77th Nevada Legislative Bills Affecting Real Estate and Common-Interest Communities

The 77th Legislative Session of the Nevada Legislature came to a close on June 3, 2013 and several new bills affecting the real estate and common-interest community industries will come into effect in July and October of 2013.  For example, Assembly Bill 370 amended Chapter 38 of the Nevada Revised Statutes. When this bill goes into effect, over twenty successful years of resolving disputes involving residential property subject to CC&Rs will be drastically changed. Existing law requires all disputes involving property subject to CC&Rs to be commenced as a mediation or arbitration with skilled and knowledgeable mediators and arbitrators. Under existing law, only after the mediation or arbitration has been completed is a party allowed to commence an action in district court.  This saves time and money for all participants.  Nearly all of the mediators are skilled and conduct the arbitrations or mediations in an impartial and professional manner. With the artificial caps on the charges that the mediators and arbitrators may receive, it is anticipated we will lose these skilled arbitrators and mediators.  The decisions in arbitrations are well-reasoned and appropriately consider the applicable law and evidence presented.

Commencing October 1, 2013, the only option will be a mediation or diversion into a program that is optional or agreed upon arbitration.  This optional program is identified as the Referee Program.  Fortunately, the parties must agree to use the Referee Program because if the existing Referee Program is the model, there may be problems.  When the Referee Program was presented to the entire Assembly Committee on Judiciary in AB 34, it was widely opposed.  The pilot Referee Program has drawn a lot criticism from numerous organizations.  There are no procedural protections in the pilot Referee Program.  In contrast, the existing procedures under arbitrations under Chapter 38 were well established and afforded numerous procedural due process rules.

Therefore, with the passage of AB 370, the current and highly successful mandatory mediation/arbitration program has been dismantled. There is no mandatory arbitration. The parties would have to agree to arbitration under the new bill.

If there is no agreement to submit the claim to the Referee Program or to arbitration, the parties will be forced to go through a mediation and then have the opportunity to present the claims in district court if there is no resolution agreed to by the parties.  It is anticipated this will increase the costs and expenses to the parties. Courts were pleased with the existing ADR process because it reduced their caseloads. These caseloads are anticipated to increase under the changes that have been implemented because there will be no mandatory arbitration.  The success of the existing ADR program resulted from a less expensive but necessary forum for the enforcement of valuable contractual rights set forth in the Governing Documents, statutes and case law.

Assembly Bill 326 amended Chapter 597 of the Nevada Revised Statutes.

When this bill goes into effect on October 1, 2013, any agreement that includes a provision requiring a person to submit to arbitration any dispute between the parties will require specific authorization of the arbitration requirement by the person. If there is no specific authorization, then the person cannot be required to submit to arbitration. In that a purchaser of real property is required to acknowledge receipt of the Governing Documents, it will be my opinion that the documentation should now include a specific provision that agrees to any arbitration provision in the CC&Rs of a community.  If possible, enforcement of the arbitration provisions in the CC&Rs of a homeowners association may be an alternative to the loss of arbitration under Chapter 38.

Senate Bill 130 amended Chapter 116 of the Nevada Revised Statutes.

When this bill goes into effect, the process and procedure for imposing a fine against a unit’s owner or a tenant or an invitee of a unit’s owner or tenant will require additional action by the homeowner’s association.  This bill requires that the written notice provided to the unit’s owner and, if different, the person against whom the fine will be imposed: (1) specify the alleged violation in detail; (2) specify the proposed action to cure the alleged violation; and (3) under certain circumstances, include a photograph of the alleged violation.  The photograph of the alleged violation is necessary if the alleged violation relates to the physical condition of the unit or the grounds of the unit or if it is possible to obtain a photograph.  This bill further provides that after the person against whom the fine will be imposed is provided the written notice of the alleged violation, he or she must be provided a reasonable opportunity to cure the alleged violation or to contest the alleged violation at the hearing.

The Community Association Institute (Nevada Chapter) will be hosting a Legislative Update at the Peppermill Resort Hotel in Reno, NV on July 25, 2013 from 9am – noon during their Northern Nevada Luncheon Tradeshow. The CAI is a national organization dedicated to fostering vibrant, competent, harmonious and educated community associations. With over 1,000 members including nearly 150 business partners, over 400 professional managers and more than 400 Community Association Volunteers, the Nevada Chapter is one of the largest and most active of the 59 chapters in the nation. The organization is currently celebrating their 40th anniversary.

Contact Kern & Associates, Ltd. for more information on the new legislation and the July 25th event.

 

Photo by Ken Lund/Flickr

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