Bill would cap collection fees when HOA bills are past due

By David McGrath Schwartz

Friday, April 15, 2011 | 3:27 p.m.

Collection agencies could charge up to $1,950 plus “reasonable attorney fees” on a house that’s late on its homeowner association assessment under a bill passed out of committee Friday by Senate Democrats.

Senate Bill 174 passed along party lines after a fiery debate that had Republicans accusing Democrats of wading into a legal battle in favor of collection agencies.

The bill is generally supported by homeowner associations and collection agencies and opposed by consumer protection groups and investors. Sen. Allison Copening, D-Las Vegas, argued that the fee cap would protect homeowners from the excessive collection practices, and “reasonable attorney fees” could be settled by a judge. She said that the collection agency fees are needed to keep homeowner associations solvent and able to provide services for existing residents.

Copening works as a lifestyle director for a homeowner association management company, and critics, including homeowners unhappy with their association boards, have said her outside employment presents a conflict.

The legislation has been a source of drama this week, and a sign that the Democratic caucus is less than iron clad. Copening this week initially would not say whether she was a part of the Democratic caucus.

Tempers flared Friday in a back and forth between Copening and Sen. Michael Roberson, R-Las Vegas. Sen. Valerie Wiener, chair of the Judiciary Committee, stopped the sides at one point and said, “Take a breath. Take a breath.”

Friday was the deadline for bills to make it out of committee, and SB174 now moves to the full Senate.

Consumer advocates said collection fees on late HOA bills have become a growing issue in the recession and as people walk away from their houses.

“The fees that are being charged to homeowners for past-due HOA fees are exorbitant,” said Cena Valladolid, operations director for the nonprofit Consumer Credit Counseling Services in Las Vegas. She said collection agencies hired by HOAs have been unwilling to bring down payments or offer much flexibility to consumers.

The bill specifies that collection agency fees are “super-priority liens” - moving to the front of the line to be paid back when a house is sold. Investors have argued that collection agency fees should not be “super-priority,” which they say the Legislature specifically reserved for past homeowner association dues.

Republicans argued that the Senate bill would do little to slow a problem in Nevada of aggressive collection agencies taking on fees of thousands of dollars on relatively small homeowner association bills. Roberson said the Legislature should also refrain from getting involved in a legal dispute between two private parties.

Copening brought up the case of Paradise Spa homeowner association in Las Vegas, which was raided by the FBI and Nevada Attorney General’s office last week. A single investor there owes more than $1 million in assessments, she said. Residents face having their gas shut off on Monday, Copening said, calling the investor a “slumlord.”

Roberson, an attorney, scoffed at the “reasonable” attorney fees in the bill. “How are homeowners supposed to dispute ‘reasonable or not?’” he said.

“They’re going to have to hire their own attorney, and have more legal fees?” said Sen. Ruben Kihuen, D-Las Vegas, who added he was not completely satisfied with the bill, and reserved the right to vote against it on the floor. He said he would move it forward to prevent excessive fees right now.

Sen. Shirley Breeden, D-Henderson, was the other undecided Democrat on the Committee. She called Copening’s bill “a good start” to capping collections.

A regulation pending in front of a Legislative committee is designed to cap the collection fees at $1,950 per house, plus costs.