What Happens if I Fall Behind on my HOA Fees?
NRS 116 governs Common-Interest Ownership (more commonly known as homeowners associations). If a Homeowner falls behind on assessments (the monthly, quarterly, or annual Homeowner Association fees), the Nevada Homeowners’ Association (“HOA”) can foreclose on the home. The HOA can also foreclose if the Homeowner incurs nuisance and/or abatement charges. Most often, HOAs foreclose when a Homeowner becomes delinquent on monthly HOA fees.
How Far do I Have to be Behind on my HOA Fees Before the HOA Can Foreclose?
It depends on the HOA. In Las Vegas, and Nevada, HOAs usually foreclose when a Homeowner falls nine (9) months behind on HOA fees. However, the HOA may foreclose at any time, if the HOA assessments are not paid prior to HOA foreclosure sale.
What is the HOA Foreclosure Process?
When a Homeowner is behind on the HOA assessments and/or nuisance and abatement charges (collectively referred to herein as “assessments”), the HOA will first send the Homeowner a notice of lien. Second, if the HOA assessments are not paid, the HOA will send the Homeowner a notice of default. Third, if the HOA assessments remain unpaid, the HOA will send the Homeowner a notice of sale. Finally, if the HOA assessments are not paid before the sale date, the HOA will sale the property to the highest bidder at a public auction. Please note: In addition to sending these three types of notices to the homeowner, the HOA will also record these notices at the county recorder’s office, and the notices will be public record.
How Long do I Have to Get my Home Back After the HOA Forecloses?
It is vital that the Homeowner act immediately after a sale in order to redeem (get back) the property. Nevada law allows a short 60-day period for the Homeowner to redeem the property. The redemption process usually takes a few weeks to complete, because it requires several steps to be completed in a particular order. If the Homeowner timely completes the following steps the property will be redeemed: (1) send a notice of redemption, (2) pay the redemption amount, (3) prepare a certificate of redemption for the HOA Purchaser, and (4) record the signed and notarized certificate of redemption.
1. What is a Notice of Redemption?
The first step in the redemption process is that the Homeowner must send a notice of redemption to both purchaser at the HOA foreclosure sale (“HOA Purchaser”) and the HOA Trustee (the person or entity tasked with overseeing the sale of the property). Nevada law requires a very specific set of documents, some of which must be certified by the Recorder’s Office, in order to meet the notice of redemption requirement. See NRS 116.31166. Sometimes locating the HOA Purchaser and the HOA Trustee can simply be obtained by reviewing the certificate of sale. However, when the buying and/or selling of properties at HOA Foreclosure sales has been outsourced (which is quite common in Nevada), it can require an investigation to determine the HOA Purchaser and the HOA (in Las Vegas the HOA Trustee).
2. How Much Does it Cost to Redeem the Property?
That depends on when the property is redeemed and whether the HOA Purchaser invested any additional monies into the property. After the HOA Purchaser receives the Notice of Redemption, the HOA Purchaser and the Homeowner (most often through attorneys) work together to determine the exact amount to redeem the property. The Homeowner is required to pay the (a) purchase price; (b) one percent of the HOA purchase price per month; (c) all assessments, taxes, and lien paid by the HOA Purchaser; and (d) the “reasonable amount expended by the purchaser which is reasonably necessary to maintain and repair the unit . . ..” NRS 116.31166(3)(a)(3). The Wright Law Group is experienced in determining whether monies spent were in a “reasonable amount” and whether the expenditures were “reasonably necessary” in order to negotiate the correct amount the Homeowner must pay to redeem the property. After the amount to redeem is agreed upon, the Homeowner must pay that amount to the HOA Purchaser.
3. What if I’m Short on Money to Pay the Redemption Price?
If you retain the Wright Law Group to assist in the redemption process, we will explore if it is possible in our case to seek the excess proceeds (funds beyond what the HOA needed to satisfy the lien plus costs-usually a substantial amount) from the HOA prior to the expiration of the redemption period to use to apply towards redemption. Otherwise, these monies would normally be paid out to you (or other lienholders) after the redemption period has ended – which would not help you to save your home.
4. How Do I Obtain the Certificate of Redemption?
In most cases, the HOA Purchaser will not sign the certificate of redemption until the funds have cleared the HOA Purchaser’s bank account, which may take several days. After the HOA Purchaser has confirmed receipt of the full redemption amount, the HOA Purchaser must sign the certificate of redemption. The Homeowner must retrieve the signed and notarized certificate of redemption from the HOA Purchaser.
5. How Do I Record the Certificate of Redemption?
The Homeowner must record the certificate of redemption with the Recorder’s Office in the county in which the property is located. This can also be a daunting task, because the Recorder’s Office will reject the certificate of redemption if it does not strictly comply with their rules.
Effect of the Recorded Redemption
Once all the steps above have been completed, it is as if the HOA Foreclosure Sale never occurred. Essentially, the Homeowner is placed back into the position prior to the initial lien.
The Homeowner will still be responsible for satisfying all other liens and/or defaults recorded against the property, unless those were satisfied by the HOA Purchaser. The Wright Law Group can also check to see if additional liens and/or defaults have been recorded against the property.