can't do that." Phil Testa, president of Justice for Home and Condo Owners, an activist group seeking association reform, has called for the resignation of Ashworth's boss, Real Estate Division administrator Joan Buchanan. Testa claims the ombudsman has been hobbled by Buchanan in a deliberate attempt to protect corporate interests. The administrator has not sought additional staffing for the ombudsman, he says, even though the money is available. Testa also sees property managers and attorneys working together through a national organization called the College of Community Associations to disenfranchise association members. The goal of the organization, Testa says, is siphoning money from the members. "This is the greatest scam since Prohibition. All attorneys knowledgeable of common interest communities are CAI attorneys." The issue has drawn the attention of the American Bar Association, which may investigate lawyers' roles in common interest communities. Schneider believes there may be unethical or criminal behavior in cases involving construction defects. Those cases involve collusion between the attorneys and the property managers. "When the smoke clears, attorneys get 40 percent of the money and expert witnesses get 10 to 20 percent. The homeowners are left with 40 to 50 percent to fix up the defects. "The whole process is so corrupt. Millions of dollars are involved here." Buchanan and Department of Business and Industry director Sydney Wickliffe did not return phone calls from CityLife. The property management industry may not be opposed to tighter laws governing associations. "I don't have a problem with it," says Vicki Parris, of Terra West, a large Las Vegas property management firm. "We're already required to have a certification." She says many residents don't understand how associations function and how that relates to their bills. "They call and say, 'Why did I get this bill?' There is a big need for more education." Parris also says tighter controls are needed to protect homeowners' rights. She supports open records and fiscal accountability by property managers. "That's the whole reason they do need to be certified. The boards and the homeowners depend on their managers." For more Nevada homeowner association stories go to: |
" | |||||
|
|
||||||
The American Homeowners Resource Center P. O. Box 97 San Juan Capistrano, CA 92693 Telephone: (949) 366-2125 Website: http://www.ahrc.com Email: ahrc@ahrc.com © 1992 - 2000, AHRC News Services |
