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december 7 – 8, 2010 CIC Commision Meeting Highlights
Angius & Terry LLP’s General
Corporate Legal Services Department attorneys regularly
monitor the regulatory activities of the Nevada
Commission for Common-Interest Communities and
Condominium Hotels (“CIC Commission”) meetings and
workshops, wherein the CIC Commission discusses and
adopts new regulations to the Nevada Administrative
Code, conducts hearings on administrative complaints
against Community Managers and Common-interest Community
(“HOA”) Board Members upon a formal complaint filed with
the CIC Commission by the Nevada Department of Business
and Industry Real Estate Division (“NRED”), and
addresses other relevant matters.
CIC Commission adopts
Advisory Opinion on the calculation of the “Super
Priority Lien”
In late 2009 various parties began
filing lawsuits regarding the calculation of the Super
Priority Lien under NRS 116.3116 against HOA’s and their
collection companies. Under NRS 116.3116(2), an HOA is
entitled to nine (9) or six (6) months of assessments
for common expenses in the form of a Super Priority Lien
superior to the first mortgage interest after
foreclosure of a unit. The Plaintiffs to these actions
essentially argued that HOA’s were only entitled to an
amount equal to the monthly assessment multiplied by the
applicable number of months. The HOA industry argued
that the amount also includes the costs of collection
and other amounts beyond the amount equal to the monthly
assessments themselves. Several actions are pending,
some of which were successfully dismissed for lack of
jurisdiction in District Court, and were later filed in
mandatory Alternative Dispute Resolution (“ADR”) through
NRED. All parties expect the matter to reach final
resolution in either the Nevada Supreme Court or the
Nevada Legislature.
Many of the Defendants in the civil
actions were collection companies which service HOA’s.
On November 18, 2010, the Nevada Department of Business
and Industry Financial Institutions Division (“NFID”),
the agency which regulates collection companies, issued
a Declaratory Order and Advisory Opinion (“NFID
Opinion”) which took the position that the lawful
calculation amount for the Super Priority Lien was
limited to the HOA monthly regular assessment multiplied
by the applicable number of months under NRS
116.3116(2); essentially taking the position of the
Plaintiffs in the civil actions. Angius & Terry
Collections LLC, and some other collection
companies, filed a Complaint against NFID asking the
District Court for a Temporary Restraining Order and
Permanent Injunction to prohibit NFID from enforcing the
NFID Opinion against collection agencies. Angius &
Terry Collections LLC, et al argued, amongst other
factors, that NFID did not have jurisdiction to
interpret NRS Chapter 116, the NFID Opinion was contrary
to precedent, and the HOA industry was not afforded an
opportunity to comment before the NFID Opinion was
issued. On December 2, 2010 the District Court granted
Angius & Terry Collections LLC, et al’s request
and entered a Temporary Restraining Order against NFID’s
enforcement of the NFID Opinion. A hearing was held on
December 7, 2010 on the Motion for a Preliminary
Injunction against NFID’s enforcement of the NFID Order;
the first day of the CIC Commission’s meeting. On
December 10, 2010 the District Court agreed with the
arguments in Angius & Terry Collections LLC, et al’s
Complaint and granted a Preliminary Injunction enjoining
NFID from enforcing the NFID Order.
As the proper jurisdiction for
interpretation lies with the CIC Commission for matters
concerning NRS Chapter 116, the CIC Commission, with
knowledge of the existing Temporary Restraining Order
against NFID’s enforcement of the NFID Order, and the
District Court hearing taking place during its meeting,
issued its own Advisory Opinion interpreting the
calculation of the Super Priority Lien under NRS
116.3116(2). The CIC Commission, in Advisory Opinion No.
2010-01, determined “Accordingly, the following
amounts may be included as part of the super priority
lien amount, to the extent the same relate to the unpaid
6 or 9 months of super priority assessments: (a)
interest permitted by NRS 116.3115, (b) late fees or
charges authorized by the declaration in accordance with
NRS 116.3102(1)(k), (c) charges for preparing any
statements of unpaid assessments pursuant to NRS
116.3102(1)(n) and (d) the "costs of collecting"
authorized by NRS 116.310313.” In other words, the
CIC Commission agreed with Angius & Terry Collections
LLC, and the HOA industry’s interpretation that the
Super Priority Lien includes collection costs and other
charges.
