Critics contend the Nevada Real Estate Division (NRED) is a smokescreen designed to do the bidding of the multi-million dollar industry it oversees, often at the expense of homeowners subject to HOA control. (Getty Images)
The state department that regulates homeowners’ associations is overly secretive, bogged down in minutiae that leaves little time for significant issues, and shies away from big-ticket enforcement while instead targeting “impoverished boards” and disruptive homeowners, say critics, including a member of the commission that regulates HOAs.
“If the Gaming Control Board or Public Utilities Commission screws up, on the other side you’ve got multimillion or multi-billion dollar organizations that will appeal quickly to district court,” says Bob Sweetin, who was appointed a year ago by Gov. Joe Lombardo to the Commission for Common-Interest Communities and Condominium Hotels (CIC).
Unlike private industry, homeowners and HOA boards generally lack the resources for expensive appeals.
A spokeswoman for Nevada Real Estate Division (NRED), the state agency within the Department of Business and Industry charged with regulating homeowners’ associations, declined to respond prior to publication of this story to a list of questions submitted by the Current.
“The division will reach out directly to Commissioner Sweetin to discuss his concerns in an appropriate forum,” Department of Business and Industry spokeswoman Teri Williams said via email Friday.
Nevada has 3,711 HOAs which represent the owners of 623,917 housing units – half of the state’s 1.3 million homes, according to the state. Wielding powers generally reserved for government tribunals, HOAs can assess fines, deny property rights, and even foreclose.
Critics contend NRED is a smokescreen designed to do the bidding of the multi-million dollar industry it oversees, often at the expense of homeowners subject to HOA control.
Sweetin, in an interview with the Current, said nearly every case before the CIC “involves either what I would call impoverished boards of directors, and whether or not they have three members as required by the law, or is against homeowners who are aggressive about their complaints, or get prosecuted for filing a false complaint, filing a repetitive complaint, or disrupting HOA board meetings.”
Legislation passed in 2023 and signed by Lombardo increased the fine for filing a “false or vexatious complaint” from $1,000 to $10,000 – an amount critics say is designed to deter homeowners from filing complaints. The law also allows an HOA to ban a homeowner from serving on its board for up to 10 years for filing a complaint that is deemed by the state to be vexatious, defamatory, or false.
Critics contend the measure and recent enforcement efforts serve as a “rainmaker” for attorneys and property management companies, which has a chilling effect on homeowners, and deters voluntary service on HOA boards.
In December, five of 12 disciplinary matters before the CIC involved association boards that lack three members, as required by law.
“Let’s say you’re on an HOA board that has three members and one of them dies suddenly. If it’s a smaller association, it’s very hard to find someone to take their spot,” Sweetin says. “Now the other two board members are on the hook for violating state law, and they’re being dragged before the commission. The deals that they’re offered are burdensome and inconsistent. They have to go to training sessions. That makes no sense.”
When staff interjects ‘you can’t talk about this or ask about that,’ those are signs, to me, of regulatory capture.
– Nevada CIC Commissioner Bob Sweetin
Training sessions are conducted by legal and property management professionals who have business before the commission, a possible conflict of interest, critics contend.
Not having the requisite number of board members “is a straightforward issue. Those cases should never be called before the commission,” says Michael Kosor, a Southern Highlands resident, who characterizes the enforcement as targeting “low-hanging fruit.”
Parties with cases that should take 15 minutes, according to Sweetin, end up sitting through three days of meetings. At least one deputy attorney general is refusing to settle cases, says Sweetin, an attorney. “This is a real administrative inefficiency we have going on here.”
The seven-member CIC meets quarterly and acts in an advisory capacity to NRED. It adopts regulations and conducts disciplinary hearings.
Much of its work is shepherded by commission staff, which critics contend suffers from regulatory capture, meaning it does the bidding of industry representatives, such as HOA attorneys and property management companies, often at the expense of homeowners.
Some 9,500 property management companies throughout the U.S. are paid $108.8 billion a year for professional HOA services, according to national experts.
Shrouded in secrecy
Kosor alleges Southern Highlands developer Garry Goett has unfairly profited by retaining control of the community’s HOA for longer than what he says the law allows. Goett sued Kosor for defamation, but in a countersuit the Nevada Supreme Court ruled Kosor’s statement were made in the interest of public participation.
Kosor has filed 13 complaints with the state during the last seven years.
“They’ve all been dismissed. The language the division typically uses is ‘unsubstantiated,’” Kosor told the Current, adding NRED refuses to identify the insufficiencies in the complaints.
The division, in the course of investigations into complaints filed by individual homeowners, reaches out to the attorney representing the board, who generally assures the state the complaint warrants no action, Kosor says.
“That’s where the regulators are captured. It’s like having a high-powered defense attorney who’s politically connected, talks to the District Attorney’s office and the D.A. decides not to prosecute,” Kosor suggests. “When the state doesn’t bring a complaint forward to the commission, the homeowner’s only option is to proceed to court.”
Kosor says he’s spent close to half a million dollars on legal challenges against Southern Highland’s developer Goett.
Homeowners faced with a question of law “should be able to go to the commission, and the commission would provide you with an answer,” says Kosor, adding in the worst case, a violation by an HOA would result in up to a $1,000 fine and perhaps a few thousand dollars to cover the Attorney General’s legal costs, “as opposed to hundreds of thousands of dollars, if you bring it in our legal system.”
