Home > Mortgages > Investors Sue Hundreds of Las Vegas Neighborhood Associations

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Two Las Vegas real estate investors filed a lawsuit recently against more than 500 neighborhood associations, claiming the groups charge illegal collection fees to people who own foreclosed homes.

The massive lawsuit is the latest, and the most spectacular, development in an expensive battle over foreclosed houses in Las Vegas that already has resulted in a score of competing bills in the Nevada state legislature, fights before various state agencies, and dozens of lawsuits, including some in which the participants accuse each other of abusing the legal system.

On one side, real estate investors who are buying up hundreds of homes in Las Vegas accuse homeowners associations of hiring debt collectors to charge fees that are illegal under Nevada’s unique real estate laws. Bank of America filed a similar lawsuit against associations and collections companies in February.

“They’re breaking the law, and they know it,” James Adams, an attorney and one of the investors involved in the fight, told us in April.

[Related Article: Las Vegas Foreclosure Mess Ends in Bitter Duel]

On the other side, the homeowner associations say they need to charge fees to continue maintaining their neighborhoods. To do that they must hire collections companies, which charge their own fee to stay in business.

“They’re filing all these lawsuits, and it’s all nonsense,” David Stone, president of Nevada Association Services, a collection company that serves only homeowners associations, told us in April. “These people just want to make millions of dollars while everybody else suffers.”

In the lawsuit, Adams and fellow investor Puoy Premsrirut accuse the homeowners associations of violating the Nevada law that guarantees the association fees will always be paid, even after a house is foreclosed upon, according to a story by the Las Vegas Sun. (In most states, the association would simply be out of luck).

The law says nothing about collection fees, however. Some houses spend years in foreclosure, wracking up thousands of dollars in such fees. A ruling by the Nevada Financial Institutions Division last year limited how much the collection companies can gather to nine months’ worth of assessments, including collection costs. Collection agencies are appealing that decision.

Meanwhile, investors like Adams and Premsrirut argue that even nine months’ of collection fees is illegal. Their lawsuit accuses the HOAs of “making improper, inaccurate and/or excessive demands,” according to the Sun.

If the investors win, that could spell big trouble for people who live in subdivisions governed by homeowner associations, Stone says. It may leave their neighborhoods with empty houses, plus streets and parks in decline, even as the remaining homeowners pay increasing fees to maintain what’s left.

“These speculators want to come in here and make huge profits, and forget what happens in the neighborhood,” Stone says. “They don’t care.”

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Image: Thierry, via Flickr

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  • Tim

    The entire HOA system is completely out of control and has crossed the boundaries of what is reasonable and even legal. Blame the state’s legislature for giving them the latitude to operate as mini-governments all this time. It is long overdue for a total overhaul. People like Stone and his Gestapo collection agency have had a good run sucking the life’s blood from the community and need to be shut down for good. They are only prolonging and exacerbating any possible recovery. We’ve had enough corruption in this county. Residents are already paying enough in property taxes and land improvement fees (i.e., SID, LID). HOA fees need to be regulated, minimized and limited, otherwise the project should even be built.

    • Larry

      You are obviously one of the people that moved into a HOA and thought it was a good idea until you decided you did not want to pay to keep your neighborhood up. Most all people that live in HOA’s like what their HOA does to keep their neighborhood in good repair. It is the few like you and the greedy out of state investors that are making it hard for the rest of us. I live in an HOA and I am an investor in repo”d homes. I will gladly pay my fair share. That is what I signed up for. I suggest you never buy another home in an HOA if you dont want to pay the tab.

      • Eric

        Larry, good luck finding homes in Las Vegas that are not part of an HOA. Las Vegas has been overrun by this fad of HOA’s, and it’s rare to find homes that are independent. I agree with Tim, these HOA’s are mostly mis-managed and require too much money for their wasteful spending. I gladly pay taxes to help with parks, streets, etc.; but then additional HOA fees for having a pool cleaning every day, or for music to play 24/7 in public areas, or fix gates that are breaking down (and cause false security anyway), etc. In addition to these poorly managed accounts, the cookie cutter neighborhoods that try and push authority on making everyone follow rules and regulations is completely out of hand. I understand trying to keep property values up and a nice neighborhood, but I think that the HOA having the power to penalize and even evict residents from their homes for not following the prescribed “norm” is just wrong.

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  • St8kout

    I’ve been looking to buy a house but I see so many nice neighborhoods being turned into slums from investors buying up houses and turning them into rentals. The rentals all seem to have several adults living on the cheap crammed into them, each with their own car (and sometimes homemade trailer), turning front lawns and streets into parking lots. This is happing all over the country.

    I imagine HOAs prevent this in their neighborhoods so that’s a good thing. However, I really don’t care to have a lifetime of monthly fees hanging over me long after the house is paid for. Plus, what is to stop them from steadily increasing year after year until it becomes so expensive you have to move out? Sounds as bad as paying rent instead of buying. I also could not help but notice that homeowners in an HOA seem to pay more property tax as their house gets assessed to a greater value. You just can’t win.

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