CIC Commission discussed
and/or adopted new Regulations
The CIC Commission discussed and
adopted various new Regulations which affect Nevada
Administrative Code (“NAC”) Chapter 116 (Common-interest
Communities), NAC Chapter 116A (Community Managers), and
NAC Chapter 116B (Condominium Hotels). The Nevada
Legislative Counsel Bureau (“LCB”) is currently drafting
text consistent with the CIC Commissions rulings, and
final versions of the various regulations will be
available upon issue from the LCB.
NAC Chapter 116 (Common-interest Communities)
LCB File No. R199-09 is a regulation concerning
the fees charged by an HOA, or a person acting on behalf
of an HOA, to cover the costs of collecting a past due
obligation from an owner. This regulation was subject to
discussion and debate at several CIC Commission
workshops and meetings since 2009 as the fees charged by
HOA’s and their collection companies for collection of
past due obligations directly affect the amount of the
Super Priority Lien calculation which is the subject of
several civil actions and Division Opinions as noted
above. The regulation lists limits on the amounts of
fees that may be charged in the collections process for
specific documents, letters, notices and other steps in
the collections process, includes a total monetary cap
of $1,950 for such fees listed, tolls fees during payoff
demand periods, and exempts some third party costs from
the charge limitations of the regulation to the extent
the costs were actually charged to the association by
the third party.
NAC Chapter 116A (Community Managers)
LCB File No. R156-09 is a
regulation concerning the type and amount of a bond
which must be posted by a Community Manager Applicant.
The discussion of this proposed regulation was in
Workshop only, and the CIC Commission did not adopt the
regulation. The HOA and Insurance industries have
expressed to the CIC Commission the inability to obtain
a bond for such issues, and the inapplicability of this
security instrument to the circumstances. However, as
Senate Bill No. 182 tasked the CIC Commission with
adoption of a regulation concerning the bond, the
proposed regulation was drafted. It is expected that the
issue will be resolved in the 2011 Nevada Legislative
Session.
LCB File No. R164-09 is a
regulation concerning the registration and
qualifications of Reserve Study Specialists and was
proposed to eliminate the previous language regarding
“applicants” and “permits” for registration to conform
to current law.
LCB File No. R166-09 is a
regulation which amends provisions regarding the
education of Community Managers which establishes Audit
Committees to audit instructors and courses approved or
funded by the CIC Commission, and amends provisions
regarding continuing education courses and the
requirements imposed upon the sponsors of such courses.
NAC Chapter 116B (Condominium Hotels)
LCB File No. 186-07 is a
regulation first proposed in 2007 which adds many of the
existing provisions contained in NAC Chapter 116
pertaining to Common-interest Communities, to NAC
Chapter 116B pertaining to Condominium Hotels, in regard
to the standards of practice of Board Members, reserve
budgets and studies, financial accounting principles and
practices, registration with NRED, and related issues.
The regulation contains some items that are specific to
Condominium Hotels including financial considerations
for shared components, hotel unit owner specific
provisions, and disclosures in public offering
statements regarding transient rental use,
identification of separate components and charges, and
the relation between the hotel unit and the
association.
calculating interest rates charged on past due common
assessments
NRS
116.3115(3) states: “Any assessment for common
expenses or installment thereof that is 60 days or more
past due bears interest at a rate equal to the prime
rate at the largest bank in Nevada as ascertained by the
Commissioner of Financial Institutions on January 1 or
July 1, as the case may be, immediately preceding the
date the assessment becomes past due, plus 2 percent.
The rate must be adjusted accordingly on each January 1
and July 1 thereafter until the balance is satisfied.”
The Prime Interest Rate as ascertained by the
Commissioner of Financial Institutions can be found at:
http://www.fid.state.nv.us/Prime/PrimeInterestRate.pdf.
Adding 2% to the Prime Interest Rate determines
the interest rate charged to past due assessments for
common expenses pursuant to NRS 116.3115(3).
giving back to the community
Angius & Terry LLP has
sustained a long-standing commitment to contributing to
charitable causes in the communities in which it
practices law. Recent contributions to the Nevada
Partnership for Homeless Youth (“NPHY”) allowed NPHY to
provide gifts to all of NPHY’s teens this holiday season
during their annual Angel Tree program.
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