Complaints before the commission are often bereft of detail, with NRED deeming essential information as confidential.
“The conduct of the staff and amount of information the commission is allowed to have, would tend to suggest regulatory capture,” says Sweetin. “It appears to me from going over the records that for a very long time, the CIC was just kind of a rubber stamp for the state.”
At December’s meeting, the deputy Attorney General and NRED’s deputy director turned off Sweetin’s microphone when he asked questions about enforcement efforts against HOAs.
“When you bring a complaint and you enforce it, it’s no longer confidential,” observes Sweetin, adding any truly confidential information can be brought up in a closed session. “To me it’s an ‘easy button’. But when I brought the idea of a confidential session up at the last hearing, they looked at me like I had four heads.”
“When I go before a commission, I want questions,” he said. “I want every opportunity to answer or show my case. With them if you ask any questions you’re a complete jerk. When staff interjects ‘you can’t talk about this or ask about that,’ those are signs, to me, of regulatory capture.”
In the first quarter of the current fiscal year, 315 individuals sought help from the ombudsman, according to a quarterly report. Complaints handled by NRED’s ombudsman are often found to be unsubstantiated.
“But we don’t get to see any of that, which, to me, is a bit mind boggling,” says Sweetin. “I’m a commissioner. I have no idea how the ombudsman’s office works. I have no idea how they pick and choose what cases they want to hear. I have no idea what cases they resolve.”
Kosor says the commission “never hears about the resolution and the homeowner doesn’t hear about it. You get a letter that simply says your complaint was unsubstantiated. NRED should be able to at least explain what was lacking in the complaint.”
‘Low-hanging fruit’
Sweetin questions “why the majority of our cases seem to be against HOAs and communities that aren’t necessarily affluent. I’m focused on the high-end HOAs, because I think that’s where hinky stuff can happen.”
Among the big ticket items that get short shrift from NRED, Sweetin says, is the transfer of control of master planned communities from the developer to homeowners.
Until 2015, developers in Nevada could retain control of their community association until 75% of the units were sold. That year, Goett of Southern Highlands spearheaded a bill that extended the developer’s control until “no later than” 90% of the units were conveyed.
“In my opinion, when a developer is trying to extend this period of time, it is all about the money control, the profit control, and it delays the amount of investment into the reserves. It delays a lot of the decisions,” Robert Frank, a former member of the CIC, testified in a legislative hearing at the time. “A common problem in the development of condominium and planned community projects: the temptation on the part of the developer, while in control of the association, to enter into, on behalf of the association, long-term contracts and leases with himself or with an affiliated entity.”
After a quarter of a century, Goett remains in control of Southern Highlands. He appoints the majority of board members, who in turn vote to pay his company to manage the association.
Kosor asserts Goett’s period of control is over and that NRED is misinterpreting the law, which he acknowledges requires developers to cede control when 90% of units in a large community are sold. But Kosor contends the law does not eliminate lesser periods of control established in covenants, conditions, and restrictions (CC&Rs).
NRED repeatedly refused to provide the Current a definitive interpretation.
“The courts (sic) affirmation of the Division’s position and rejection of Mr. Kosor’s arguments has concluded the matter as there has been no material change in the facts or circumstances since that time,” NRED’s spokeswoman Teri Williams wrote via email.
However, no court has weighed in on the issue.
“You won’t get an answer. I’ve asked the administrator, Sharath Chandra, who is, in theory, the person who can put an opinion out as to what a statute means,” says Kosor. “In each case he says ‘the language is clear. I’m not going to give you an opinion.’ If he said it’s clear it’s 90%, we wouldn’t be discussing it.”
Mesquite resident Bob Muszar is hoping to enlist a state lawmaker to amend the law.
“These developer-controlled HOA boards routinely spend thousands upon thousands of homeowner dollars in ways that benefit the developer more than homeowners,” he told the Current. “Simply put, they make decisions that help them sell houses — often at the expense of existing homeowners.”
Sweetin says public comment at every CIC meeting “is replete” with questions about developer control. “And then we sit there and hear a bunch of cases that are, in my opinion, absurd.”
HOA: A four-letter word
In 2019, as a result of concerns about the independence of NRED’s regulatory scheme, state lawmakers created a task force designed to address concerns about existing laws and bill drafts outside the time constraints of the Legislature, which meets every two years for 120 days.
The task force, which meets at the discretion of NRED’s director, had two meetings in 2020. It has not met since.
Kosor and others suggest the state fears an open discussion would expose flaws in the regulatory scheme.
Now the task force is one of many state boards destined for the chopping block when lawmakers meet next month. In 2023, Lombardo ordered a review of existing regulations by all executive branch agencies, departments, boards and commissions.
Sweetin says he was unaware of the task force’s pending demise.
“My opinion is that that task force falls under the jurisdiction of the Committee of the CIC,” he said. “They report back.”
On Friday, NRED told the Current that Dr. Kristopher Sanchez, the director of Business and Industry, has expressed a willingness to reconvene a meeting of the taskforce during the first quarter of 2025.
“The task force is the solution to a big political problem,” says Kosor, who suggests recommendations from the task force on an omnibus bill, as needed, would alleviate the need for lawmakers to sort through complicated details in a compressed time frame. “Lawmakers don’t want to talk about it. There’s no win in it for them. HOA is a four-letter word.”