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Foreclosure investors suing over HOA, collection fees


A stagnant pool is shown in Ventana Canyon in Henderson, whose homeowners association was sued by investors.

Updated Thursday, Jan. 28, 2010 | 11:41 a.m.

Depending on who is doing the talking, investors buying foreclosed homes in the Las Vegas area are either being gouged by greedy homeowners associations or are contributing to neighborhood decay by failing to maintain their newly purchased properties.

Those charges flew Wednesday as news circulated that investment groups had filed class action lawsuits in Las Vegas claiming they are being overcharged by hundreds of homeowners associations and collection agencies for assessments, fines, interest and collection costs that typically accumulate while homes sit vacant during foreclosure proceedings.

The lawsuits, filed by Adams Law Group Ltd., said the associations and their collection agencies charge investors more than what the law allows.

That past-due amounts are capped by law at the equivalent of nine months of association assessments and can include a combination of regular assessments, fines and other charges. After acquiring properties, investors must pay monthly assessments as well as fines like everyone else.

One lawsuit seeking class action status was filed Friday in District Court in Clark County against about 125 homeowners associations, claiming civil racketeering, negligence and breach of fiduciary duty, among other assertions.

Attorney James Adams said he was filing a second class action lawsuit Wednesday against eight collection agencies that work for the associations, claiming they, too, have wrongly collected excessive funds from the investors.

Adams said in a typical deal, an investor may buy a vacant property, paint it, fix it up and then resell it, all to the benefit of the community.

But at the closing of the sale, the investor may get hit with invoices for assessments, fines, interest and collection costs for which the investor may not be responsible, he said. These overcharges can vary widely and typically amount to a few thousand dollars, he said.

“The investors feel they are being ripped off,” Adams said, adding overcharges may have totaled millions of dollars in recent years.

None of the defendants has responded to the lawsuits, but two executives at association management companies Wednesday disputed the assertion that associations are deliberately trying to overcharge investors.

The managers said collection agencies and title companies may be informing investors of the total amount of liens piled up against properties, but that’s a far cry from requiring the investors to pay more than what’s legally obligated.

Besides, the managers said, some banks are being good citizens and paying all of the lien amounts — not just what’s due under the nine-month rule.

The bigger issue for the managers is that while homes sit vacant awaiting foreclosure, regular monthly assessments and fines pile up — and most of that amount has to be written off as bad debt.

The situation is extreme in Las Vegas, which led the nation in foreclosures in 2009, according to RealtyTrac statistics Wednesday.

The associations frequently have to shell out money to contractors to work on rundown properties, deal with stagnant and toxic swimming pools and to water lawns and vegetation. If that money can’t be recovered from previous or new owners, it hits association budgets, jeopardizing their maintenance programs.

Although there are some responsible investors, many fail to maintain their newly acquired homes and don’t pay association assessments on time — repeating the problems experienced when the homes were in foreclosure, managers say.

“Everyone wants a good deal,” said Jamie McCafferty, president of Excellence Community Management, which works with about 125 associations. “But not everyone wants to step up to the plate to maintain the property to community standards.”

At Terra West Property Management, which serves more than 170 homeowners associations, spokeswoman Wendy Linow agreed with Adams on one point: The Legislature and state regulatory agencies may need to get involved to help resolve disputes over which expenses investors are responsible for.

Linow said lawmakers may also need to clarify when the nine-month cap begins and ends.

In the meantime, Linow defended the present system in which investors apparently are being asked in some cases to pay off fines and past-due assessments they are not legally responsible for.

“The collection industry in any industry will ask for the full balance due and in many cases the foreclosing entity will pay it all off,” she said.

The plaintiffs in the Jan. 22 lawsuit are Higher Ground LLC, RRR Homes LLC, Triple Braided Cord LLC, Equisource LLC, Equisource Holdings LLC, Appleton Properties LLC, CBRIS LLC, Mega LLC and Southern Nevada Acquisitions LLC.

The approximately 125 associations sued include the Aliante Master Association, Desert Shores Community Association, Elkhorn Community Association, Estates at Seven Hills Owners Association and Seven Hills Master Community Association, Estates at Stallion Mountain Homeowners Association and the Stallion Mountain Community Association; and the Green Valley Ranch Community Association.

Also among those sued were the Mountains Edge Master Association, Panorama Towers Condominium Unit Owners Association, Peccole Ranch Community Association, Platinum Unit Owners Association, Rhodes Ranch Association, Sky

Las Vegas Condominum Unit Owners Association, Southern Highlands Community Association, Summerlin South Community Association, Sun City Anthem Community Association, Sun City Macdonald Ranch Association, Sun City Summerlin Community Association and Sundridge at Macdonald Ranch Community Association.

The collection agencies to be sued Wednesday were Nevada Association Services Inc., RMI Management Inc. dba Red Rock Financial Services; Homeowner Association Services Inc., Alessi & Koenig, Hampton & Hampton, Angius & Terry Collections LLC, Eugene Burger Management Corp. and Silver State Trustee Services LLC.

David Stone, president of collection company Nevada Association Services, denied Thursday that his company tries to collect money beyond what is allowed by law -- and claimed the investors are trying to strong-arm homeowner associations into reducing fees so the investors make more money.

"These are not sympathetic plaintiffs," he said. "They are real estate speculators taking advantage of foreclosures and people losing their homes. Every dollar saved is a dollar in their pocket."

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